The household as a source of labor for entrepreneurs: Evidence from New York City during industrialization

• Author: Martin Ruef
• Published date: 01 March 2020
• Date: 01 March 2020
• DOI: http://doi.org/10.1002/sej.1309

SPECIAL ISSUE ARTICLE

The household as a source of labor for

entrepreneurs: Evidence from New York City

during industrialization

Martin Ruef

Department of Sociology, Duke University,

Durham, North Carolina

Correspondence

Martin Ruef, Department of Sociology, Duke

University, Durham, NC 27708-0088.

Email: mr231@duke.edu

Research Summary:This article conceptualizes households as a cru-

cial pool of labor for small entrepreneurs. The household varied his-

torically in its scope (depending on whether bonded workers were

included) and work intensity (depending on the authority or coer-

cion exercised by household heads). Drawing on data that enumer-

ate over 100,000 households in New York City, I examine how the

shift from institutions of unfree labor to wage labor affected busi-

ness proprietorship between 1790 and 1850. Given the dispropor-

tionate importance of unfree household labor to small

entrepreneurs, the contraction of this labor source may offer one

general explanation for their decline.

Managerial Summary:How does household scope and composition

affect the ability of an individual to run their own business? Histori-

cal archives can provide useful insights into this question. They

track long-term declines in family size and the emancipation of

non-family members—such as apprentices, indentured servants,

and slaves—from the authority of household heads. Examining

records from early New York City, this study shows that business

ownership was strongly linked with the ownership of slaves and

the presence of dependent males after the American Revolution.

Large households and unfree laborers were especially important for

entrepreneurship among individuals with limited wealth. For mod-

ern economies, the results suggest that policymakers consider

potential tensions between small business ownership and the

development of free and equitable labor markets.

KEYWORDS

entrepreneurship, households, industrial revolution, institutional

theory, labor markets

Received: 1 June 2016 Revised: 30 July 2018 Accepted: 26 November 2018 Published on: 27 December 2018

DOI: 10.1002/sej.1309

© 2018 Strategic Management Society

20 wileyonlinelibrary.com/journal/sej Strategic Entrepreneurship Journal. 2020;14:20–42.

1|INTRODUCTION

The transformation of entrepreneurship during the Industrial Revolution has been actively studied by economic his-

torians and entrepreneurship scholars, considering an array of economic and social changes between the mid-18th

and mid-19th centuries. To name just a few examples, explanations for the changing character of entrepreneurship

include the scholarship of McCloskey (2006, 2010) on the emergence of bourgeois virtue, Mokyr (2008, 2010) on

intellectual property rights and cultural beliefs supporting early industrial entrepreneurs, and Sylla and his colleagues

on the role of financial institutions (Rousseau & Sylla, 2005). While earlier accounts of industrialization in the West

posited an exogenous source from a “sudden efflorescence of technological change”(De Vries, 2008, p. 77), recent

perspectives have come to eschew this narrow view of technological determinism, either situating the effects of

technological innovation—such as the steam-powered mechanization of industry—in a broader context of institutions

and management ideologies (Freeman & Louçã, 2001; Bodroži

c & Adler, 2018; see also Bendix, 2001) or placing pri-

mary emphasis on institutional determinants of industrial development.

A recurring theme in institutional approaches has been the household as a historical source and locus of labor

for small entrepreneurs (e.g., Kay, 2009; Scranton, 1983; Smelser, 2006; Tilly & Scott, 1989). In treatments of modern

entrepreneurship, there is a robust and related literature on characteristics of family systems and entrepreneurship

(Mehrotra, Morck, Shim, & Wiwattanakantang, 2011; Morck & Yeung, 2004; Stamm, 2016), with households often

appearing as synonymous with families (Aldrich & Cliff, 2003; Lumpkin, Steier, & Wright, 2011). Some historical

approaches likewise equate the household with the “family economy”of entrepreneurs (e.g., Smelser, 2006). Yet an

important lesson from history is that the household was a unit with malleable boundaries, one that varied consider-

ably over the course of industrialization, both in the legal capacity of household heads to control nonkin and fictive

kin under their aegis and in their ability to extract labor from household members (Steinfeld, 2002). The implications

of such institutional variation in household labor remain to be drawn out for entrepreneurship theory and, as I will

argue, bear not only on historical cases, but also on the character of entrepreneurship in developing and developed

countries today.

This article focuses on the likelihood that households were able to engage in business proprietorship as one mea-

sure of entrepreneurship.

1

Its primary thesis suggests that transformations in households and labor market institu-

tions in the late 18th and 19th centuries were a major challenge to the small business owners who dominated the

preindustrial economy. The study begins with a theoretical approach that anchors the likelihood of business owner-

ship in the size of a household's labor pool. Labor market institutions are crucial to entrepreneurs because they have

historically allowed them to extend their household labor pool, through the incorporation of bonded workers

(e.g., slaves, indentured servants, apprentices), and to intensify the utilization of family members in the pool, through

their authority over spouses and working-age children. Over the course of industrialization, legal, and normative

changes regarding peonage and contractual relationships gradually eroded these institutional mechanisms of labor

expropriation (Stanley, 1998; Steinfeld, 2002; Tomlins, 1993). As a result, the theory predicts, small business owners

were at a growing disadvantage because they were least inclined and able to switch to wage labor.

To evaluate these claims empirically, the study considers the case of New York City, the center of early metro-

politan industrialization in the United States (Rock, 1979; Wilentz, 2004). Drawing on a data set matching households

and businesses in the city between 1790 and 1850, I analyze how the deinstitutionalization of slavery, indenture,

and long apprenticeship affected the likelihood that residents would become entrepreneurs at multiple points during

this 60-year period. Findings suggest that slave ownership was a potent predictor of business proprietorship and the

pursuit of entrepreneurial occupations before the 1820s, when the emancipation of bondsmen and women in the

1

A more exacting definition of entrepreneurship might differentiate between those individuals who start their own businesses and

those who inherit or acquire businesses started by others (e.g., Stamm, 2016). While it is often not possible to draw this distinction

with historical data, most businesses during industrialization were short-lived and were operated by the proprietors who

founded them.

RUEF 21