A Triumph of ‘Competitive Managerial Capitalism’? Evaluate Chandler’s ‘Visible Hand’ Thesis with Reference to the Rise of Us Business and Economy from the Late Nineteenth Century.
A triumph of ‘competitive managerial capitalism’? Evaluate Chandler’s ‘visible hand’ thesis with reference to the rise of US business and economy from the late nineteenth century.
The Chandler thesis of the ‘visible hand’ is a play on the metaphor of economist Adam Smith of the ‘invisible hand’ of the market forces of demand and supply, which were always accepted to allocate resources in a perfectly competitive market. Up until Chandler’s ‘The Visible Hand: The Managerial Revolution in American Business’ (1977), the invisible hand which describes the self regulatory nature of supply and demand was used to coordinate flows of goods through existing processes of production and distribution, and to allocate funds and personnel for future production and distribution (Chandler, 1977). It was the transition to the internalisation of business functions and departmentalisation of booming firms during the rise of US businesses and the economy that led to the growth of competitive managerial capitalism in the late nineteenth century.
Chandler’s thesis was effectively laid out by eight propositions, all of which related to the industrial boom in the United States from the middle of the 1800s, through to the turn of the century, a boom which was instigated by the construction of the railroads. The railroads were regarded as the first modern business enterprises and fitted into what Chandler named the M-Form (multi-divisional form). Because the railroads spanned the whole of the USA, Chandler (1977) explains how engineers formed companies to build the railroads during the railroad boom of the 1940-50’s, contracting smaller units (who became so big they turned to sub-contracting ) to perform each of the tasks that would have been carried out originally by one company. The first proposition is that modern multiunit business enterprise replaced small traditional enterprise when administrative coordination permitted greater productivity, lower costs and higher profits
The Chandler thesis of the ‘visible hand’ is a play on the metaphor of economist Adam Smith of the ‘invisible hand’ of the market forces of demand and supply, which were always accepted to allocate resources in a perfectly competitive market. Up until Chandler’s ‘The Visible Hand: The Managerial Revolution in American Business’ (1977), the invisible hand which describes the self regulatory nature of supply and demand was used to coordinate flows of goods through existing processes of production and distribution, and to allocate funds and personnel for future production and distribution (Chandler, 1977). It was the transition to the internalisation of business functions and departmentalisation of booming firms during the rise of US businesses and the economy that led to the growth of competitive managerial capitalism in the late nineteenth century.
Chandler’s thesis was effectively laid out by eight propositions, all of which related to the industrial boom in the United States from the middle of the 1800s, through to the turn of the century, a boom which was instigated by the construction of the railroads. The railroads were regarded as the first modern business enterprises and fitted into what Chandler named the M-Form (multi-divisional form). Because the railroads spanned the whole of the USA, Chandler (1977) explains how engineers formed companies to build the railroads during the railroad boom of the 1940-50’s, contracting smaller units (who became so big they turned to sub-contracting ) to perform each of the tasks that would have been carried out originally by one company. The first proposition is that modern multiunit business enterprise replaced small traditional enterprise when administrative coordination permitted greater productivity, lower costs and higher profits
References: Azzam, A. M., & Anderson, D. G. (1996). Assessing competition in meatpacking: Economic history, theory, and evidence. US Department of Agriculture, Packers and Stockyards Programs, Grain Inspection, Packers and Stockyards Administration. Berle, A. & Means, G. (1932) The Modern Corporation and Private Property, Transaction Publishers Best, D Burnham, J. (1942) The Managerial Revolution, Penguin:Aylesbury Chandler, A Chandler Jr, A. D. (1984). The emergence of managerial capitalism. The Business History Review, 473-503. Chandler, A. D. (1999). "The Visible Hand: The Managerial Revolution in American Business, 1977." Cambridge, MA: Belknap. Chandler, A. D., Jr., and Tedlow, R.S (1985) The Coming of Managerial Capitalism: A Casebook on the History of American Economic Institutions. Homewood, IL: Richard D. Irwin, 1985. Godley, A. (2006). Selling the sewing machine around the world: Singer’s international marketing strategies, 1850–1920. Enterprise and Society, 7(2), 266-314. Gordon, J.S. (2012) Iron and Steel Industry, The History Channel, [Online] Available at: http://www.history.com/topics/iron-and-steel-industry, Accessed: 16/01/12 Gorton, G Jones, G. & Kiron, D (2008) Globalizing Consumer Durables: Singer Sewing Machine before 1914, Harvard Business School 9-804-001 Mizruchi, M Noyes, A. D. (1894). The Banks and the Panic of 1893. Political Science Quarterly, 12-30 Olson, M (2012) Book Notes: The Visible Hand, FutureBlind, [Online] Available at: http://www.futureblind.com/2012/10/book-notes-the-visible-hand/ Accessed 18/01/13 Porter, P. G. (1969). "Origins of the American Tobacco Company." Business History Review 43(01): 59-76. Shmoop Editorial Team. (2008).The Gilded Age Summary & Analysis. Retrieved January 18, 2013, from http://www.shmoop.com/gilded-age/summary.html Swift & Company (1920) Teece, D. J. (2010). Business models, business strategy and innovation. Long range planning, 43(2), 172-194.