Small Firms, Large Concerns: The Development of Small Business in Comparative Perspective

Small Firms, Large Concerns: The Development of Small Business in Comparative Perspective

Small Firms, Large Concerns: The Development of Small Business in Comparative Perspective

Small Firms, Large Concerns: The Development of Small Business in Comparative Perspective


Economic stagnation in the 1970s heavily influenced public perception of small business in the industrialized world. Suddenly, small businesses were seen as the dynamic creator of new jobs, as a source of new technology, as a flexible mode of organization able to outmanoeuvre larger firms, and as an important key to community revitalization. Because of its inherent diversity and complexity, however, small business does not easily lend itself to traditional quantitative consideration, and relatively scant scholarly attention has been paid either to the role of small business in the wider economy or to potentially valuable international comparison. In Small Firms, Large Concerns, G-7 researchers and scholars follow the process of small business development in North America, Europe, and Japan. They examine economic growth and social stability; the links between small and big business; and the resilience and vulnerability of small business management. Fuji Business History series General Editor: Professor Akira Kudo, Institute of Social Science, University of Tokyo Series Adviser: Professor Mark Mason, Yale University This is the third volume in the collaboration between OUP and the Business History Society of Japan to publish the `Fuji Conference Series' under the general editorship of Professor Akira Kudo. The series itself has been established for more than twenty years and is a major international forum for scholars from Asia, Europe, and North America. Books in the series were formerly published by the University of Tokyo Press.



The Concept of Small Business

Small business is a generic concept. Being the antonym of big business, its social significance becomes clearer when placed in the historical context where the latter first appeared in the world economy.

Big business became conspicuous in the US economy in the second half of the nineteenth century, especially after the 1890s when the wave of corporate mergers swept the country:

... it is during these closing years of the nineteenth century that one can first speak of the mass demand of a national urban market, a market brought into being by the railroads and by legal change, and sustained in effectiveness by rising per capita incomes. (Bruchey 1980: 11)

Mass-production methods were then introduced after the turn of the century, as best exemplified by the phenomenal success of Ford's Model T, produced at the company's Highland Park plant beginning in 1913 (cf. Hounshell 1984: 9). As noted by Peter Drucker (1946/1960), Ford's method demonstrated for the first time that 'under conditions of modern technology, the maximum profit is obtained by maximising production at the minimum cost' (p. 220).

Mass production, characterized by 'the principle of power, accuracy, economy, system, continuity; speed, and repetition' (Ford 1950: 38)

... includes the factory as a logistic concept, division of labor as an organizational concept, the special-purpose machine tool as a technological concept, scientific management as an intellectual concept, and fabrication from interchangeable parts as a concept at once logistical, organizational, technological, and abstract. (Mayr and Post 1981, p. xvi)

It is probably no coincidence that the 1900s and the 1910s were identified by W. W. Rostow (1960: 75-6) as the period of mass-consumption-come of- age in the USA. Relevant to the phenomenon was the thesis put forward by Alfred Chandler (1977: 486), according to which mass production was distinguished from its predecessors by its administrative co-ordination with mass distribution.

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