Alfred chandler: His vision and achievement

Business History Review

Volumn 82, Issue 2, 2008, Pages 207-226

  McCraw, Thomas K ^a  

^a HARVARD BUSINESS SCHOOL   (United States)

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EID: 50849129444     PISSN: 00076805     EISSN: None     Source Type: Journal    
DOI: 10.1017/s0007680500062723     Document Type: Article

References (33)

1. Of this group of eight, Schlesinger was the youngest to publish his first book (he was twenty-two, and only twenty-eight when he brought out The Age of Jackson, which won him the first of his two Pulitzer Prizes). Donald was twenty-seven, Franklin twenty-eight, and Hofstadter twenty-nine, but none lost time to service in World War II, as did the other five. Bailyn was thirty-three, Morgan thirty-six, Chandler and Degler thirty-eight. So distinguished was the cohort of historians born during this eight-year period that the list could be a good deal longer. Here are eleven others: John Morton Blum, Don Fehrenbacher, Robert Ferrell, Frank Freidel, Norman Graebner, Oscar Handlin, William Leuchtenberg, Arthur Link, Henry May, Richard Wade, and William Appleman Williams. The absence of women from this list reflects their radical underrepresentation at research universities before the late twentieth century.
2. Chandler commented many times to his colleagues about the advantages of doing his work at Harvard Business School. In The Hedgehog and the Fox: An Essay on Tolstoy's View of History (London, 1953), Isaiah Berlin drew on a comparison first made by the Greek poet Archilochus in the seventh century B.C., then repeated by Erasmus in Adagia (1500 A.D.).
3. David A. Potter, "Roy F. Nichols and the Rehabilitation of Political History," in Don E. Fehrenbacher, ed., History and American Society: Essays of David M. Potter (New York, 1973). 206-7. Both Nichols and Potter were also Pulitzer Prize winners, as was Don Fehrenbacher. Willard Hurst had served as clerk to Justice Louis D. Brandeis and had declined an offer to become dean of Harvard Law School because he wanted to remain at Wisconsin and pursue his scholarship.
4. The most important articles appear in Thomas K. McCraw, ed., The Essential Alfred Chandler: Essays toward a Historical Theory of Big Business (Boston, 1988). To these I would add, at a minimum, two others published since 1988: "Organizational Capabilities and the Economic History of the Industrial Enterprise" Journal of Economic Perspectives 6 (Summer 1992) 1992: 79-100;
5. and "The Competitive Performance of U.S. Industrial Enterprises since the Second World War," Business History Review 68 (Spring 1994): 1-72.
6. A full bibliography of Chandler's work to 1988 appears on pp. 505-17 of McCraw, ed., The Essential Alfred Chandler. Most of his subsequent publications can be traced online through JSTOR, which also provides access to a very large number of reviews and critiques of Chandler's books.
7. Some effective critiques of his work do exist, and several are noted later in this article. Here, I'm referring to the general structure and arguments of his books. And even on those dimensions I'm not asserting that it can never be done. For example, Charles A. Beard's book, An Economic Interpretation of the Constitution (New York, 1913) was one of the most influential works of its time. Beard argued that the delegates to the Convention of 1787 had shaped the contents of the Constitution to serve their own economic interests. And, despite frequent challenges, his thesis held strong for four decades. But then it was completely eviscerated by two books published in the 1950s: Robert E. Brown, Charles Beard and the Constitution (Princeton, 1956);
8. and Forrest McDonald, We the People: The Economic Interpretation of the Constitution (Cambridge, U.K., 1958). McDonald in particular retraced all Beard's research, added several layers of his own (such as investigations of the state ratifying conventions), and convincingly refuted Beard's entire argument. The efforts of Brown and McDonald required a tremendous amount of work, far beyond what Beard himself had done. In the case of Chandler, an even greater effort would likely be required because of the immensity of his empirical research. As he himself often said, interpretations are one thing, but facts quite another; and it was the avalanche of facts from Brown and McDonald that buried Charles Beard's interpretation.
