Economic History Review, LIV, 4 (2001), pp. 657–679
Business networking in the
industrial revolution1
By ROBIN PEARSON and DAVID RICHARDSON
he concept of ‘networking’ has been applied over the past 20 years
to a variety of fields including economics, management, sociology,
T
organization studies, and business history. Despite the scepticism of
2
some—that networks are exceptional or transient phenomena, a sign of
market failure in young economies—it is now widely argued that networks
are an integral part of economic activity, which is moulded by social,
cultural, and political influences as well as by market mechanisms.3 Some
authors have made a useful distinction between the everyday personal
relationships within a group—the activity of networking itself—and the
‘institutional arrangements’ which are produced by this activity, including
custom and contractual devices designed to discourage malfeasance.4
Moral attitudes and value systems shared by members of a network, as
well as rules and regulations, can reduce the risk, and therefore also the
cost, of commercial transactions. Few economic actors rely solely on
either institutional arrangements or a generalized morality to guard against
the risk of opportunism, free riding, or cheating. Instead they prefer to
deal with individuals of known repute and to base their decisions to trade
on information about reputation from reliable sources, and on their own
past dealings with the same individuals. However, the greater the level of
trust, the greater the potential gain from malfeasance. Thus, institutional
arrangements for contract enforcement are seldom dispensed with
entirely.5 In general terms it can be said that business networking
1
Earlier versions of this article have been presented at the Economic History Society’s conference,
Lancaster University, 1996, and at the International Business History Conference, University of
Glasgow, 1999. Our thanks to the participants and to anonymous referees for their useful comments,
and to our research assistants, Caroline Ashton and Liam Mogan, for their diligent work on Liverpool
records. This research was supported by a grant from the University of Hull’s research support
fund, for which the authors are also grateful. Robin Pearson also acknowledges the support of the
Twenty-Seven Foundation, and both authors acknowledge the support of the Nuffield Foundation
(grants SOC/100/284, Pearson, and SOC/181/2303, Richardson).
2
For a review of the relevant literature in organization studies, see Grandori and Soda, ‘Interfirm networks’. Recent examples in business history include Hamilton, ed., Asian business networks;
Shimotani, ‘The formation of distribution Keiretsu’; Newton, ‘Regional bank-industry relations’;
Amdam and Bjarnar, ‘Regional business networks’; Colli, ‘Networking the market’; Rose, ‘Networks
and leadership succession’.
3
Chandler and Williamson are among the sceptics. For a critique of Williamson’s view on
the influence of social relations on market behaviour, see Granovetter, ‘Economic action and
social structure’.
4
Carnevali, ‘Between markets and networks’, p. 84; Lovejoy and Richardson, ‘Trust, pawnship
and Atlantic history’.
5
Granovetter, ‘Economic action and social structure’; Macaulay, ‘Non-contractual relations in business.’
 Economic History Society 2001. Published by Blackwell Publishers, 108 Cowley Road, Oxford OX4 1JF, UK and 350 Main Street, Malden,
MA 02148, USA.
658
robin pearson and david richardson
describes the closest and most regular types of commercial relations
between individuals and firms in the marketplace, but that these relations
are rooted in social and cultural practice, and in power.6
It has also been argued that it is not just the cost of transactions which
is reduced by networking, but properly the cost of commercial information. Information costs entail both the costs of enforcing contracts
and of monitoring moral hazard and free riding, but also many other
costs embodied in determining business strategy, such as those of market
research, of monitoring competition, and of appraising investment
decisions.7 Information is collected as long as its expected value exceeds
the cost of collection. In historical industrializing economies, with relatively poor communications across distances, the cost of collection was
high, but so also was the value of information. Networking helped to
enhance the ‘natural’ efficiency gains of operating in increasingly sophisticated but stretched regional, national, and international markets, by
reducing the cost of information as commercial news and sometimes also
capital resources were shared across a web of acquaintances.
