Introduction
In the last quarter of the nineteenth century, large corporations began appearing in some of the most advanced industrialized nations. Experts have different opinions behind the arrival of these large corporations, and whether it will all change back again to the previous condition. Finding the most convincing reason behind this phenomenon is very interesting and requires reading an abundance of literature with different views.
As a result of my findings, I strongly believed that the evolution of transport and information costs can explain the rise of big business. In addition to this, Mokyr claimed in the paper that the changes in the cost of moving people about set the numerator of the ratio of moving people vs. moving knowledge. For this reason, the concentration of workers in large factories, department stores, and large offices continued to increase in 1850-1914. Through this essay, I will give further arguments that support my statement.
BODY
Mokyr argues that the concentration of workers under one roof depends on the ratios of costs and benefits of moving information relative to that of moving people. Before 1850, these costs only changed a little, and the emergence of the factory was due primarily to changes in the benefits that resulted from changes in the production technology. While these changes continued during the second Industrial Revolution, there were some major developments in the technology of transportation and information.
Initially, production technology continued to favor large units. The established firm came to the fore in the closing decades of the nineteenth century and technical factors were very important in its emergence. The development of railroads was one of the factor since it became not only the standard model for the next generation of large firms but also created ever-larger markets for standardized products.
On the other hand, as information technology explodes across the internet, Mokyr believed that in recent years modern communications and information technology are weakening many of the benefits that the “factory” has had over the household. Moreover, with increased female participation in the labor force and slight improvement in commuting technology, the relative costs of factories vs. home production have risen up. In contrast to Mokyr, I agree with Lamoureaux, Raff and Temin (2000), that information and transportation costs determine the location and organization of economic activity but worry that these costs all decline monotonically over time, yet the organization of business shows anything but a unidirectional trend.
According to the book “Business History” written by Franco Amatori and Andrea Colli, the evolution of transport and information costs play an important role in the rise of big business. As networks of transportation and communication emerged, these new infrastructures became the key elements in shaping the emergence of the modern form of big business both in the most advanced nations of Europe and in the United States.
To demonstrate, in Germany, the rapid expansion of railroads was intrinsically linked to the country’s industrialization. Then the railroads industry became key players for the nations. The railways helped to create a national market and a growing demand for the products of new sectors such as metallurgy and machinery. The railroads offered a means of transportation that became a fundamental component in large-scale production and distribution of goods and was a prerequisite for the emergence of big manufacturing firms. By constructing networks of rail tracks and telegraph lines, companies were finally able to exploit a truly national market and quickly meet the needs of customers in every corner of the country.
Another argument of my statement, the amount of capital required for the construction of a railway was greater than the capital necessary to start a textile factory during the preindustrial era. In Germany, railways favored the creation of the universal banks that played a significant role in the growth of the biggest firms in the country. The enormous amount of money necessary to build the railroads in the United States led to the creation of specialized investment banks. Large institutions, such as J.P. Morgan, invested heavily in the railroads prior to 1900. The pressing financial needs of the big railway companies in the United States brought about a concentration of financial markets in the second half of the nineteenth century.
In another case, the growth of the railroads necessitated new forms of corporate management. The railway companies had to manage enormous investments, to hire very large number of workers, and to coordinate their activities so as to provide for safe, efficient travel. Because of this, a fragmentation of corporate property and a systematic division of roles was born. Over a few decades, the railroad organizations showed themselves to be highly qualified to deal with new problems of running very large and complex enterprises, which leads to more big business being established.
Furthermore, telecommunications are a sector where costs have decreased significantly as well. With fiber optic cables and decreased costs for satellite use, telecommunications are accessible throughout the world, particularly through the Internet, which has made long distance communication close to free. Another significant wave of innovation involves information technologies, by the 1990s low storage costs enabled the massive diffusion of personal computers, with each new generation of computers faster and cheaper than the previous. The subsequent transformation led to important changes in decision-making processes and internal structures, changes that were essential aspects of management in the modern large corporation.
Conclusion
To sum up, the evolution in transportation and communications lowered costs and increased speed in distributing goods. As a result of this, the evolution of transport and information costs stimulate the rise of big business by helping to create a national market, meeting the needs of customers in every corner of the country, favored the creation of the universal banks, and necessitated new forms of corporate management. This turning point would not have been possible without accompanying changes in communication and transportation system.