Information, Mediation, and Institutional Development: The Rise of Large-Scale Enterprise in British Shipping, 1870-1919

Information, Mediation, and Institutional Development: The Rise of Large-Scale Enterprise in British Shipping, 1870-1919. By Gordon D. Boyce . Manchester: Manchester University Press, 1995. xi + 346 pp. Notes, tables, bibliographical references, and index. $79.95. ISBN 0-7190-3847-2.

Reviewed by Arthur Donovan

This is a theoretically ambitious, densely empirical and intensely argued study in business history. The book's subtitle identifies its subject-British Shipping from 1870 to 1919. Its evidential base is impressive and tightly woven into the analytic narrative-company records, interviews, government documents, and published works that provide information on seventyfive shipowners and eighty-five firms. But what makes this work significant for historians not otherwise interested in the history of shipping is the alternative Boyce presents to Alfred D. Chandler, Jr.'s account of "the Managerial Revolution in American Business."

Boyce begins with an account of the well-known difference between British and American management structures in the founding period of modern industry. Business historians, following Chandler, have long noted that the American inclination to create vertically integrated corporations was to a large extent forced by antitrust legislation, a political constraint that did not exist in Great Britain. In Europe, horizontal combinations and price-fixing agreements (shipping conferences being notable examples) were acceptable although not legally enforceable forms of business practice. In the United States, however, antitrust laws prohibited such collusion. But this explanation of difference does not address the historical significance of the new form of vertically integrated and administratively centralized management that emerged in America. Did Chandler's "Managerial Revolution" mark the appearance of a new form of organization so powerful and progressive that all industries incapable of or unwilling to adopt it deserve to be characterized as weak and in decline? Boyce thinks not. Older ways of doing business could still be highly successful when employed in suitable industries and environments.

British shipping in this era certainly was a successful industry. By the middle of the nineteenth century Britain had repealed her Navigation Acts and was championing free trade in ocean commerce; from 1870 to 1919, as Boyce notes, British shipping grew more rapidly than manufacturing and Britain had the world's largest and most efficient merchant marine. And as he also points out, the culture of the firm in British shipping was "externally oriented" and dominated by an incessant yet flexible use of contracts. If Boyce had Chandler's flair for titles, he might have called his book The Persistence of the Invisible Hand.

Everything described thus far merely sets the stage for Boyce's main concern, which is to present "a complementary yet alternative framework to Chandler's transaction cost approach" (p. 2) to the analysis of management structures and operations. Boyce's constructive theoretical contribution to business history is substantial and suggestive. His book's title provides a rather opaque indication of his theory's key elements. The main task of shipping companies was to mediate between the market and the firm. The means by which they did so was the contract. Decision making, as in the forming of alliances and the commitment of resources, was dependent upon acquiring and evaluating relevant knowledge in a timely manner. Boyce argues that how such knowledge was obtained, assessed and shared can best be explained by utilizing principal-agent theory. From these starting points he constructs a compelling account of the structure and operation of British shipping firms during the heyday of British maritime hegemony.

The theoretical approach Boyce develops shifts the analytic focus in ways he is at pains to make explicit:

The chief difference between Chandler's framework and the principal-agent approach . . . lies in the range of information channels examined to explain institutional change. Chandler focused on how formal communication lines, as the underpinning of firm structure, adjusted to accommodate new strategic goals. Principalagent theory considers not only internal conduits, but also channels that extend beyond the firm's frontier. When these extra-firm links are included in business analysis they give rise to a conception of a firm with a penetrable boundary. This, in turn, makes it possible to probe the operations of intermediate contractual arrangements and to gain a wider understanding of the range of organizational alternatives . . . Far from being residual factors in relation to technology, markets and legal prescriptions, social and cultural elements are central to contracting for they determine rules, values, and bases of trust . . . Our approach places culture at the centre of analysis.... (p. 312)

Although written in a highly compressed style, this is an informative and rewarding book. Much of what Boyce says about British shipping was also true of shipping firms in America, or at least those that did not depend fundamentally on government subsidies. His contrast between the contracting culture of shipping firms and the internalized administrative culture of manufacturing firms is especially insightful. The tension between these two forms of organization can be seen as rooted in two different ways of organizing transport, for as Chandler emphasized, the pattern for centralized management was first worked out by the consolidated railroad corporations. Today, as the different modes of surface freight transportation are being consolidated into a small number of intermodal companies, cultural tensions persist between the styles of management used in railroads and in maritime shipping. Boyce's fine history of a central period in modern shipping helps explain why.

[Author Affiliation]

Arthur Donovan teaches history at the U.S. Merchant Marine Academy in Kings Point, New York. Primarily a historian of science and technology, his most recent book is a biography of the eighteenth-century chemist Antoine Lavoisier (1993). He is now working on several maritime topics, including federal maritime policy and the post World War II container revolution in shipping.