The form of networking which has been the major preoccupation of
the business historical literature is that of inter-firm relations, for example
relations between small family firms such as in the textile engineering
industry in early nineteenth-century Yorkshire, or relations between large
firms and their smaller sub-contractors.8 Clearly there were many different
types of business networks in time and place, including those of ethnic
or religious groups, such as the Jews and Quakers, which have been a
familiar refrain in various accounts of economic development.9 In
addition, there exists a substantial body of writing in British urban and
economic history, which, though largely detached from the theoretical
literature on networking, does offer valuable insights into the activities of
specific manufacturing and mercantile ‘oligarchies’ or ‘elites’.10 Urban
historians have explored some of the connections between members of
the middle classes emerging in towns, while economic historians have
recognized the great range of business interests held by individual merchants in the eighteenth century.11 Most of this work, however, has been
circumscribed by decisions to focus on a few criteria. Often authors have
concentrated on the connections of leading families or firms in a locality
or trade.12 Some have focused upon the political or cultural institutions
of a town, at the expense of analysing the economic relations between
6
Casson and Rose, ‘Institutions and the evolution of modern business’, p. 3; Rose, ‘Networks
and leadership succession’, pp. 59-60.
7
Casson, ‘Institutional economics’.
8
Cookson, ‘Family firms and business networks’; Granovetter, ‘Economic action and social structure’.
9
Maifreda, ‘Networks and economic behaviour’; Prior and Kirby, ‘The Society of Friends’; Mosse,
Jews in the German economy; Greif, ‘Reputation and coalitions in medieval trade’; Curtin, Crosscultural trade in world history.
10
Devine, Tobacco lords; Wilson, Gentlemen merchants; Howe, Cotton masters.
11
Morris, Class, sect and party; Smith, Conflict and compromise; Neale, Bath, 1680-1850; Trainor,
Black Country elites; idem, ‘The elite’; Crouzet, The first industrialists, pp. 6-7; Devine, ‘Eighteenthcentury business elite’.
12
Devine, ‘Eighteenth-century business elite’, p. 42.
 Economic History Society 2001
business networking in the industrial revolution
659
13
urban leaders. Few have attempted to examine the business population
of a specific location in its entirety and systematically to analyse all its
activities and economic, social, religious, political, cultural, and familial
linkages. Few have moved beyond the small numbers of elite families to
less prominent members of urban networks, and relatively little attention
has been paid to examples of collective diversification by fairly homogeneous business groups moving out of core trading or manufacturing
activities into other areas. Such diversification, we believe, was often
crucial to economic change.14
The purpose of this article is to extend further existing analyses of
historical networks through a study of four groups of investors who
established fire insurance offices in Leeds, Liverpool, Manchester, and
the west of England between 1776 and 1824. The immediate object is
to explore the characteristics of these investors and their links with
each other beyond the insurance boardrooms, and to indicate how their
networking activities influenced local and regional economic development
during the classic period of British industrialization. Our approach distinguishes itself from much of the literature discussed above by being directly
comparative, drawing general lessons from different localities, and by
striving—within the confines of this article—to be holistic in its analysis
of both economic and non-economic linkages. Furthermore, the type of
business networking examined here did not generally take the form of
commercial or financial relations between discrete firms, but rather of
relations between individuals from a number of different partnerships,
partially inter-locked in a variety of ways, but all coming together in a
single collective enterprise, insurance. Nor, as demonstrated below, did
religion, ethnicity, or politics provide a unique point of entry to these
networks. Networking on the basis of religious or ethnic identity is often
regarded as stimulated by a relatively high level of risk aversion, and
bounded by moral, behavioural, and theological prescripts imposed externally by the religious institutions to which all network members belonged.
