Category Archives: Business & Management

Reconstructing the B-School

Clio in the Business School: Historical Approaches in Strategy, International Business and Entrepreneurship

by Andrew Perchard (Stirling), Niall Mackenzie (Strathclyde), Stephanie Decker (Aston) and Giovanni Favero (Venice)

On the back of recent and significant new debates on the use of history within business and management studies, we consider the perception of historians as being anti-theory and of having methodological shortcomings; and business and management scholars displaying insufficient attention to historical context and privileging of certain social science methods over others. These are explored through an examination of three subjects: strategy, international business and entrepreneurship. We propose a framework for advancing the use of history within business and management studies more generally through greater understanding of historical perspectives and methodologies.

Keywords: History, strategy, international business, entrepreneurship, methodology

Freely available for a limited time at: Business History, 59(6): 904-27

Review by Mitchell J. Larson (University of Central Lancashire)

Recently Martin Parker (Bristol) has taken to the airwaves promoting the idea of bulldozing the business school. In sharp contrast, Andrew Perchard, Niall McKenzie, Stephanie Decker, and Giovanni Favero make a compelling case for certain disciplines in the management sciences to open themselves to alternative methodological and epistemological approaches. They argue that the fields of strategy, international business, and entrepreneurship have not embraced historically-oriented research to the same extent as other fields within business and management studies. The authors also admit that many scholars conducting historical business research have not made a sufficiently solid case about the robustness of their historical methodology(s) or data to convince other social scientists about the validity of their claims. Drawing upon an impressive range of previous works to develop their discussion, the paper attempts to reconcile these discrepancies to highlight how a more explicit articulation of the historian’s process could overcome the concerns of ‘mainstream’ management scholars regarding theorization and methodology in these three fields specifically and in management studies generally.

One major concern held by non-historians is that historical work illustrates an alleged a-theoretical or even anti-theoretical nature of scholarly writing (Duara, 1998). A second major concern is that historical methods (i.e. of data collection) are not sufficient grounds upon which to base management theory. The authors demonstrate the complexities of these issues with respect to existing historical work in business and management studies, such as the ‘cherry-picking’ of outlier events to support a more general point – especially by scholars in other fields applying historical methods rather casually – and place responsibility upon business and management historians to make their process(es) more transparent and explain themselves and their work better to other social scientists. The article claims that the “continuing distinctions drawn between the primary data created by social science research…with the collection of ‘secondary’ documentary evidence in archives…are misleading.” (p. 915). Whereas social science researchers will be aware explicitly about potential sources for bias in their data and often include discussions about this in their work, the historical process ‘internalizes’ these judgements and thus appears to hide them from the reader. The discipline of history, so accustomed to the individual historian’s assessment of the materials being examined, assumes that with satisfactory preparation the historian’s assessment will be reasonable based on her (or his) knowledge of the historical context, the actors involved, and assumptions about the rationality and practicality of the various decisions that might have been made at any particular point in the timeline. But it is this internalization of decision-making and assessment which so troubles non-historians and why the authors call for business and management historians to “more clearly articulate the methodologies adopted by historians to show the value of history to business and management studies…” That there is value to be realized is shown through the acceptance of historical approaches by other branches of the management studies arena, and their point is that these three sub-fields have been slower to warm to their use than others.

The major difficulty here lies in the way data are encountered: the social scientist generates new ‘primary’ data through his or her interaction with respondents whether actively (through interviews or questionnaires) or passively (through observation). Given the nature of historical work, of course this style of primary data generation is seldom possible: all the protagonists are gone and even the organization(s) to which they were affiliated may have disappeared or transformed beyond anything the historical actors could have imagined. Indeed even the labels of what constitutes ‘primary’ and ‘secondary’ data differ between historians and other groups of social scientists. What the historian then faces is piecing together traces of the past much like an archaeologist might do when exploring new ruins. The main difference is that the business historian deals with written records while the archaeologist deals with physical remains, but in both cases often as much (or more) remains hidden as is brought to light in the process of discovery. This process, and the gaps in data continuity that it allows, appear to bother social scientists whose epistemological approach is steeped in the rationalist arguments of the physical sciences and applies only to the data they have actively sought to collect. That other elements can be discarded as irrelevant to the analysis likewise troubles historians for whom contingency and context are vitally important pieces of the story.

There are a number of significant factors here which the article discusses at some length, but what is striking about the discussion is that there is, perhaps ironically, seemingly little consideration for how these disciplines arose and evolved over time and whether these differences in development might be at the root of the issue. History as an activity reaches back to antiquity but the modern discipline of history received fresh articulation in the early nineteenth century. In contrast, the fields one might ascribe to the ‘social science’ area relevant to business and management (anthropology, communications, economics, geography, sociology, and psychology, for example) tend as a group to be newer and as part of their growth had to justify space in the academic environment for themselves. The process of doing so led these fields to ally themselves with the methods and approaches of the physical sciences to gain scientific credibility in a way that the traditional subject of history never did. The discipline of history, and by extension business and management history, is now playing a catch-up game to find ways to articulate and justify its value as a discipline in the face of criticism from practitioners in other fields. Perchard et. al. try to move this process forward by explaining to historians how their work could or should be explained differently (not necessarily done differently) to assist non-historians in assessing and appreciating its value. Here they remind us of the work of Andrews and Burke (2007) whose ‘five Cs’ (change over time, causality, context, complexity, and contingency) provide a useful guide to help non-specialists appreciate the aspects that historians are likely to fix upon as explanatory variables. The authors also point to the work of Jones and Khanna (2006) and Maclean, Harvey, and Clegg (2016) as helpful in making historical work relevant to mainstream business and management studies.

The article is a valuable contribution to the on-going effort to bring management and business historians closer to those studying and theorizing about management and business activity. Its relevance touches on a number of critical issues both in the academic field of study and related to the career development of those engaged in this kind of research.

References

Andrews, Thomas and Burke, Flannery (2007), “What Does it Mean to Think Historically?”, Perspectives in History, available at: https://www.historians.org/publications-and-directories/perspectives-on-history/january-2007/what-does-it-mean-to-think-historically

Duara, Prasenjit (1998), “Why is History Anti-theoretical?”, Modern China, 24(2): 106.