9. Sales figures were communicated to me in October 2007 by MIT Press and Harvard University Press. (MIT Press does not have figures for hardback sales since the initial appearance of Strategy and Structure in 1962.) In addition, two of Chandler's Ph.D. students, both of them gifted writers, have published short books on business history for classroom adoption. Each book owes a great deal to Chandler's work, but both are creative syntheses in their own right: Harold Livesay's Andrew Carnegie and the Rise of Big Business (Boston, 1975, 3rd ed. 2006), which has sold more copies than all of Chandler's books combined; and Glenn Porter's The Rise of Big Business, 1860-1920 (New York, 1973, 3rd ed. Arlington Heights, 111., 2006), which has also sold extremely well. Livesay told me the figures for his book's sales in 1996.
10. A wealth of information about dyslexia is available on the Internet. Estimates of the number of people affected range from 5 percent of the population to 20 percent.
11. I asked Chandler's sisters as well, and they responded as follows: Sophie Chandler Consagra: "There were many cases of dyslexia in our family. One especially was our mother. Reading over her old letters and diary it is blatant with reversals and atrocious spelling. All of which I inherited.... When I was in school, dyslexia was not a common word. I was just 'slow.' However my son George got pinpointed in first grade. I was told he would never get beyond 7th grade, but he ended up with an MA from Columbia." Nina Chandler Murray: "I once talked with Dr. Norman Geschwin at Harvard Medical School wondering how/why the familial dyslexia came down through the females. Geschwin's immediate response was 'You are overbred.' Needless to say, I was at a loss to reply. He went on to explain that dyslexia is an Anglo-Saxon gene disorder and advised me to have all my children marry out of the gene pool.... [A]s you note, it has nothing to do with intelligence, and indeed, dyslexics know how to compensate and get along fine. You didn't mention Al's handwriting which as you know, was atrocious. This is part of the syndrome."
12. Max Hall had been the social-science editor at Harvard University Press before his retirement in the early 1970s; he was a marvelous line editor in addition to his skill in inferring what an author was trying to say. He worked not only on Chandler's books but also on some of mine and on Richard Vietor's, among many others. The only instance of which I'm aware in which Chandler referred to his dyslexia came in a brief remark in 1984, when he and Richard Tedlow were working on a revision of the popular MBA course, "The Coming of Managerial Capitalism." They came to a case in which Standard Oil, squeezing its costs ever more tightly, had lowered the average refining expenses for all its plants from 0.543 cents per gallon in 1884 to 0.452 cents in 1885. As Chandler and Tedlow worked this information into the teaching document, Al said to Richard, as an aside, "It took me an awfully long time to get those digits in the right order."
13. Joseph A. Schumpeter, History of Economic Analysis (New York, 1954), 41.
14. Ibid., 1171-72. The italics are in the original.
15. It would be a mistake to imagine that Chandler knew little about these topics, any more than that Keynes knew only macroeconomics; a reading of Chandler's work in its entirety reveals a good familiarity with most of them, though not all. But it would have been impossible for him to assemble the vast evidentiary underpinnings for these other subjects to the extent that he did for large corporations.
16. Chandler knew this better than some of his critics seem to think. Not that he ever stopped believing in the importance of large corporations; but he did put less emphasis on certain aspects of his argument. For example, the seventh of the eight "propositions" with which he begins The Visible Hand "is that, in making administrative decisions, career managers preferred policies that favored the long-term stability and growth of their enterprises to those that maximized current profits" (p. 10). For the period from the 1960s to the present, this proposition rings quite false, and Chandler recognized that. Then, too, his de-emphasis on finance no longer fits what he liked to call "reality." Whereas in 1950 only 8 percent of U.S. corporate profits came from the financial sector, about 31 percent do so today. He lamented this trend, though more often in conversation than in print.
17. Chandler's ideas about "medium-tech" firms and "transaction-driven" mergers and acquisitions are developed in his article of 1994, "The Competitive Performance of U.S. Industrial Enterprises since the Second World War," cited in note 4 above.
18. To my knowledge, the first person to grasp the importance of this characteristic was Richard Tedlow, who saw it in 1984 when he and Chandler were designing the course mentioned in note 10 above.