By comparison, we shall argue that iterative business activity led to the
transmutation of predominantly trade-based relationships into new types
of multilateral commercial arrangements from the 1770s, especially associated with the rise of business ventures in the tertiary sector of the
economy—most notably joint-stock canal, dock, insurance, water, gas,
and property companies. Such companies helped to transform the business landscape of Britain during the late eighteenth and early nineteenth
centuries.15 For the most part, especially in insurance, they were unchartered but well capitalized and, despite their official legal disabilities under
13
Trainor, Black Country elites, p. 20.
Pearson, ‘Collective diversification’.
15
On the rise of joint-stock companies in eighteenth-century England, see Harris, Industrialising
English law; Pearson, ‘Shareholder democracies?’.
14
 Economic History Society 2001
660
robin pearson and david richardson
the Bubble Act, remarkably durable.16 Thus, they offered stability with
low costs relative to chartered corporations which were expensive to
organize and to small partnerships which were vulnerable to short-term
business fluctuations.
Stock companies were the direct manifestation of a form of permeable,
rather than bounded, networking, which reflected a lower level of risk
aversion, and in which behavioural prescripts were largely generated
internally, rather than imposed externally. Permeable, yet still personalized, business networking on a multilateral basis developed a
momentum of its own, which helped to bridge existing social, political,
religious, and familial divisions among the middle classes, reinforcing,
and, in turn, reinforced by, a denser web of non-economic associations
emerging in urban centres during the late eighteenth and early nineteenth
centuries. In the first instance, it was the practical experience of working
together in a business environment which highlighted common interests
and facilitated resource pooling. This, in turn, spawned a range of new
service sector enterprises, such as insurance, which, we believe, helped
to reduce the costs of running the economic system, facilitated structural
change, and enhanced growth performance during the critical early phase
of British industrialization.
The ‘institutional arrangements’ created by the types of business networks examined below may be more accurately entitled ‘associational
conventions’. These largely took the form of the regulations embodied
in the deeds of partnership, constitutions, and by-laws of stock companies
in the tertiary sector of regional economies. Because such companies
were generally unchartered they received no formal recognition at law,
but the regulations developed were widely accepted as buttresses for
reciprocal trust relations between investors. These included the check on
personal liquidity provided by the paid-up subscription, the power
afforded to proprietors to inspect deeds of settlement and amend them
by majority vote, the power to inspect and query company accounts, and
the power to elect and remove directors and managers.
The focus of this article is on capital rather than credit networks.
Considerable attention has been paid to networks as intermediaries in
credit markets, and, by extension, to credit relations between industrial
firms and banks.17 Capital networks, on the other hand, have received
less attention. These permitted the pooling of business knowledge and
technical expertise to enable groups of individuals to diversify collectively
16
The share capital of most provincial fire insurance offices during the late eighteenth and early
nineteenth centuries ranged between £50,000 and £200,000, and that of London offices between
£1 m and £2 m: Ryan, ‘Norwich Union’, p. 48. The mean duration of English fire insurance offices
founded between 1767 and 1809 was 55 years, and it was 34 years for those founded between
1819 and 1826. However, with subsequent bubble foundations and waves of corporate takeovers,
there was a marked decline in insurance company longevity during the second quarter of the
nineteenth century. Calculated from data in Insurance Directory and Yearbook (1981/2), and a variety
of other sources.
17
Cf., for example, Godley and Ross, ‘Banks, networks and small-firm finance’.
 Economic History Society 2001
business networking in the industrial revolution
661
18
into capital intensive service industries. This usually involved certain
costs, such as those incurred in learning new technical skills, for instance
when textile merchants or bankers moved into the business of supplying
water, gas, or insurance. However, such networks, and the ‘associational
conventions’ which they developed, also helped to reduce the cost of
collecting market information, and to spread the risks of investment and
strategic decision making more widely among a local or regional elite.
The pooling of information and experience increased the chance, for
example, of getting right the risk assessment in insurance underwriting.19
On the occasions where capital and other resources were pooled for the
purposes of trading or manufacturing, there may also have been economies of scale in some areas of production or distribution.