Jones, Geoffrey and Khanna, Tarun (2006), “Bringing History (Back) into International Business,” Journal of International Business Studies, 37(4): 453-68.

Maclean, Mairi, Harvey, Charles and Clegg, Stewart (2016), “Conceptualizing Historical Organization Studies,” Academy of Management Review, 41(4): 609-32.

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Palm Oil, Rubber, and Colonialism

The Emergence of an Export Cluster: Traders and Palm Oil in Early Twentieth-century Southeast Asia

by Valeria Giacomin (Harvard-Newcomen Fellow in Business History during 2017/2018)

Abstract: Malaysia and Indonesia account for 90 percent of global exports of palm oil, forming one of the largest agricultural clusters in the world. This article uses archival sources to trace how this cluster emerged from the rubber business in the era of British and Dutch colonialism. Specifically, the rise of palm oil in this region was due to three interrelated factors: (1) the institutional environment of the existing rubber cluster; (2) an established community of foreign traders; and (3) a trading hub in Singapore that offered a multitude of advanced services. This analysis stresses the historical dimension of clusters, which has been neglected in the previous management and strategy works, by connecting cluster emergence to the business history of trading firms. The article also extends the current literature on cluster emergence by showing that the rise of this cluster occurred parallel, and intimately related, to the product specialization within international trading houses.

Freely available at Enterprise and Society, Volume 19, Issue 2, June 2018, pp. 272-308

Review by Helena Varkkey (University of Malaya)

In this article, Giacomin presents an archive-based historical analysis of how palm oil became one of the most important traded commodities from Southeast Asia to the world in the early- to mid-1900s. She uses the cluster (defined as a “geographically proximate group of interconnected companies and associated institutions in a particular field, linked by commonalities and complementarities”) approach to explain how the organizational structure of the pre-existing rubber cluster in the Malay peninsula (at the time a British colony) and Sumatra (under the Dutch) formed the basis for an emerging palm oil cluster in the same geographical region.

The first part of her paper focuses on how the regional rubber cluster structure developed. While the literature commonly credits unique local factors in the development of such clusters, Giacomin instead looks at nonlocal factors: (1) mainland Chinese traders that controlled regional trading routes from major Southeast Asian ports and brought in low-skilled tappers and harvesters from surrounding territories, and (2) Western traders that brought in capital inputs (seeds, machinery and finance) and highly-skilled human resources (estate managers and engineers) from Europe and other parts of the Empire and established headquarters in major European trading ports, allowing them to access crucial market information on demand. Both of these foreign merchant communities congregated in the emerging trading hub of Singapore, strategically located in between British Malaya and Dutch Sumatra, and developed a mutual dependency: Chinese contacts were vital for Western traders wanting to run a business in the Eastern colonies, while the Chinese needed Western traders to scale up their region-based commercial activity to a global scope.

The second part of the article explains how palm oil became the “spin-off” crop of the rubber cluster in the region. During the natural rubber boom in the early 1900s, the Malaya-Sumatra rubber cluster became over-dependent on this export and thus over-specialised in terms of existing practises, agronomic knowledge (through R&D agencies like the Rubber Research Institute), and coordinating institutions (eg. the Rubber Growers’ Association). When the advent of synthetic rubber in the 1920s caused natural rubber prices to fall, companies desperately looked to diversify their production to recoup and replace their losses. However, this over-specialisation meant that they could consider only a limited range of crops similar to rubber for diversification. As it happened, the rubber estate structure could be conveniently repurposed for into oil palm estates. Furthermore, the oil palm flourished in a much narrower latitude span compared to rubber, giving confidence to companies that the demand for palm oil would be more sustained since supply would be more limited.
Giacomin concludes that even though the literature often regards over-specialisation as fatal, in the case of the Southeast Asian rubber cluster, this serendipitously led to the emergence of one of the most enduring regional clusters serving the global economy. Today, Indonesia and Malaysia account for over 90% of global palm oil exports.

While the significance of the rubber sector in paving the way for palm oil in Malaysia and Indonesia is well known, this paper remains an important and significant addition to the current literature, not only on general business management and strategy, but also more specifically in terms of (1) palm oil expansion and development and (2) agricultural systems (estate vs. smallholdings).

Firstly, the specific role of nonlocal (especially Chinese) entrepreneurs in connecting the production areas in this region to the consumption areas in the West was previously not well understood. In the context of the “global north” and “global south”, palm oil can be considered a uniquely “southern” vegetable oil. Compared to other oils like sunflower, rapeseed, and soya bean, the production, major business players, beneficiaries and direct impacts of palm oil is situated more comparatively in the global south. Giacomin alludes to this in reference to the narrow latitude where oil palm can be grown. This northern/southern framing has coloured much of the recent debates and controversies over palm oil today. This paper’s analysis on the historical role of Chinese merchants is especially useful in further informing the idea of palm oil as a “southern” oil, while at the same time, the equally important role of the Western merchants that Giacomin highlights may be useful in moderating certain northern arguments in this ongoing debate.

Secondly, the historical nature of Giacomin’s analysis of this sector is especially timely in the current period where other regions, like West Africa and Latin America, are looking to increase their global trading share of palm oil. Giacomin mentions that even though the oil palm originated from and was first produced commercially in West Africa during colonial times, Western African territories were unable to effectively penetrate global markets because they did not display the same institutional cohesion across neighbouring territories, something that Southeast Asia managed to do through the pre-existing rubber cluster. This “cluster” model may thus provide an exemplar to be used by emerging palm oil production regions and companies as an effective way to possibly break the current oligopoly (Indonesian and Malaysian firms) which is the palm oil industry. Especially for West Africa, which is considered the current “greenfield” area for palm oil outside Southeast Asia, current strategies can be developed to avoid past mistakes.

