A Schumpeterian View of the Great Merger Movement in American Manufacturing
Donald J. Smythe
California Western School of Law
April 7, 2009
Cliometrica, Vol. 4, No. 2, July 2010
This paper offers a Schumpeterian view of the Great Merger Movement in the American manufacturing industries, which occurred from 1895-1904. From this perspective, the Great Merger Movement was a response to competitive pressures associated with a number of significant technological innovations which occurred at the end of the nineteenth century. Because the implementation of these innovations required large capital investments, and because the returns to the investments would have been highly uncertain if they had been made competitively, firms at the turn of the twentieth century sought to restrain competition. Since the uncertainty precluded cooperating at arms length, cooperation was internalized through horizontal consolidations. The consolidations in turn increased the size of the capital investments undertaken to implement the technological innovations. The theory is supported with historical evidence about the technological environment and industrial conditions at the turn of the twentieth century, and an econometric model is tested using data from the Twelfth and Thirteenth Censuses of Manufactures.
Number of Pages in PDF File: 40
Keywords: Great Merger Movement, Technological Change, Market Power, Schumpeterian Hypothesis, Antitrust.
Date posted: April 8, 2009