Between 1770 and 1830 fire insurance in Great Britain expanded
rapidly from a dozen offices insuring £110 million, or an estimated 34
per cent of insurable assets, to nearly 60 offices insuring £487 million,
or an estimated 49 per cent of insurable assets. For much of this period
insurance grew faster than the economy as a whole, and was closely
linked to urban and industrial development.20 The collective activity of
diversifying into this increasingly significant financial service provides a
convenient common starting point from which to analyse four relatively
small, easily defined groups of investors, and to use these as an entrée
into their networks. The first group consists of the 70 men who occupied
posts as directors, trustees, and auditors of the Manchester Fire and Life
Assurance Company between its foundation in 1824 and 1843. The
second consists of the first 41 officers—trustees, directors, auditors, and
secretaries—of the Leeds & Yorkshire Assurance Company appointed
between 1824 and 1826. The third comprises 117 proprietors, directors,
and trustees of the Salamander Fire Office in 1822, the year it was
reconstructed from its original form as the Wiltshire & Western Assurance
Office, founded in 1790.21 The final group comprises the 17 individuals
who established and directed the first Liverpool Fire Office from 1776
to 1795. The four cohorts are not entirely comparable, in that the
Manchester and Leeds groups comprise only the directors and officers
of their respective insurance offices, while the Liverpool and west country
groups comprise both proprietors and directors. The Leeds and Manchester companies were much larger than the other two, with several hundred
shareholders each, a number too large to analyse in the detail necessary
for this article. However, for present purposes, each group does illustrate
the variety of forms which associational activity could take among those
18
As we shall see below, the functions of the two types of networks often overlapped, where an
enterprise which was the product of a capital network began to lend credit to individuals or firms
in the network, or to other similar collective enterprises.
19
Pearson, ‘Fire insurance and the British textile industries’.
20
Pearson, ‘Ein Wachstumsrätsel’, tabs. 1, 2.
21
The source is Guildhall Library, London, MS 11935e, Sun Fire Office, Take-over papers,
Salamander, Deed of settlement, 8 Jan. 1823. A total of 115 names are given in this document to
which two proprietors, William and George Wansey, have been added. They were among the seven
of the original 60 co-partners of 1790 who died before the reconstruction of 1822. The names of
the remaining five are unknown.
 Economic History Society 2001
662
robin pearson and david richardson
who found themselves in the cradle of the industrial revolution, as well
as those who lived and did business in a deindustrializing region. In fact,
the base cohort hardly matters, for an analysis of contemporary moves
to set up gas, water, or transport ventures between c.1770 and 1830
would have generated similar names in the lists of proprietors and
directors for their respective regions. As demonstrated below, the overlap
of membership of these different economic institutions in any one region
was considerable, and the form and intensity of their networking all point
to similar conclusions.
This article does not pretend to offer the total analysis of business
networks during the early industrial revolution which is ultimately
required. The populations of Manchester and Liverpool were around
80,000 in 1801, and that of Leeds had risen to 124,000 by 1831.22
Some 15 per cent of Leeds residents could claim middle-class status,
and these were led by a mercantile and professional elite perhaps numbering several hundred.23 Nor do we have an exact measure of the size
of the mercantile communities of Manchester and Liverpool. There were,
for instance, 1,600 subscribers to the Manchester Exchange in 1825,
though only about 200 manufacturers and merchants subscribed to the
Chamber of Commerce in 1820.24 Anderson has calculated that there
were 1,207 individual investors in ships registered in Liverpool between
1786 and 1793, of whom 934, or 77 per cent, had resided in the town.25
What is clear from these figures is that a comprehensive analysis of
business networking would involve the construction of a database of
several thousand names for a large city, and probably at least several
hundred names for smaller localities. However, by pulling together all
the activities—economic, social, political, religious, and cultural—of these
smaller groups of insurance investors, this article provides insights into
the associational webs spun by urban elites.26
The next section examines the density of these webs and demonstrates
how political and religious divisions—the principal sources of fraction
within the urban middle class—could be bridged by common business
interests. Section II traces the diversification of the insurance men into
other business activities and indicates—though at this stage of research
it cannot definitively measure—the impact of their networking on local
and regional economic development during the industrial revolution. The
final section draws conclusions about the nature and timing of the rise
22
Population figures from Corfield, Impact of English towns, p. 183; Morgan, ‘Demographic
change’, tab. 2
23
Morris, Class, sect and party, pp. 76-80, 325-7. According to Morris, there were 124 members
and proprietors of the Leeds Philosophical and Literary Society in 1834, while 387 subscribed to
the relief of the Leeds poor in 1832.