Finally, Giacomin’s analysis of early smallholders is useful to inform current discussions on the ideal agricultural systems for oil palm. Her paper argues that in the mid-20th century, the fact that the palm oil was an estate crop (involving high costs and favouring large-scale production) provided a solution to the problem previously faced by rubber companies that were facing competition from and losing market share to rubber smallholdings. While this might have been the case historically, oil palm today has been successfully adapted to the smallholder model in both Indonesia and Malaysia, with a significant share of both countries’ production (about 40% each) coming from either organised or independent smallholders. Giacomin’s analysis stops at the early decolonialisation period, before the newly independent nations began to formulate oil palm smallholder schemes as a strategic tool for rural development and poverty eradication for both countries. Her analysis however can serve as a useful starting point in the ongoing debates on if and how both the estate and smallholder systems can co-exist efficiently and in harmony.

Overall, this paper is a valuable piece of business history that helps to further shed light on a controversial agro-economic sector often shrouded in secrecy. The fact that palm oil continues to be a hot topic worldwide today underlines the relevance and importance of such forays into history to inform the present.

A Conceptual Framework for New Entrepreneurial History

Reinventing Entrepreneurial History

By R. Daniel Wadhwani (University of the Pacific, USA) and Christina Lubinski (Copenhagen Business School, Denmark)

Abstract: Research on entrepreneurship remains fragmented in business history. A lack of conceptual clarity inhibits comparisons between studies and dialogue among scholars. To address these issues, we propose to reinvent entrepreneurial history as a research field. We define “new entrepreneurial history” as the study of the creative processes that propel economic change. Rather than putting actors, hierarchies, or institutions at the center of the analysis, we focus explicitly on three distinct entrepreneurial processes as primary objects of study: envisioning and valuing opportunities, allocating and reconfiguring resources, and legitimizing novelty. The article elaborates on the historiography, premises, and potential contributions of new entrepreneurial history.

Keywords: entrepreneurship, entrepreneurial processes, history, theory, temporality, uncertainty, agency, opportunity, resources, legitimation

URL: https://doi.org/10.1017/S0007680517001374

Business History Review, 2017, 91 (4): 767-799 – doi:10.1017/S0007680517001374

Review by Nicholas D Wong (Newcastle Business School, Northumbria University)

This article by Wadhwani and Lubinski proposes the reinvention of ‘entrepreneurial history as a research field’ with the aim of promoting greater ‘conceptual clarity’ between comparative studies and dialogue amongst scholars in the field. This engaging and well-written paper provides a new way of considering entrepreneurial activities over time with the emphasis placed on the processes that drive entrepreneurship rather than the individuals or institutions. Following a call to arms for history to join other social sciences (“management, economics, sociology, finance and anthropology”) in developing a distinct sub-field for the study of entrepreneurship the authors provide a neat structure to the paper which begins by providing an historiographical assessment of the strengths and weaknesses of what they term the “old entrepreneurial history”. This is followed by an insight into the parameters of the concept of “new entrepreneurial history”; one which considers the development temporally and defined succinctly as “the study of the creative processes that propel economic change”. This conceptualization foregrounds entrepreneurial processes rather than focusing on particular actors, institutions, or technologies.” The third section develops a set of core processes that frame the object of study in entrepreneurial history, “(i) envisioning and valuing opportunities, (ii) allocating and reconfiguring resources, and (iii) legitimizing novelty”. The paper concludes by highlighting the important contributions new entrepreneurial history can make to the field of business history.

‘So that’s my presentation. When do I get the half million dollars?’

In assessing the historical foundations of entrepreneurship, the authors follow the well-trawled path through the German Historical School of Schmoller and Weber and ultimately on to Schumpeter which, over time, helped promote the concept of “historical change focussed on entrepreneurial processes”. It was perhaps Schumpeter more than any other who ardently proclaimed the centrality of history in enabling the understanding the role of the entrepreneur as the driving force of capitalism and “central to the operation of markets and the dynamics of economies”. However, despite the strength of scholarship that developed during the immediate post-war period, the authors highlight how the field of entrepreneurial history dissipated in later decades being replaced by formulaic, normative and structured research that was “increasingly focussed on how norms, laws and other institutions shaped entrepreneurial roles and functions”. The authors highlight how this approach ultimately led to the demise of the field in the late 1960s as Chandlerian theory on organisational form and managerial hierarchies dominated business history. The 1970s and 80s saw entrepreneurship studies receive increasing attention from business-people and policy makers alike as a way of understanding how economies and markets operate (and what drives them). However, it was still largely ignored by business historians.

To demonstrate the difficulty for historically-orientated scholarship in defining and framing the concept of entrepreneurship, the authors provide some quantitative analysis of the number of articles published in Business History Review during the period 1954-2015 which mention entrepreneurship in the full text, including references. The figures are startling, with only 44 of 1044 featuring the term ‘entrepreneurship’ and when excluding the phrase appearing in citations this figure reduces to only twenty-six articles. This provides clear evidence of the lack of engagement with entrepreneurship by business history scholars. Moreover, of those articles that directly use the term, ‘entrepreneurship’, there is a general lack of clear definitions (most rely on Schumpterian definition, whilst more recently, Mark Casson’s definition has been widely-used). The authors use this evidence to demonstrate the lack of engagement in entrepreneurial studies (beyond the individual entrepreneur at least!) in business history. This is interesting research method although it could possibly have been improved by extending the analysis into other prominent business history journals such as Business History or Enterprise and Society – this would have strengthened the conclusions drawn from this section of the study. This section finishes by highlighting how historians have tackled entrepreneurship in recent years, with Popp, Raff, Amatori, Friedman, Jones and others using a variety of approaches including biography, microlevel process (such as agency over time) and macrolevel approaches which consider the consequences of entrepreneurship for structural change (such as the industrial revolution or globalisation).

“You told him he should start his own business.”

