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The Lessons of Business History

The Lessons of Business History

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Published by Irum Mehvish
The Lessons of Business History: A Handbook
The Lessons of Business History: A Handbook

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Categories:Types, Business/Law
Published by: Irum Mehvish on May 25, 2011
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The Lessons of BusinessHistory: A Handbook 
Q&A with: Geoffrey G. Jones Published: March 17, 2008 Author: Sean SilverthorneCompiling a handbook on the currenthinking in any area of study seems daunting enough, but the just-published Oxford  Handbook of Business History carries an evenlarger mission: bring the lessons of businesshistory to current research in other disciplinesand to the practice of business management itself. A Q&A with coeditor 
Geoffrey Jones
. Key concepts include:Business historians over recent decadeshave generated rich empirical data on firmsand business systems that can confirm or challenge many of today's fashionabletheories and assumptions by othedisciplines.Business history has broadened its scope inthe last two decades by including researchon corporate governance, industrial districts, business groups, business culture,business education, skills training,accounting and information systems, design,and engineering.Historical knowledge helps us to trulyunderstand business, but the growinahistorical nature of much management and economics literature has seriouslycompromised its legitimacy.The business history literature is extremelyweak in Africa, and not much better in Latin America, many Asian countries, and theMiddle East.
Confined
to specialist journals and books, business history research too often lacks theimpact it should have on the research and practice of business management and the socialsciences, according to the editors of the newly published
Oxford Handbook of Business History
.The
provides an overview of  business history research worldwide aimed at both researchers and practitioners, addressingchallenging issues such as globalization,entrepreneurship, corporate governance,technology and innovation, and economictheory and development.Over the last few decades, businesshistorians have generated rich empirical datathat in some cases confirms and in other casescontradicts many of today's fashionable theoriesand assumptions by other disciplines, saysHarvard Business School professor GeoffreyJones, who edited the volume with Universityof Wisconsin-Madison professor JonathanZeitlin.But unless you were a business historian,this data went largely unnoticed, and theconsequences were not just academic."This loss of history has resulted in thespread of influential theories based onill-informed understandings of the past," saysJones.For example, current accepted advice is thatwealth and growth will come to countries thatopen their borders to foreign direct investment."The historical evidence shows clearly that thisis an article of faith rather than proven by thehistorical evidence of the past," says Jones.We asked Jones to discuss the current stateof business history.
Sean Silverthorne: What is the purposeof the book, and who is the intendedaudience?Geoff Jones:
The purpose of this book is to provide a state-of-the-art overview of businesshistory research worldwide. It seeks to speak toresearchers in management, economics,sociology, and history who want to know aboutthe latest research in business history, as well asto a wider audience beyond academia, including practitioners, who are interested in learningfrom the past of business.Handbooks such as the Oxford series perform a useful role in making disciplinaryresearch accessible to nonspecialists.Academics have a growing tendency to pursueever-narrower research agendas and to talk  primarily to their own discipline, resulting in achronic problem of knowledge existing in silosand different disciplines reinventing wheels.This problem particularly affects businesshistory, making this handbook especiallysignificant. Business historians over recentdecades have generated rich empirical data onfirms and business systems. They can in somecases confirm, and in others challenge, many of today's fashionable theories and assumptions byother disciplines. Yet for a number of reasonstheir research rarely permeates into wider literatures.
Q: Why does business history researchremain in a silo?A:
I think there are at least three reasons.First, business historians often write big books on big issues, whilst the preferred outletfor much management and social scienceresearch is specialist, peer-reviewed journals.Second, much research takes the form of case studies and is often qualitative rather thanquantitative. In disciplines where standardizedsocial science methodology, especially multipleregressions, has become the accepted norm of rigor, it is hard to understand the significance of this empirical literature, and quite easy todismiss it as anecdotal and unscientific.Third, many business historians still work within national frameworks. As a result, muchliterature is placed within the context of thehistories of particular countries rather thanaddressing analytical issues, such as why firmsgrow big. Moreover, whilst English may betriumphant in the world of business, in theworld of business history, scholars still write inlocal languages. There is a rich literature onJapanese business history in Japanese and onLatin American business history in Spanish, aswell as a good understanding of European business history that requires knowledge of multiple languages.
"This loss of history hasresulted in the spread of influential theories baseon ill-informeunderstandings of the past."
As editors, Jonathan Zeitlin and I insistedthat the contributors of our chapters focus onkey issues and not national frameworks, and ata minimum address the literature generated in North America, Europe, and Asia, and ideallyelsewhere. The references in almost everychapter contain multiple citations to literatures
COPYRIGHT 2007 PRESIDENT AND FELLOWS OF HARVARD COLLEGE 1
 