24
Farnie, ‘Index of commercial activity’; Redford, Manchester merchants and foreign trade.
25
Anderson, ‘Financial institutions’, p. 35. A similar proportion is given by the data for investors
in ships registered in 1804/5: 75% of 584 shareholders came from Liverpool, calculated from Craig
and Jarvis, eds., Liverpool registry of merchant ships, tab. 23.
26
For present purposes, the focus on joint-stock partnerships also resolves definitional problems
about who to include in a network. It is not pretended that the following analysis offers anything
more than a partial picture—albeit a representative one—of elite networks in action.
 Economic History Society 2001
business networking in the industrial revolution
663
of the permeable business network and its impact on British economic
development, and offers some speculative comments about the broader
significance of collusive behaviour during the first industrial revolution.
I
A common feature of the capital networks examined here was the relatively high degree of occupational homogeneity. Occupations traced for
53 of the 66 directors who held seats on the board of the Manchester
Fire and Life Assurance Company between 1824 and 1843 show that
46 were involved in some branch of cotton manufacture or distribution.27
The great majority were merchants, agents, and yarn dealers, or merchants
who did some manufacturing or finishing, especially calico printing, as a
secondary activity. A similar concentration of textile capital supported
the foundation of the Leeds & Yorkshire Assurance Company in 1824,
although manufacturers were more in evidence there than in Manchester.
Thirty-three of the first 41 officers of the Leeds company appointed
between 1824 and 1826 were involved in the textile industry, mostly in
wool textiles, although the group also contained three flax spinners and
a cotton and silk spinner.28 Wool textiles also dominated the capital
which went into the Wiltshire-based Salamander office, although not to
the extent of its Yorkshire counterpart. Occupational titles have been
traced for 76 of the 117 Salamander proprietors, and textiles accounted
for 45 per cent, mostly clothiers and cloth-manufacturers.29 However,
unlike in Leeds and Manchester, the professions were also heavily represented, accounting for 36 per cent of the total occupations traced.
Attorneys formed the largest single group in the firm after clothiers,
perhaps a sign of the reorientation of former Wiltshire manufacturing
centres away from industry and towards services. Also to be expected
was the dominance of mercantile capital in the Liverpool insurance
venture. Occupations have been traced for 16 of the 17 men who were
proprietors of Liverpool Fire Office. All but one, an attorney, were
merchants, and 11 were shipowners. They included some of the largest
slave traders operating out of the port, such as Thomas Earle, and John
and Thomas Tarleton, and three members of the wealthy merchantbanking family of Heywood.
All four groups drew heavily from those who were among the most
prominent businessmen in their regions. Many, notably the textile manufacturers, were major employers. Two of the largest in the country,
Benjamin Gott and John Marshall, were among the original directors of
27
Pearson, ‘Collective diversification’. Unless otherwise indicated, references for the Manchester
material presented in the following paragraphs can be found in this paper.
28
Calculated from Leeds & Yorkshire Assurance, Prospectus, 1824; W. Parson, Directory of Leeds,
1826; Wilson, Gentlemen merchants. We are grateful to Dr David T. Jenkins for providing information
on Leeds & Yorkshire Assurance.