Following the illuminating section on the historiography of entrepreneurship, the next section tackles the concept of entrepreneurship as it relates to field of history. Here the authors provide a succinct and applicable definition of entrepreneurial history: “the study of the creative processes that propel economic change”. Here they are keen to point out that, “the definition focuses on the study of entrepreneurial processes and their relationship to change”. They provide three key premises that link entrepreneurial history to historical change over time: the temporal foundations of agency; multiplicity in the forms of value; and the collective and cumulative character of entrepreneurship. With reference to the first premise, the authors cite the work of Popp et al., and Beckert, by suggesting that understanding entrepreneurial agency “hinges on examining the processes by which they envision and pursue futures beyond the constraints of the present context”. Here they are making clear linkages to the concept of forward projection, that being the idea that the study of entrepreneurial history requires the researcher to understand the necessity of entrepreneurs to think-forward and plan for an “unpredictable future”. This is a novel approach, although it is reliant on a particular set of sources that work as evidence for qualitative research that can enable the historian to penetrate the mindset of the entrepreneur. The two papers cited by Popp and Holt both rely on extensive sets of letters between entrepreneurs and their familial, social and business networks which help construct a picture of the entrepreneur and the strategic forward planning for key developments such as succession, diversification, or international expansion. The second premise, multiplicity in the forms of value, suggests that entrepreneurs can find value beyond baseline profitability. Here the authors infer that entrepreneurs can seek future forms of (non-economic) value such as civic, environmental, academic, and industrial. This again is linked to the idea that the pursuit (or accumulation) of intangibles such as reputational and social capital can provide competitive advantage in the market place and, perhaps, can be considered as entrepreneurial as innovation, expansion and diversification. The final premise, the collective and cumulative character of entrepreneurship, refers to the domino effect of entrepreneurial opportunities that provide the foundation for, and provoke, further streams of entrepreneurship. This is linked to the notion that entrepreneurs have a sense of collective identity and the idea that “they belong to a generation, group or epoch”. The importance of this premise is that it moves away from what the authors refer to as the “heroic individual”. Here, new entrepreneurial history calls for further analysis of “cumulative entrepreneurial processes across multiple actors over time that propel historical change”.

The third section of the article points to processes that act as primary objects of study in entrepreneurial history. The first of these, envisioning and valuing opportunities, is linked to the classical characteristics of entrepreneurship such as forecasting market changes, seeking new opportunities, accessing and creating new technologies, exploiting new markets/territories and developing new practices. However, the authors highlight how new entrepreneurial history deviates from the old forms by explaining how the new opportunities are enacted rather than discovered. This is because actors define value and worth in different ways and this changes over time. The second process is allocating and reconfiguring resources; here they suggest that entrepreneurial history can “explore the processes and mechanisms by which actors allocated and reconfigured resources towards uncertain, future ends”. This section highlights the value of history in analysing the process and motivation for entrepreneurs to influence macro-level developments in terms of institutional or societal change and how this influences their allocation of resources. The final process identified by the authors, legitimizing novelty, builds on the previous processes as, in their view, legitimacy can pose ‘a problem in the entrepreneurial process because the new forms of value and new combinations of resources entrepreneurs introduce often fail to conform to widely shared expectations regarding rules, norms, beliefs, and definitions. Legitimation processes thus form another important focus of research in entrepreneurial history”. The key contribution of the historian in this area is understand the process of legitimation and to analyse how and why societal or institutional change occurs over time.

Congratulations on starting your own firm.

In terms of the potential contributions that new entrepreneurial history can make the authors have compiled a helpful table that compares it to Chandlerian business history, new institutional business history, and new economic histories of business. This table, in part, helps reinforces the central tenets of new entrepreneurial history (such as the emphasis on the process of entrepreneurship, the cumulative and collective approaches, the impact on development of society and institutions, the methods of assigning value over and above profit etc.) and how it diverges or challenges traditional schools of business history. The eclectic approach to entrepreneurship as designed by the authors provides a framework for future research to follow in order to consider the development of entrepreneurship over time but also in understanding how entrepreneurship influences, and is influenced, by, individual, institutional and societal micro and macro-level factors. Perhaps the greatest contribution, as highlighted in the conclusion, is the implications or influence that new entrepreneurial history can have on entrepreneurs today. Here the authors demonstrate the strength of the historian in enabling entrepreneurs to understand the world and “acting in it”. By following the framework developed in this paper, business historians have opportunity to develop a richer and deeper insight into the core factors that influence and drive the process of entrepreneurship.

A couple of minor observations: the definition provided by the authors, in my opinion, could be broadened out slightly. In the case the authors raise the point that new entrepreneurial history focuses on the study of the creative processes that propel economic change, [my emphasis], however, this framework could be used to study processes far beyond the purely economic (including, for example, environmental, technological, cultural, management, social, political). Indeed, the section on ‘multiplicity in the forms of value’ highlights how value can be assigned to non-economic factors, such as the accumulation of social and cultural capital, environmental, civic, academic, esthetic, industrial etc. The definition in this instance seems too narrow in enabling the researcher to understand change and the authors themselves provide insight into factors beyond market forces. In terms of broadening out the concept, I feel this particular theme has potential to inform research beyond business history and could have relevance to research in other branches of management and organisational studies, and perhaps even other disciplines in social sciences. My second observation concerns the blurring or overlap between premises two and three concerning the recruiting and allocation of resources on one hand and gaining of legitimacy on the other hand. Both sections cover similar areas with regards to the winning institutional support or driving institutional change in order to gain support or enhance legitimacy. I feel there is scope to draw greater distinctions between these two processes.

To conclude, this article presents a well-considered and well-structured contribution to the field of entrepreneurial history. The authors establish a real need for their approach and then provide a strong, clear and adaptable framework that can open the field to future researchers. As a business historian myself, I am always sympathetic to papers championing a historical or temporal approach and found this paper extremely useful to my ongoing research projects. I am sure it will make a strong contribution to the field and provoke much discussion and research in the years to come!

Acknowledgements

I am extremely grateful to Andrew Popp and Niall Mackenzie for their feedback on an earlier draft of this review.

Entrepreneurs and Indian Transnational Business

Transnational Indian Business in the Twentieth Century

By: Chinmay Tumbe (Indian Institute of Management Ahmedabad, India)

Abstract: This article argues that migration and investment from India moved in tandem to chart the evolution of transnational Indian business in the twentieth century, first toward Southeast Asia and Africa and later toward the United States, Europe, and West Asia. With a focus on the banking and diamond sectors, the overseas investment project of the Aditya Birla Group, and the transnational linkages of India’s one hundred richest business leaders, the article locates important events, policies, and actors before economic liberalization in 1991 that laid the foundation for subsequent globalization of Indian firms.