not published in English.
Q: The foundational research by the lateHBS professor Alfred Chandler isacknowledged in essays throughout the book,but is also sometimes contradicted. How havecurrent research agendas built upon ormoved beyond Chandler's work?A:
The foundational nature of Al Chandler'sresearch is widely confirmed throughout theessays of the
Handbook 
. Chandler was primarily concerned with understanding thegrowth of large, diversified, and professionallymanaged firms from the late 19th century. Thegrowth of big business, and its role ingenerating innovation and wealth, remains acentral topic of research in business history,reflecting of course its continued importancetoday.Yet it is immediately apparent from thetitles of the 25 chapters in the book that business historians have become concernedwith a much wider set of issues. Some of these,such as marketing, entrepreneurship, and therole of the state, also concerned Chandler, butthey were not central to his concerns. There arealso chapters on topics that Chandler had littleor nothing to say, including corporategovernance, industrial districts, businessgroups, business culture, business education,skill training, accounting and informationsystems, design and engineering, and so on.Business history has widened its scopeenormously in the last two decades.A striking feature of the research reviewedin the
Handbook 
is that so much of it concernsthe period since 1950. Chandler's primaryhistorical research covered the era between1850 and 1950, when big business emerged andgrew spectacularly, and when the United States became the world's largest economy. There isan underlying assumption in Chandler's work that the United States and large, professionallymanaged firms represent the normative modelto which the rest of the world is marching as aresult of the imperatives of technology andmarkets. Over the last two decades, as the boundaries of firms became much more fluidand as non-U.S. players became much moreimportant, it has become clearer that in fact theclassic Chandlerian firm should be better seenas the product of a specific historical era and a particular place, essentially the United States.The chapter on family firms shows that theycould be as successful or more so than themanagerial firms that Chandler considered to beoptimal. The chapters on business groups andeven cartels treat them as valid and oftensuccessful forms of business enterprise rather than inferior options to large, verticallyintegrated firms.
Q: Is there a major theme runningthrough the book?A:
For me, a major theme is the importanceof historical knowledge in truly understanding business, and how the growing ahistoricalnature of much management and economicsliterature has seriously compromised itslegitimacy.In a well-documented process, the spread of quantitative and standardized social sciencemethodologies has driven business andeconomic historians from economicsdepartments and journals, and from manysecond-tier business schools. This loss of history has resulted in the spread of influentialtheories based on ill-informed understandingsof the past. As Gary Herrigel's chapter oncorporate governance argues, much of thecontemporary literature distinguishing sharply between dispersed/outsider (e.g., UnitedStates/United Kingdom) andconcentrated/insider systems (e.g.,Germany/Japan) is problematic, because inreality countries have historically both moved between different systems and, moreimportantly, combined elements of differentsystems for long periods.
"The history o globalization warns against easy assumptions on thelinearity of globalization."
Another instance is the highly influential"law and economics" literature, whichemphasizes the importance of the common lawtradition in protecting minority shareholders incontrast to the civil law tradition, and instimulating financial and economicdevelopment. This has sometimes been used toexplain why the United States performed somuch better economically than Latin America.Yet there is now a formidable amount of evidence from business history, not least theoutstanding research by Harvard BusinessSchool's Aldo Musacchio in the BGIE Unit,showing that this hypothesis has little empiricalsupport. A careful study of 19th-century Frenchand American law, for example, found littledifference between the two countries in thelegal system's responsiveness to businessorganizational needs. Indeed, U.S. law offeredentrepreneurs fewer options on how to organizetheir businesses.
Q: In an essay you write that"globalization is a central issue, and perhapsthe central issue, in business history." Whathave business historians contributed to thestudy of globalization, and what can theycontribute to our current understanding?A:
It is seldom recognized how early business historians have been in identifyingissues that later become highly fashionableamong management scholars.Of course it is well-known how muchstrategic management and the resource-basedtheory of the firm owe to Chandler, but thereare other important examples. For example,during the 1950s Harvard's Research Center inEntrepreneurial History, organized by HBS business historian Arthur Cole, laid thegroundwork for the academic study of entrepreneurship.The study of globalization provides another example. Mira Wilkins published a major studyof the globalization of Ford in 1964, only four years after the word "multinational" was coined.Her study of the growth of Americanmultinationals from the colonial era to 1914was published in 1970. Its analysis of why andhow firms globalize would only be much later formalized in the economic theory of themultinational enterprise, and it would take afurther 20 years before the mainstreameconomics profession would identifyglobalization and global firms as a topic of realimportance.
"Many of the most pressinunanswered questions inbusiness history centearound entrepreneurship."
A succession of other "firsts" followed,including major studies of the globalization of services whilst most of the literature remainedfocused on manufacturing, and of diasporaentrepreneurship years before it became of interest because of recent attention on Indianand Chinese entrepreneurs in the United Statesand elsewhere.As I write in my essay in the
Handbook 
, andhave explored in other work with my HBScolleague Tarun Khanna, the history of globalization delivers a rich set of data for current debates and literature on globalization.At the crudest level, historical evidence avoidsspurious labeling of some phenomena as "new,"and by so doing can challenge currentexplanations of their determinants. Historicalevidence is crucial to exploring the causalrelationship between foreign direct investmentand long-run economic development. Today'sworld policy advice to all countries, and evenmore so to poor ones, is to open their borders toforeign multinationals because they willgenerate wealth and growth. The historicalevidence shows clearly that this is an article of faith rather than proven by the historicalevidence of the past. Or more precisely, therehave been a wide variety of outcomes, but one persistent generalization is that foreign directinvestment does not bring sustainabledevelopment unless the host country has a business system that is able to learn and absorbnew knowledge, and an appropriate public policy framework.At the broadest level, the history of globalization warns against easy assumptionson the linearity of globalization, as businesshistorians have shown how the world globalized
HARVARD BUSINESS SCHOOL | WORKING KNOWLEDGE | HBSWK.HBS.EDUCOPYRIGHT 2007 PRESIDENT AND FELLOWS OF HARVARD COLLEGE 2

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