Network Preferences and the Growth of the British Cotton Textile Industry, c.1780-1914

Prepared for presentation at Association of Business Historians Conference, Glasgow, June 2017

Leeds University Business School Working Paper No. 18-05

44 Pages Posted: 12 Apr 2017 Last revised: 26 Jan 2018

See all articles by Steve Toms

Steve Toms

University of Leeds - Leeds University Business School (LUBS); University of Leeds - Division of Accounting and Finance

Date Written: April 10, 2017

Abstract

The paper considers the dual aspect of social networks in terms of 1) product innovators and developers and 2) the providers of finance. The growth of networks can be explained as a function of incumbents and entrants’ preferences to link with specific nodes defined according to the underlying duality. Such preferences can be used to explain network evolution and growth dynamics in the cotton textile industry, from being the first sector to develop in the industrial revolution through to its maturity. The network preference approach potentially explains several features of the long run industry life cycle:

1. The early combination of innovators with access to extensive credit networks, protected by entry barriers determined by pre-existing network structures, leading to lower capital costs for incumbents and rapid productivity growth, c.1780-1830.

2. The spread of innovation and productivity through value chain linkages during the nineteenth century.

3. The trust movement, joint stock and personal capitalism: the emergence of large firms and a preference for regional financial markets in Lancashire and Scotland.

4. The consolidation of regional instead of national business groups which help explain the decline of the industry.

The paper uses case studies of firms, networks, and market institutions based on a mixture of archival evidence, drawn mainly from the financial records of a large sample of cotton firms, and contemporary publications. It stresses human interactions (as opposed to population ecology mechanisms) as determinants of the character, scale and scope of network evolution. Intergenerational features of the networks are identified and classified by these characteristics. Networks were typically bounded in terms of product innovators and less bounded in terms of finance providers. Consequently, finance providers tend to provide the impetus for the rate of network growth in expansion, maturity and contraction phases.

Keywords: Business Networks, British Cotton Textile Industry, Innovation, Finance, Regions, Entrepreneurship, Mergers

JEL Classification: L14, L26, O33, N24, N83

Suggested Citation

Toms, Steve, Network Preferences and the Growth of the British Cotton Textile Industry, c.1780-1914 (April 10, 2017). Prepared for presentation at Association of Business Historians Conference, Glasgow, June 2017; Leeds University Business School Working Paper No. 18-05. Available at SSRN: https://ssrn.com/abstract=2950009 or http://dx.doi.org/10.2139/ssrn.2950009

Steve Toms (Contact Author)

University of Leeds - Leeds University Business School (LUBS) ( email )

Leeds LS2 9JT
United Kingdom

University of Leeds - Division of Accounting and Finance ( email )

Leeds LS2 9JT
United Kingdom

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