Business History Review (Forthcoming – Published online: 12 December 2017)
https://doi.org/10.1017/S0007680517001350

Review by Niall G MacKenzie (Strathclyde Business School)

Chinmay Tumbe’s article in Business History Review, ‘Transnational Indian Business
in the Twentieth Century’ is, as the title suggests, an exploration of Indian business history at home and abroad throughout the twentieth century. The article is well-written with a number of themes present throughout which go beyond simple transnational analyses, encompassing elements of kith (networks) and kin (family) in the development of Indian business over the period set against changing migration patterns within and outwith, the Indian sub-continent. A further clear theme throughout the paper is the changing role and concomitant impact of the institutional frameworks in which Indian business acted under, both in domestic and international terms. It is on these areas that this review takes its focus.

The paper compares and contrasts twentieth century Indian migration trajectories and their impact on Indian international business connections, with a particular focus on the activities of the banking and diamond industries, as well as highlighting a number of famous Indian firms and entrepreneurs including the Godrej, Birla, and Tata families, Lakshmi Mittal, and the top 100 richest Indians using a mixture of archive data, corporate histories, biographies, and secondary materials such as magazines and newspapers. In this sense, the paper is a non-traditional business history piece that combines a variety of methodological approaches to paint a picture of Indian transnational business history over the twentieth century that distinguishes itself with its attention to rigour, a clear story arc, and the creation of a historical framework for future studies. As one may expect from Business History Review, the writing is tight, the subject matter broad but detailed in its analysis, and a number of valuable insights into how Indian business developed over the period emerge as a result.

Tumbe’s work covers both Indian domestic business activities and overseas investment activities by Indian companies over the twentieth century, offering readers an interesting and illuminating analysis of these subjects which reflect a growing interest in Indian business within business history more generally, including a special issue in Business History edited by Carlo Morelli and Swapnesh Masrani on Indian Business in the Global World, publication of the Oxford History of Indian Business by Dwijendra Tripathi (2014), the developing economies initiative at Harvard Business School which focuses on (amongst other developing countries) Indian business, a 2015 conference on Indian and South East Asian business history hosted by Harvard Business School bringing together scholars from all over the world, and a number of articles published in each of the major business, economic, and accounting history journals. In this sense Tumbe’s paper is a continuation of the growing interest in Indian business history around the world and recognition that much of the history of the country has been written from the perspective of the west, and in particular Anglo-Indian viewpoints.

Work written from the perspective of indigenous Indian scholars therefore has the potential to provide counterpoints, deeper insights, and more interesting considerations of phenomena and change that are oftentimes taken for granted by Western scholars. Indeed, much theory that has been produced in business and management has been done so within Western developed countries and typically by Western scholars. This is a point that has been raised in the Family Business Review journal by its outgoing editor Pramodita Sharma (with family business stalwarts Jim Chrisman and Kelin Gersick), who in a 2012 editorial called for more testing of existing theory, and creation of new theories by looking at ‘different institutional contexts’ as ways of doing this. This is a call that applies beyond family business however and into business and management more generally – cognizance of context and its multiple forms and applications to existing and new knowledge is something that historians are perhaps naturally familiar with and indeed drawn to, but which has value beyond history also.

Arguably the most interesting aspect of the paper (to this author at least) was the focus on the role that Indian family businesses played within the constantly evolving Indian and global institutional contexts over time, engaging domestic and international business networks and deploying their capital in different ways to address their aims and aspirations. The case of AV Birla going to study at MIT is one such example – scions of large family businesses nowadays are regularly packed off to global top institutions to gain a world class education and expose them to more of the world in preparation for taking the helm of the family business. However, according to Tumbe, in the mid-1960s India was a relatively insular looking country and business environment which suggests Birla’s decision to study at MIT was one that was more than just expanding personal horizons but was in fact, at the time, a relatively novel way of preparing Birla and the helping firm’s international expansion aspirations. Birla was then an early example of what is now a relatively standard practice in terms of preparing for the future leaders within the family business, but also of preparing the business itself by accessing and leveraging the networks that come with enrolment in top global education institutions for higher education.

One of the principal questions posted in the paper was “How and why did Indian business operations extend beyond the boundaries of the subcontinent, and was migration a relevant factor in this process?” The short answer that Tumbe’s paper provides, is that migration was a relevant factor in the process (as one might reasonably expect), but also that Indian business operations did exist beyond the boundaries of the subcontinent and the reasons for doing so were varied. In some cases, Indian businesses were accessing existing networks of Indian diaspora for soft landings abroad, in others they were seeking to expand operations due to the constrictions that were imposed on them by an FDI-hostile Indian government that resulted in domestic industrial stagnation and a strong push factor to invest abroad, requiring Indian businesses to look outwards for international expansion and growth opportunities. Kith and kin were therefore important features of such expansion with the desire to mitigate the agential risk that naturally comes with the creation of distance between operations and control as far as possible. Consistent within this is the recognition that friends and family are important in business expansion and development; Tumbe provides a demonstrable example of this in his analysis of Birla’s expansion into Antwerp and the role Vijay Mehta, a cousin of AV Birla’s best friend based in Antwerp and Bangkok, played in Birla’s first overseas investment.

Tumbe’s article is ultimately a broad sweep analysis of Indian transnational business activities and development over the twentieth century that illustrates the changing nature of business in India, the shifting institutional context, and the opportunities and constrictions that come with doing business in a developing country. Its relevance and interest to business and economic historians is clear in its historical analysis and content, but its wider applicability to understanding contemporary business and management phenomena such as resource orchestration, transnational business, and family business is also apparent. For those familiar with Indian business history it will likely confirm a number of existing thoughts and concepts, but for those who are not as familiar it provides an enjoyable and informative overview of how Indian business changed over the course of the twenties century with an array of source material that is handled well and written in an engaging fashion.

Computers and Business History: Mira Wilkins Prize Winner

IBM Rebuilds Europe: The Curious Case of the Transnational Typewriter
By Petri Paju (Turku) and Thomas Haigh (Wisconsin, Milwaukee).