29
Calculated from the source given in n. 21 above, together with a variety of other sources,
including pollbooks, trade directories, local histories, and especially the works by Mann, Cloth
industry in the west of England; and Rogers, Wiltshire and Somerset woollen mills.
 Economic History Society 2001
664
robin pearson and david richardson
the Leeds & Yorkshire Assurance. Gott employed nearly 1,500 workers
at his three woollen mills, while Marshall employed about 1,200 workers
in his flax mills at Leeds and Shrewsbury.30 The Salamander proprietors
also included most of the largest employers in their respective localities.
The Sheppards of Frome, for example, employed 2,000 hands in 1833,
of whom 500 were in their three factories in the town.31 Like the members
of the Black Country elites examined by Trainor, such individuals drew
strength from the links between their role as employers and their local
civic and public activities.32
Many members of the four insurance offices could trace their family
roots back several generations in the region. This was particularly true
of members of the west country network. Several Salamander proprietors,
such as the Wanseys of Warminster and the Longs and Langfords of
Trowbridge, boasted an ancestry among the region’s clothiers dating back
to at least the sixteenth century. These were probably a minority among
the shareholders, but their presence lent a tone to the insurance office,
which placed it in the most venerable lineage of local enterprise.33 The
members of the northern networks were rather less deeply rooted in the
history of their respective localities, but some could still boast longstanding family connections. Seven of the Manchester insurance directors
had relatives in the Manchester Commercial Society of the 1790s. The
majority of the directors of the Leeds & Yorkshire came from oldestablished families, the gentlemen merchants and bankers of the eighteenth-century town. The Tarletons, Earles, and Heywoods of the Liverpool Fire Office had local roots reaching back to the seventeenth century.
Above all, the members of these networks were among the wealthiest
in their communities, and many were linked by marriage and by business
partnership. Rateable values for 15 of the earliest directors of the Manchester Fire & Life Assurance placed them in the richest 8 per cent of the
town’s mercantile community. At least 12 came from the youthful second
generation of some of Manchester’s most established cotton dynasties.
Their wealth was generated through property and investments in trade,
manufacturing, and for some also in mining and banking, as well as
through marriage and inheritance.34 Partnerships and intermarriage were
also common among the Salamander and Leeds insurers. Gent & Tylee
were brewers in Devizes, while the Tylees were also in a banking partnership with the Salmons. Stephen Phelps had a law practice with John
Thring in Warminster, while Thring was also a partner with two other
Salamander proprietors, Everett and King, as bankers in Warminster.
30
Royal Commission on the Employment of Children in Factories, Supplementary Report, II, (P.P.
1834, XX), C1, answers of millowners to queries from the commissioners for the north-eastern
district, 173, 243, 254.
31
Rogers, Wiltshire and Somerset woollen mills, p. 208.
32
Trainor, Black Country elites, p. 367.
33
However, the number of Salamander proprietors who could trace their ancestry in the region
to before 1750 was not inconsiderable. A trawl of the works by Rogers and Mann reveals at
least 22 proprietors who were descendents of old clothier dynasties, and this is certainly not a
comprehensive count.
34
Pearson, ‘Collective diversification’, pp. 384-5.
 Economic History Society 2001
business networking in the industrial revolution
665
There were also several partnerships of insurance shareholders in cloth
manufacturing and several clothier families were related by marriage.
