Scale and Scope: The Dynamics of Industrial Capitalism.

• Author: Speir, John P.

By Alfred D. Chandler, Jr. Cambridge, Massachusetts: The Belknap Press of Harvard University Press, 1990, Pp. 628, $35.00.

No institution of modern society has had a more significant effect than the modern industrial enterprise. it was the organizational structure for firms which provide the bulk of economic growth through the first half of the twentieth century, as well as the means by which goods were produced and distributed, resources allocated and incomes earned. In this book Alfred Chandler provides an analysis of the factors that spurred the development and growth of the modern industrial enterprise by examining the industrial histories of the 200 largest industrial firms in the United States, Great Britain and Germany during the first sixty to seventy years of the "second industrial revolution". Two of the most important factors that precipitated the development of the modern industrial enterprise were the new transportation and communication systems, such as railroads, steamships, telegraph and cable, which allowed firms to take advantage of substantial economies of scale and scope. To take full advantage of these economies of scale and scope firms to make three interrelated investments. First, production facilities had to be large enough to exploit the economies of scale and scoop. Second, a marketing and distribution network had to be developed which could maintain sales at a sufficient level so that production facilities could maintain enough throughput to minimize the cost of production. Third, to extract the maximum benefits from the first two investments, it was necessary for the firm to make an additional investment in the quality and structure of management to assure the efficient of the firms production, marketing and distribution systems.

There are several general features of the process of growth of the modern industrial enterprise. One of the most important is the advantage of the first mover. Not surprisingly, the first firm to make the required "three pronged" investment in production, marketing and management was often to exploit a significant cost advantage and assume a dominant position in the industry, and maintain its dominant position for several decades. Second, to successfully challenge the dominant firm, potential challengers had to make similar investments in production, distribution and management sufficient to offset the first movers advantage. Third, the form of the industrial firm and the nature of...