Abstract: In the decade after the Second World War IBM rebuilt its European operations as integrated, wholly owned subsidiaries of its World Trade Corporation, chartered in 1949. Long before the European common market eliminated trade barriers, IBM created its own internal networks of trade, allocating the production of different components and products between its new subsidiaries. Their exchange relationships were managed centrally to ensure that no European subsidiary was a consistent net importer. At the heart of this system were eight national electric typewriter plants, each assembling parts produced by other European countries. IBM promoted these transnational typewriters as symbols of a new and peaceful Europe and its leader, Thomas J. Watson, Sr., was an enthusiastic supporter of early European moves toward economic integration. We argue that IBM’s humble typewriter and its innovative system of distributed manufacturing laid the groundwork for its later domination of the European computer business and provided a model for the development of transnational European institutions.

Enterprise & Society 17(2, June 2016): 265-300

DOI: https://doi.org/10.1017/eso.2015.64

URL: https://www.cambridge.org/core/journals/enterprise-and-society/article/ibm-rebuilds-europe-the-curious-case-of-the-transnational-typewriter/35D5A3FD95F5948F12754DBE07E9D89F

Free download (for limited time): https://www.cambridge.org/core/services/aop-file-manager/file/59e769bb60a7c0f73791cd84

Review by James W. Cortada (Charles Babbage Institute, Minnesota)

Prizes are awarded all the time for “best article” in a particular field, calling our attention to a well-executed, thoughtful one. But, occasionally, a prize winning article signals bigger shifts in a discipline than might otherwise be noticed. With this year’s award of the Business History Conference’s “Mira Wilkins Prize,” for the best article published in Enterprise & Society, we have such a signal.

Petri Paju and Thomas Haigh wrote “IBM Rebuilds Europe: The Curious Case of the Transnational Typewriter,” published in June 2016. They were recognized for “the best article on international business history,” the objective of this prize, but it is far more than good international business history.

The article chronicles how IBM created an internal network across eight national electric typewriter plants in post-World War II Europe to manufacture parts and to assembly these products. While electric typewriters were in great demand and IBM made what many considered to be the best one, the company created an internal network for their manufacture and distribution that transcended international borders in the decade after the war, presaging what would happen for some European products after the establishment of the European Union. But that was never solely the point—to create a European-wide market by governments—rather, it was to drive down production costs, increase demand for and the ability to deliver enough machines, while promoting IBM management’s belief that “World Peace through World Trade” could be a global objective for nations and companies. The authors trace how parts were made in one country, shipped to another, put together then sold, called the “Interchange Plan.” This experience taught IBM management how to create a more formal pan-European wide, later worldwide organization in 1949 that could manufacture, sell, and support its products called IBM World Trade. Within a half generation, World Trade did as much business as the American side of IBM.

Lessons learned in forming a pan-European typewriter business made it possible for IBM to develop a pan-European computer business that quickly dominated the mainframe business in Western Europe and in other parts of the world. Just as important, when IBM moved into the computer business, it already had factories, sales offices, and experienced employees in those countries that would become its best customers. These include Great Britain, France, West Germany, the Nordics, Italy, Spain, and a sprinkling presence in every country that eventually became part of the EU. The authors explain how the company created and learned from its “Interchange Plan,” operationally and strategically. They explored the accounting level to explain how money and budgets were exchanged across borders when governments had yet to sort out those issues, let alone even allow such exchanges.

The benefits to IBM were both obvious and extraordinary. Obvious ones included reduced operating costs for the manufacture and increased sale of typewriters. Less obvious, but ultimately more important, “this system would also foster interdependence among the various national [IBM] firms,” while spreading capabilities across multiple countries so that if one nation were to nationalize or block local IBM production, as occurred during World War II, another plant could pick up the slack. The company used its system in its public relations campaign to promote international trade through American managerial leadership and “to meet the challenges of communism” in the Cold War. Other American corporations—all of them with close ties to IBM’s management—took note of what IBM was learning and applied those lessons as well. IBM’s country organizations could also claim to be local, since each employed nationals, Fins in Finland, French in France, and so forth.

The lesson urged by these two young historians is an appropriate one at the moment: “think more carefully about the assumption that postwar globalization of European trade can be reduced to ‘Americanization’,” because IBM’s experience reflected a “hybridization of U.S. technology and management in postwar Europe.” Apply their suggestion worldwide. IBM was also prepared to experiment and operate in ways that valued expansion into new markets even at the costs of profits. That is one reason why it came to dominate the mainframe market so fast and for so many decades. The wisdom of today’s corporate fixation on shareholder value is challenged by this study of how IBM ran its typewriter business.

Perhaps the greater lesson, the more significant observation for why this prize this year is so important, lies elsewhere. For the past two decades, a month has barely gone by without an historian or economist publishing on the interactions of computing technology and business management. E&S is not alone in doing so; Technology & Culture has published some two-dozen similar articles in the new century, and Information & Culture is rapidly becoming another journal with a mix of business/information technology conversations. Petri Paju and Thomas Haigh are more than two gifted prolific article writers, they are teaching a new generation of scholars how to understand the role of information technologies and of management, business operations, and corporate strategy in a world filled with computers. Simply put, this article is seminal, worthy of being studied across multiple disciplines. The Mira Wilkes Prize Committee is to be congratulated for not letting this paper slip through the cracks.

No man can serve two masters

Rogue Trading at Lloyds Bank International, 1974: Operational Risk in Volatile Markets

By Catherine Schenk (Glasgow)

Abstract Rogue trading has been a persistent feature of international financial markets over the past thirty years, but there is remarkably little historical treatment of this phenomenon. To begin to fill this gap, evidence from company and official archives is used to expose the anatomy of a rogue trading scandal at Lloyds Bank International in 1974. The rush to internationalize, the conflict between rules and norms, and the failure of internal and external checks all contributed to the largest single loss of any British bank to that time. The analysis highlights the dangers of inconsistent norms and rules even when personal financial gain is not the main motive for fraud, and shows the important links between operational and market risk. This scandal had an important role in alerting the Bank of England and U.K. Treasury to gaps in prudential supervision at the end of the Bretton Woods pegged exchange-rate system.

