03 May 2004  Research & Ideas

Business History around the World

One way to understand management trends and ideas today is to look at yesterday. HBS entrepreneurship professor Geoffrey G. Jones and co-editor Franco Amatori have done just that with their new book, Business History around the World.

 

While many history departments of American universities prefer to keep business as a separate discipline, HBS entrepreneurship professor Geoffrey Jones encourages the examination of history as a way to better understand contemporary management issues.

To that end, Jones and Franco Amatori, a professor at Bocconi University in Milan, co-edited Business History around the World (Cambridge University Press 2004), a report on the current state of business history worldwide. Recently Jones took time to explain the importance of this new book, to which he also contributed chapters.

Cynthia Churchwell: What inspired your work analyzing the study of business history around the world?

Geoffrey Jones: There were two main factors driving our desire to bring together this survey of the current state of business history worldwide.

First, there has been an explosive growth of research over the last decade. Ten years ago our knowledge of the history of business was heavily concentrated on the cases of the United States, Japan, Britain, Germany, the Netherlands, and Scandinavia. Since then there has been exciting new research on the business history of other European countries, especially Italy and Spain, on many Latin American countries, especially Argentina, Colombia, and Mexico, and on Chinese-speaking communities. Much of the best research is only available in local languages.

Business historians have also widened their research agendas. Understanding the evolution of the strategies and structures of large manufacturing corporations remains important, but a new generation of researchers has explored business networks, the family firm, knowledge creation and transfer, public policy and business, and a host of other topics. We wanted to bring together this new literature and perspectives and make it accessible, in English, to a broader audience.

Additionally, we felt that the moment was opportune for such a survey because the discipline of business history is at a crossroads. There are some researchers who wish the subject to be embedded firmly within the discipline of history, and to address the primary concerns of that discipline. In the United States, many history departments are currently heavily concerned with topics relating to culture, ethnicity, and gender. There is often an unwillingness to relate these important topics to business. Other scholars, including myself, perceive of business history as playing a central role in enhancing our understanding of key issues in contemporary management and business administration. The book provides a position statement of where we are now, which we hope will enrich the debate about the future direction and research agenda of the discipline.

Q: How does this new work differ from your previous research on multinationals?

A: This new book reflects my longstanding interest in the diversity of the business past. Much of my own research has been concerned with the historical evolution of multinationals. However, although research on this topic has often focused on high technology manufacturing companies, I have written extensively on the service sector, on business groups and alliances rather than hierarchical corporations, and on the different ways the entrepreneurs and firms of different countries have pursued strategies and organized their businesses. The contributors to this new book bring out this rich diversity on a much broader canvass.

Q: What have you learned about the success and impact of businesses around the world?

A: This book shows how entrepreneurs and firms have occupied center stage in driving the wealth of nations. It also demonstrates that there has never been a single model for successful or unsuccessful capitalism.

To give only one example, business and economic historians have often taken a skeptical view of the merits of family-owned and -managed firms. Harvard Business School's Alfred Chandler, the doyen of business historians, famously ascribed Britain's relative economic decline to the United States from the late nineteenth century to that country's proclivity towards family or "personal capitalism." This was contrasted with the separation of ownership and control and the growth of professional management seen in the United States. That debate continues. But this book does report compelling research that shows that, historically, family ownership and management in many countries has been a dynamic force. Leading firms such as Michelin in France, Heineken in the Netherlands, or Cargill or Mars in the United States are the tip of a huge iceberg of successful and long-lived family firms worldwide. Even today around a third of Fortune 500 companies are family controlled.

Business and economic historians have often taken a skeptical view of the merits of family-owned and-managed firms.

It may sound a simplistic conclusion that there has never been "one best way" of achieving business success. However, this historical experience stands as a powerful corrective to over-simplistic management fads and fashions, and to slavish transfers of management systems and practices that might work well in one country but can be disastrous in another.

Q: What are some of the most important similarities and differences you found in comparing British and Dutch business history? How do the histories of these countries relate to that of the United States, considering that all three have been large foreign direct investors?

A: Keetie Sluyterman and I intended our chapter comparing British and Dutch business history to be provocative. The business historians of these two countries have frequently made comparisons with the United States, and sometimes Germany. Generations of British business historians explained their country's economic "failure" by establishing what it did "wrong" compared to U.S. or German business. They then explained this by identifying idiosyncratic factors in Britain's development, such as the class system, or an alleged "anti-industrial" bias of its social elite, or the post-1945 flirtation with socialism and extensive state intervention. We maintain that comparisons which use the United States as a benchmark can be misleading. The United States is an idiosyncratic country by virtue of its size and growth, high levels of entrepreneurial energy, legalistic culture, and a number of other unusual features.

In our essay we show that the business systems of Britain and the Netherlands shared many similarities. Both countries had an imperial and mercantile heritage. Family business stayed important. The service sector was strong. Multinational activity was extensive and persistent. The two countries even shared the ownership of two of the world's largest multinationals, Shell and Unilever. Many allegedly distinctive features of British and Dutch capitalism turn out to be part of a wider pattern for countries with shared geographical positions, cultural orientations, and historical patterns of development.

It is a paradox that in a global world so much research on business history remains trapped within national borders.

There were some significant differences, however, which help to provide explanations behind the divergent performances of the two countries, especially the higher levels of productivity seen in the Dutch economy since the Second World War. The Netherlands has provided much higher levels of skill training for its workers than Britain. Dutch firms also preferred to recruit people with an engineering or technical background, while traditionally British managers were chosen on the basis of "character."

The firms and entrepreneurs of the United States, Britain, and the Netherlands have shared one common characteristic over the last 150 years—an enthusiasm for investing abroad. Historically there have been huge differences in national propensities to engage in foreign direct investment. Britain held almost one-half of total world FDI before 1914. The United States replaced Britain as the largest foreign investor after the Second World War. The Dutch were also massive foreign investors given the size of their country. Between 1914 and 1980, the U.S., Britain, and the Netherlands together accounted for between two-thirds and three-quarters of total world FDI. It was only in 1980 that German FDI exceeded that of the Netherlands, even though the former's population was four times larger.

Q: What do you think are some frontiers of business history still to be explored?

A: It is a paradox that in a global world so much research on business history remains trapped within national borders. I believe that the most productive research agenda will move away from such parochialism towards exploring key issues in an internationally comparative framework. Within this context, I would like to see attention move beyond a strong emphasis on the top-level strategy of firms towards seeking a deeper understanding of how firms work. Much management theory stresses how firm-specific resources—especially knowledge—accumulate over time, and become embedded in distinctive routines or cultures which shape the competitive advantage of firms. Business historians are in a unique position to explore this process over time, and to deepen our understanding of it.

Q: Where do you see your research taking you next?

A: I continue to be fascinated by the role entrepreneurs and firms have played in integrating national economies over the last two centuries. This global integration has driven much of world economic growth. The process explains, in part at least, the current patterns of wealth and poverty in the world today. I believe the special skills of business historians—based on their ability to look deeply inside firms over long time periods—can make a major contribution to understanding how this was done, and with what consequences.

The project I am currently working on examines the globalization of the world personal care or beauty industry over the last fifty years. It is concerned with explaining how an industry fragmented on national lines has come to be concentrated in the hands of a small number of global corporations, and in turn to consider the impact of this outcome. I hope to use the lens of this large and extremely fast-growing industry, which influences the self-image of so many people, to provide deeper insights on the business, social, and cultural dimensions of globalization.

About the author

Cynthia Churchwell is a business information librarian at Baker Library, Harvard Business School, with a specialty in international economy.