19. Historical Statistics of the United States to 1970 (Washington, D.C., 1975), vol. 2, 1141. Eisenhower became a brigadier general in September 1941.
20. Eisenhower reached O-11, the highest possible rank (general of the army), in 1944, having climbed six ranks in five years, a meteoric rise even in wartime, and one that entailed leaping over several thousand officers senior to him.
21. Chandler described these experiences to me in numerous conversations beginning in the 1970s. I had served as a naval officer for four years myself, and this was one of the very few things common in our backgrounds.
22. See, for example, Chandler, "The Large Industrial Corporation and the Making of the Modern American Economy," in Institutions in Modern America: Innovation in Structure and Process, ed. Stephen Ambrose (Baltimore, 1967), 71-101, reprinted in McCraw, ed., The Essential Alfred Chandler, 225-46; on pp. 240-41, Chandler comments on the organization of production during World War II; on pp. 241-45, he discusses the effects both world wars had on diversification and reorganization within large companies. The literature on mobilization for World War II is very large, and, together with the information cited in this paragraph and the next one, is summarized in Thomas K. McCraw, American Business 1920-2000: How It Worked (Arlington Heights, Ill., 2000), ch. 5 and 230-34. The only potential exception to my generalization about the superiority of American production is the Soviet Union, whose output of tanks and artillery pieces surpassed that of the United States. During the war, the Soviets squeezed production of consumer goods to the lowest possible levels, whereas in the United States-alone of all belligerents during any major war-consumer spending actually increased, by 22 percent.
23. Among the senior scholars who participated in the Center's activities were Arthur Cole (the director), Joseph Schumpeter, Leland Jenks, Fritz Redlich, Thomas Cochran, and William Miller. Younger scholars, most of them graduate students, included Bernard Bailyn, David Landes, Henry Rosovsky, Hugh Aitken, John Sawyer, and Douglass North-all of whom, like Chandler himself, went on to distinguished careers.
24. Chandler, Comment [on the New Economic History], in Explorations in Economic History, 2nd ser., 6 (1968): 66-74. Here Chandler mentions many economists, expresses regret that history provides little guide to a conceptual framework, and refers explicitly to Schumpeter's example of Keynes's vision discussed earlier in the present article. (Chandler met Schumpeter two or three times but had little close contact with him.) Although Chandler's "Comment" here is brief, it is one of the most revealing of the few autobiographical references he ever made to the origins of his own work. He gives pride of place to Max Weber and Talcott Parsons, then goes on to mention the helpful influences of Elton Mayo, Chester Barnard, Robert Gordon, Herbert Simon, James March, Robert Homans, and Robert Bales-a diverse group of management scholars, economists, and sociologists. Impatient with neoclassical economists' preoccupation with price theory, Chandler writes that "Max Weber's single chapter on bureaucracy written before World War I had more useful information and a more significant approach to the problem of the growth of the large corporation than almost anything written in price theory. Weber raised questions about the structure and function of a large corporation by suggesting the regularities of human action in any large-scale organization." See also Chandler, "Business History as Institutional History," in Approaches to American Economic History, eds. George Rogers Taylor and Lucius F. Ellsworth (Charlottesville, Va.), 17-24.
25. On the usefulness of Talcott Parsons's work to historians, see Louis Galambos, "Parsonian Sociology and Post-Progressive History," Social Science Quarterly 50 (June 1969): 25-45.
26. Strategy and Structure, pp. 91-113. Recent scholarship has shown that German firms anticipated American ones in many aspects of the M-form. See, for example, Jeffrey Fear, Organizing Control: August Thyssen and the Construction of German Corporate Management (Cambridge, Mass., 2005).
27. Robert Heilbroner, New York Review of Books, 8 Feb. 1978, 36.
28. Geoffrey Jones, "In Memoriam," Business History Review 81 (Summer 2007): 327.