Business History Review, Volume 91 (1 – April 2017): 105-128.

DOI: https://doi.org/10.1017/S0007680517000381

Review by Adrian E. Tschoegl (The Wharton School of the University of Pennsylvania)

Since the 1974 rogue trading scandal at Lloyds’s Lugano branch we have seen more spectacular sums lost in rogue trading scandals. What Dr Catherine Schenk brings to our understanding of these recurrent events is the insight that only drawing on archives, both at Lloyds and at the Bank of England, can bring. In particular, the archives illuminate the decision processes at both institutions as the crisis unfolded. I have little to add to her thorough exposition of the detail so below I will limit myself to imprecise generalities.

Marc Colombo, the rogue trader at Lloyds Lugano, was a peripheral individual in a peripheral product line, in a peripheral location. As Schenk finds, this peripherality has two consequences, the rogue trader’s quest for respect, and the problem of supervision. Lloyds Lugano is not an anomaly. An examination of several other cases (e.g. Allied Irish, Barings, Daiwa, and Sumitomo Trading), finds the same thing (Tschoegl 2004).

In firms, respect and power come from being a revenue center. Being a cost center is the worst position, but being a profit center with a mandate to do very little is not much better. The rogue traders that have garnered the most attention, in large part because of the scale of their losses were not malevolent. They wanted to be valued. They were able to get away with their trading for long enough to do serious damage because of a lack of supervision, a lack that existed because of the traders’ peripherality.

In several cases, Colombo’s amongst them, the trader was head of essentially a one-person operation that was independent of the rest of the local organization. That meant that the trader’s immediate local supervisor had little or no experience with trading. Heads of branches in a commercial bank come from commercial banking, especially commercial lending. Commercial lending is a slow feedback environment (it may take a long time for a bad decision to manifest itself), and so uses a system of multiple approvals. Trading is a fast feedback environment. The two environments draw different personality types and have quite different procedures, with the trading environment giving traders a great deal of autonomy within set parameters, an issue Schenk addresses and that we will discuss shortly.

Commonly, traders will report to a remote head of trading and to the local branch manager, with the primary line being to the head of trading, and the secondary line being to the local branch manager. This matrix management developed to address the problem of the need to manage and coordinate centrally but also respond locally, but matrix management has its limitations too. As Mathew points out in the New Testament, “No man can serve two masters, for either he will hate the one, and love the other; or else he will hold to the one, and despise the other” (Matthew (6:24). Even short of this, the issue that can arise, as it did at Lloyds Luggano, is that the trader is remote from both managers, one because of distance (and often time zone), and the other because of unfamiliarity with the product line. A number of software developments have improved the situation since 1974, but as some recent scandals have shown, they are fallible. Furthermore, the issue still remains that at some point the heads of many product lines will report to someone who rose in a different product line, which brings up the spectre of “too complex to manage”.

The issue of precautionary or governance rules, and their non-enforcement, is a clear theme in Schenk’s paper. Like the problem of supervision, this too is an issue where one can only do better or worse, but not solve. All rules have their cost. The largest may be an opportunity cost. Governance rules exist to reduce variance, but that means the price of reducing bad outcomes is the lower occurrence of good outcomes. While it is true, as one of Schenk’s interviewees points out, that one does not hear of successful rogue traders being fired, that does not mean that firms do not respond negatively to success. I happened to be working for SBCI, an investment banking arm of Swiss Bank Corporation (SBC), at the time of SBC’s acquisition in 1992 of O’Connor Partners, a Chicago-based derivatives trading house. I had the opportunity to speak with O’Conner’s head of training when O’Connor stationed a team of traders at SBCI in Tokyo. He said that the firm examined too large wins as intently as they examined too large losses: in either case an unexpectedly large outcome meant that either the firm had mis-modelled the trade, or the trader had gone outside their limits. Furthermore, what they looked for in traders was the ability to walk away from a losing bet.

But even small costs can be a problem for a small operation. When I started to work for Security Pacific National Bank in 1976, my supervisor explained my employment benefits to me. I was authorized two weeks of paid leave per annum. When I asked if I could split up the time he replied that Federal Reserve regulations required that the two weeks be continuous so that someone would have to fill in for the absent employee. Even though most of the major rogue trading scandals arose and collapsed within a calendar year, the shadow of the future might well have discouraged the traders, or led them to reveal the problem earlier. Still, for a one-person operation, management might (and in some rogue trading scandals did), take the position that finding someone to fill in and bring them in on temporary duty was unnecessarily cumbersome and expensive. After all, the trader to be replaced was a dedicated, conscientious employee, witness his willingness to forego any vacation.

Lastly, there is the issue of Chesterton’s Paradox (Chesterton 1929). When a rule has been in place for some time, there may be no one who remembers why it is there. Reformers will point out that the rule or practice is inconvenient or costly, and that it has never in living memory had any visible effect. But as Chesterton puts it, “This paradox rests on the most elementary common sense. The gate or fence did not grow there. It was not set up by somnambulists who built it in their sleep. It is highly improbable that it was put there by escaped lunatics who were for some reason loose in the street. Some person had some reason for thinking it would be a good thing for somebody. And until we know what the reason was, we really cannot judge whether the reason was reasonable.”

Finally, an issue one needs to keep in mind in deciding how much to expend on prevention is that speculative trading is a zero-sum activity. A well-diversified shareholder who owns both the employer of the rogue trader and the employers of their counterparties suffers little loss. The losses to Lloyds Lugano were gains to, inter alia, Crédit Lyonnais.

There is leakage. Some of the gainers are privately held hedge funds and the like. Traders at the counterparties receive bonuses not for skill but merely for taking the opposite side of the incompetent rogue trader’s orders. Lastly, shareholders of the rogue traders firm suffer deadweight losses of bankruptcy when the firm, such as Barings, goes bankrupt. Still, as Krawiec (2000) points out, for regulators the social benefit of preventing losses to rogue traders may not exceed the cost. To the degree that costs matter to managers, but not shareholders, managers should bear the costs via reduced salaries.

