David Higgins

Towards a new business history

This article calls for a discussion about business history research. We advocate that the current typical approach in business history – dominantly case study analysis – maintains its prominent position, but the purpose and relevance of this type of research in the scientific method for business history is made more explicit. Moreover, the article proposes the application of additional approaches in business history, which specifically aim to develop theory and test hypotheses. These approaches are well established in the social sciences, but require adaptation to the particular needs of business history. The purpose of this article is to argue that opportunities for scientific explanations in business history are enhanced by engagement with the circle of knowledge creation where theory is confronted with empirical evidence and empirical observations feed back into theory formation.

Explaining corporate success: The structure and performance of British firms, 1950-84

Predictions from dominant strands of the management strategy and business history literature suggest that the adoption of the multi-divisional form is associated with corporate success. There is theoretical support for this contention and, in certain non-British contexts and historical periods, also some confirmatory evidence. To examine the relationship in the British case, this article examines the strategy and structure characteristics of successful firms between 1950 and 1984. To do so it utilises an extensive accounting database to compute the return on capital employed for all quoted companies in the period. Using this measure, and applying it to a sub-sample of long-run surviving companies, it produces a ranking of firms according to profitability. A sample of best performing firms is matched to a paired sample of firms selected from the bottom of the financial performance ranking, and their organisation structures are contrasted. Examples are used to illustrate cases where strategies have been well supported by the structures adopted and have successful financial performance outcomes. A tendency for firms to adopt holding company structures in preference to the multi-divisional form is identified, particularly before 1970. Transitions from the functional to the holding company form tend to be successful in general and appear more successful than transitions to the multi-divisional form, again in the earlier decades in particular. These findings cast doubt on the universal applicability of the Chandler–Williamson model of the large, professionally managed, multi-divisional enterprise.

The business of protection: Bass & Co. and trade mark defence, c. 1870-1914

This article uses a case study of Bass to examine the business and accounting history of trade mark defence in the nineteenth and early twentieth centuries. We employ a variety of business, legal and parliamentary records to discuss the measures they adopted to prevent trade mark infringement. The central arguments of this article are that Basss trade marks were susceptible to infringement because of weaknesses in its business structure, and these, in turn, necessitated a robust defence of its trade marks both before and after the Trade Marks Act, 1875. Of particular interest, we demonstrate that Basss reliance on the free trade was financially successful, in marked contrast to the predictions of Chandler, and the financial performance of the big London brewers who relied heavily on tied estates.

Public Subsidy and Private Divestment: The Lancashire Cotton Textile Industry, c.1950–c.1965

The investment and divestment policies of Lancashire cotton companies are examined by reference to historical financial and other archival data. Capital/product market and political/institutional constraints on entrepreneurial behaviour are evaluated. Lancashire entrepreneurs were faced with a legacy of over-capacity and a market situation that individual decisions could do little to later. Political constraints, especially in the form of taxation and regulation of overseas trade, had important influences on investment behaviour. Divisions within the Lancashire lobby weakened its political influence prior to 1959. Dividend policy and the constraint on corporate cash flow imposed by the capital markets also helped to limit the effectiveness of restructuring investments. Partial solutions from the British government could not prevent the total demise of what remained of an important regional industry.

Reputation and export performance: Danish butter exports and the British market, c.1880–c.1914

This article extends current scholarship on the role of branding and trade marking in establishing competitive advantage. Using a case study of Danish butter exports to the British market, 1880–1914, we demonstrate that many of the technological and organisational innovations in this industry were not in themselves sufficient to guarantee that Danish butter would command price premiums in the British market. We argue that the introduction of the ‘Lurbrand’, together with the rigorous prosecution of vendors misrepresenting other butters as Danish, were vital to maintaining the reputation of Danish butter at a time when rival countries were producing butter of comparable quality. Of particular importance to current debates on branding and trade marking is our finding that independent butter producers collaborated with the Danish government to use the same trade mark and to ensure that state inspection guaranteed that Danish butter was produced consistently to the highest quality.

Forgotten Heroes and Forgotten Issues: Business and Trademark History during the Nineteenth Century

This reassessment of the importance of trademarks in business during the nineteenth and early twentieth centuries reveals that the focus by business historians on the beverage and processed-foodstuff industries has resulted in comparative neglect of the textile and metal-fabrication industries. The trademark histories of the latter two show that they followed their own paths, which resulted in their adopting three solutions to trademark issues that differed sharply from the approaches taken by the former two. The textile and metalfabrication sectors participated heavily in the evolution of an international regime to protect intellectual property; featured prominently in the development of patents in trademarks and trade names; and devised unique institutional solutions to the emerging problem of conflicting private marks in the Lancashire cotton-textile and Sheffield edge-tool industries. The history of these two industries indicates that trademark protection was not sufficient to ensure international competitiveness and long-run survival.

Financial distress, corporate borrowing, and industrial decline: the Lancashire cotton spinning industry, 1918-38

The analysis presented is based on a case study of Lancashire cotton textile firms. It traces their financial history through the sharp boom of 1919–20, and the sudden crisis that followed. Using a sample of representative companies it is shown that firms unwittingly adopted inappropriate financial structures that acted as the decisive constraint on the adoption of recovery strategies in the subsequent slump. The paper explains how the relationship between indebtedness and asset values prevented subsequent internal financial retrenchment, restructuring and re-equipment, and dictated the competitive processes within the industry. It is demonstrated that financial constraints were the decisive factor determining the feasibility of competitive strategies available to the industrys leaders.

Financial institutions and corporate strategy: David Alliance and the transformation of British textiles, c.1950–c.1990

This article introduces and assesses a conceptual model of institutional and corporate change. In particular it seeks to integrate strategic choice and associated corporate structure with the role of the market for corporate control (MCC) as a governance mechanism. The model is illustrated using longitudinal case studies from the British textile industry with particular reference to the acquisition policy of David Alliance as he built up the Spirella Group and then used this as a vehicle to acquire, in turn, Vantona, Carrington Viyella, Nottingham Manufacturing Company and Coats Patons. These policies are contrasted with the acquisition strategies of the Lancashire Cotton Corporation (LCC) and Courtaulds and Imperial Chemical Industries (ICI). The evidence indicates that there was no relationship between the depth of the MCC and restructuring success, but to the extent that the market lacked depth, abnormal profits accrued to market-making entrepreneurs such as Alliance. There is evidence that decentralized market-led strategies were more successful than strategies based on the integration of production for the achievement of scale economies. Successful adoption of these strategies was also based on the acquisition of financial resources through appropriate network connections and associated political lobbying channels.

Firm structure and financial performance: the Lancashire textile industry, c.1884 - c.1960

Recent business history has been much concerned with the relationship between organization structure and competitive advantage. Using an archetypal case, the decline of the export-led British cotton industry, the contention that the vertically integrated, professionally managed firm has been an important pre-condition for the creation of international competitive advantage during the twentieth century is subjected to scrutiny. This is achieved by a long-run comparison of accounting-based financial performance indicators. Evidence suggests that vertical specialization was a superior form of business organization. Explanations for this lie in the evolution of technology, a conflict between production and marketing in integrated firms, but, above all, in market signals which repeatedly informed entrepreneurs that specialization worked. In drawing such conclusions we differ fundamentally from previous interpretations of the rise and fall of Lancashire textiles.

New business history

This editorial introduces eight articles for the special issue on ‘New business history?’. Following a workshop on this topic, several submissions with discussions on business history methodology and studies with non-standard historical approaches were received and reviewed. In the editorial we provide an overview of recent debates in the discipline and provide a short introduction to the articles accepted for publication in this special issue.