29. One early example is the influence of Strategy and Structure on Robert Wiebe's extremely important book, The Search/or Order: 1877-1920 (New York, 1967). During the last three decades of Chandler's life, the mainstream in history moved so powerfully away from political, economic, and diplomatic topics and toward social and cultural history that his influence, at least for the time being, may be less in history than in sociology, economics, and business administration.
30. For example, the second paragraph of this article states that in The Visible Hand Chandler in effect proclaims "the end point of business history." This is a clever but erroneous comment. The notion of an end point was antithetical to Chandler's way of thinking. Throughout his career, he emphasized that the heart of the historian's task was the identification and interpretation of change, which of course has no end point. The article's sixth paragraph, still characterizing The Visible Hand, contains this sentence: "Because relatively few firms could raise the enormous amounts of capital required, these industries [toward the end of the nineteenth century and the start of the twentieth] quickly took on oligopolistic structures." As written, the statement is a non sequitur. For example, the new firm International Mercantile Marine was backed by J. P. Morgan, but it failed because it could not erect barriers to entry: any owner of one steamship could compete with the new firm on price. More generally, as many critics have pointed out, Chandler's argument in this book has very little to do with finance and almost everything to do with technology. On page 423 of their article, the authors write: "The disadvantages of the hierarchical coordination techniques employed by Chandlerian-style firms appeared earliest and most obviously in the case of conglomerates," i.e., during the 1960s. Here there are two problems. First, the phrase "appeared earliest" is incorrect. As Chandler shows in The Visible Hand, the relevant disadvantages appeared sixty-odd years earlier, around the turn of the century. At that time, now-forgotten companies, such as American Ice, Booth Fisheries, National Cordage, National Starch, National Wall Paper, and United States Leather, tried to turn themselves into monopolies or oligopolies. They had no success, because their underlying technologies of production and distribution afforded no significant cost advantage over smaller firms. The second problem with the authors' statement is that Chandler himself often denounced the conglomerate movement in harsh terms. I first heard him do it in 1973, the year I met him, four years before The Visible Hand appeared; and it's very unlikely that I was the first person to whom he voiced this opinion. There are other errors in this article, but I will mention only the most ahistorical: the authors seem to criticize Chandler for not understanding the present industrial situation and even for failing to foresee the future. Yet even here, by the time their article appeared, Chandler had written very extensively on high-tech industries of the late twentieth century: chemicals and pharmaceuticals, computers and consumer electronics, as well as on global competition. The three authors should not be faulted unduly, because each of them has done excellent work. But in this particular piece, they reveal one of their core premises when they chide Chandler for not developing economic models-or, to put it another way, for not being an economist, as two of the three authors are (the third, in addition to having a Ph.D. in history, has a master's in economics).
31. Both Chandler's article and Sylla's comment appeared online from the Berkeley Press, in a journal sponsored by the Center for Capitalism and Society at Columbia: bepress.com/cas/iss2/art1, accessed in December 2007.
32. Will Hausman surveyed computerized databases and found that citations to Chandler in articles published during the years 1996 and 1997 outnumbered by a factor of 1.6 the combined total of citations to the twelve past presidents (1987-98) of the Business History Conference-a remarkable finding given the distinction of the other scholars. Hausman, "U.S. Business History at the End of the Twentieth Century," in Franco Amatori and Geoffrey Jones, eds., Business History around the World (Cambridge, U.K., 2003), 94-95. "What is truly impressive," Hausman comments, "is the range of journals containing articles that cite Chandler's work," not only in business history, but also in military, technological, regional, and agricultural history; in law reviews; and in journals of management, sociology, political economy, behavior, and public administration.
33. Joseph Schumpeter, "Science and Ideology," presidential address to the American Economic Association, American Economic Review 29 (Mar. 1949): 358-59.