References

Chesterton, G. K. (1929) ‘’The Thing: Why I Am A Catholic’’, Ch. IV: “The Drift From Domesticity”.

Krawiec, K.D. (2000): “Accounting for Greed: Unraveling the Rogue Trader Mystery”, Oregon Law Review 79 (2):301-339.

Tschoegl, A.E. (2004) “The Key to Risk Management: Management”. In Michael Frenkel, Ulrich Hommel and Markus Rudolf, eds. Risk Management: Challenge and Opportunity (Springer-Verlag), 2nd Edition;

Historicising Business Strategy

Evolving Ideas about Business Strategy

by Pankaj Ghemawat (NYU Stern, USA and IESE Business School, Spain)

Abstract

This paper updates an earlier article published in Business History Review that concluded that by the second half of the 1990s, there had been a profusion of new, purportedly practical ideas about strategy, many of which embodied some explicit dynamics. This update provides several indications of a drop-off since then in the rate of development of new ideas about strategy but also a continued focus, in the new ideas that are being developed, on dynamics. And since our stock of dynamic frameworks has, based on one enumeration, more than doubled in the last fifteen to twenty years, updating expands both the need and the empirical basis for some generalizations about the types of dynamic strategy frameworks—and strategy frameworks in general—that managers are likely to find helpful versus those that they are not.

Source: Business History Review 90, 1-23 (DOI: https://doi.org/10.1017/S0007680516000702)

Review by Kyle Bruce (Macquarie University, Australia)

Editor’s note

Ghemawat’s 2017 paper below should not be read in isolation but as part of a round table organized at Harvard Business School that brought together historians and management scholars to discuss the origins of ideas in business and management. The results of the round table were published as a special edition of the Business History Review. In this sense, Ghemawat’s contribution to the special issue and its discussion by Chris McKenna (in the same special issue) came to an independent yet similar conclusion to that expressed by Nobel laureate Robert Shiller, who suggested “that in the age of social information networks, economists need to rethink how and why information really spreads.” (See a summary of Shiller’s ideas in The Role of Narratives in Economics).

It is laudable that the executive editors of the Business History Review created a space to disseminate the results of the round table through the journal. However, as you will read below, Kyle Bruce questions whether this is the right way to engage other management scholars in business history as, strictly speaking, the contribution by Ghemawat would be found wanting as scholarly work of international standing.

A final note is that in its comments to Ghemawat, even McKenna gets it wrong by pointing to Lotus 1-2-3 as the first spreadsheet. It actually was VisiCalc.

Having said that, the aim in this space is to generate academic debate through a blog format. So by all means do chip in.

Bernardo Bátiz-Lazo
General Editor NEP-HIS & Editorial Board member, Business History Review.

As a historian and teacher of strategy and, moreover, as a close follower of Ghemawat’s work, I was very much looking forward to his recent update of his 2002 BHR paper on the history of the sub-discipline. I habitually invoke the decade-and-a-half old piece as background reading for my Executive MBA strategy students and hitherto have experienced little, if any, pushback from students typically cagey about the words “theory” or “history”. Regrettably, I am not so sure the updated paper under review here will escape unscathed for the simple reason that it is pretty tough to follow. Let me explain.

After briefly overviewing the 2002 paper that in essence discerned a profusion of new ideas about strategy – particularly those embodying a more dynamic approach – dating from the early to mid-80s, Ghemawat introduces his new findings. After a big peak in the mid-90s, there has been a marked drop-off in new ideas, but dynamics “is a sustained interest focus of strategic innovation rather than one of passing interest” (p. 5; emphasis added). So far, so good you might think, but I started to worry about the phraseology (“strategic innovation”?) attendant on the use of analytical tools from strategy and adjacent sub-disciplines to make sense of his findings; namely, “what should one make of the drop-off overall and the shift toward more attention to dynamics? And what, if anything, should be done?” (p. 8).

Pankaj Ghemawat

Pankaj Ghemawat

Unless the strictures concerning the dreaded “so what?” question have been lifted in history journals such as BHR, I could not discern after several reads a compelling argument as to why readers should be at all bothered by the findings presented? For students of the strategy-as-practice literature, for instance, the suggestion there’s fewer models and frameworks out there for practising managers to employ is not a concern given they probably don’t use them anyway. For my MBA students who routinely complain of framework fatigue, again, the theory drop-off is not a problem. And so, for me, the remainder of the paper was rather superfluous and unnecessarily complex. Curiously, I think Ghemawat makes it so when he concludes that while it’s certain there’s been a drop-off in the “rate of development of big new strategy ideas/frameworks, it is much harder to be definite about the welfare implications” (p. 10; emphasis added). For me, this conclusion renders redundant both the ensuing “what is to be done” question he poses, as well as the next eight-and-half pages of the article devoted to “a critical assessment of frameworks new and old” (p. 2).

After several reads of these aforementioned pages, I could not really follow or appreciate the “irreversibility” and “uncertainty” dimensions utilised to assess how dynamic current frameworks really are. However, I felt comforted when Ghemawat concludes that “quite a few” of said frameworks “seem subject to some practical limitations” (p. 19). This comfort was short-lived, though, when he finishes the paper with the frustrating and seemingly throwaway line that the way forward, as it were, “is to shift some attention away from the chronologies of frameworks to historiography that attempts to assess them in some fashion” (p. 21). I immediately asked myself: “well, why didn’t he just do this, then??”

fashion-management

For me, and I trust also BHR readers, a historiographical piece embodying intellectual history, actor-network theory, or sociology of scientific knowledge to account for the “trials of strength” in strategy theory, the tension between contributions from the academy and those from business practice, and the current fascination with dynamics, would have been an easier and more interesting read. Like much being published in business and management history journals of late, Ghemawat’s paper is short on actual history and, notwithstanding the final sentence, even short on how to DO history. I was left wondering why this paper was published in this journal and asking myself what this paper’s place tells me about BHR? I have no answers for these questions but look forward to some in due course.

References

Ghemawat, P. (2002) “Competition and Business Strategy in Historical Perspective”, Business History Review 76(1): 37-74. (DOI: https://doi.org/10.2307/4127751)