Among the Leeds & Yorkshire Assurance directors, the brothers William
Aldam and Thomas Benson Pease were partners in the family firm of
Quaker stuff merchants.35 Two further merchant-directors, Banks and
Goodman, were also in partnership. The banker William Williams Brown
was the brother of one of the trustees of the insurance office, the cloth
merchant-manufacturer James Brown. Benjamin Gott was the father-inlaw of a fellow director John Edward Brooke, while Henry Hall married
the daughter of another fellow director, Thomas Tennant. William
Beckett’s elder daughter married John Marshall’s partner, Thomas
Benyon, of Gledhow Hall, and both Marshall’s son, John junior, and
Benjamin Gott’s son John, were trustees of the insurance office. Probably
the wealthiest member of this group, the banker William Beckett, left
£700,000 and a mansion at Kirkstall upon his death in 1863.36
Liverpool kinship ties do not appear to have been as numerous as the
links between proprietors through their business partnerships outside the
insurance boardroom. Ship-ownership and both general commodity and
slave-trading voyages commonly fostered co-partnership agreements which
might embrace a dozen or more merchants in a single enterprise. Their
commercial activities therefore gave the founders of the Liverpool Fire
Office considerable experience in heavily capitalized ventures which
required the burden of risk to be spread through share-ownership. A
preliminary analysis of ship registrations at Liverpool between 1786 and
1788 reveals that 10 of the Liverpool proprietors shared ownership of
ships with their insurance office colleagues.37 These were among the
wealthiest families in Liverpool. Slaving ventures alone were heavy investments. The fortune of one slaver, John Tarleton IV, the father of the
two insurance office Tarletons, was computed at £80,000 at his death
in 1773.38 The total assets of his son John were calculated at £127,267
in 1776, while the balances of the firm Tarleton & Backhouse were
£135,000 in 1795.39
The sources of such wealth were not always certain or regular. Violent
fluctuations in income during their active business life were characteristic
of the majority of this class of businessmen.40 Bankruptcy, for instance,
plagued the network of Salamander shareholders, reflecting the general
difficulties faced by the west country wool textile industry in the 1820s
and 1830s. However, the shared experience of business risk lent momentum to efforts to reduce it through combination. This was also comp35
Paz, ‘William Aldam’, p. 18; Wilson, Gentlemen merchants, app. B; Prior and Kirby, ‘The
Society of Friends’, p. 79.
36
Sprittles, ‘New Grange, Kirkstall’, p. 31.
37
Craig and Jarvis, eds., Liverpool registry.
38
Richardson, American material from the Tarleton Papers.
39
Liverpool RO, Tarleton Papers, 920 TAR 2/24, Accounts drawn up for John Tarleton by
Daniel Backhouse, 29 June 1776; 920 TAR 5/1, Balance sheets, Messrs Tarleton & Backhouse,
1786-1810.
40
On the fluctuating income of one Leeds & Yorkshire director, the woolstapler Robert Jowitt,
see Morris, ‘Middle class and the property cycle’.
 Economic History Society 2001
666
robin pearson and david richardson
lemented by near-residence and by some property dealing between members of these groups. Many of the Leeds, Liverpool, and Manchester
insurance directors were neighbours, although this is less true of the
Salamander shareholders, who were mostly scattered across Wiltshire,
Gloucestershire, and Somerset. Residence has been traced for 60 of the
first 70 directors, trustees, and auditors of the Manchester Assurance
Company. Forty-two had houses either in Manchester itself or in one of
five suburbs on the fringe of the central area, notably in Ardwick. The
directors of the Leeds & Yorkshire Assurance resided either in the west
end of Leeds around Park Square, where at least one-third of the board
lived, or increasingly in the northern outskirts. At least eight lived at
some time in Woodhouse, and seven moved to the more salubrious
northern out-townships to escape the rising levels of noise and pollution
in the town. Unsurprisingly they traded in property between themselves.
George Rawson, for instance, sold Denison Hall to John Gott, while
John Marshall paid £7,500 for a house in Headingley in 1818 to another
future colleague on the insurance board, George Bischoff.41 In 1769 the
uncle of the Liverpool Fire Office director, Thomas Earle, had moved
into the house of the father of a fellow insurance office proprietor
John Blackburn junior. Sometime later, Thomas Earle’s brother, William,
purchased a house from another Liverpool insurance director, Gill
Slater.42 Salamander proprietors also bought, sold, let, and exchanged
cloth mills with each other, and purchased each other’s houses. Some
purchased in order to expand their core business, while others purchased
mills to let.43
Generally the wealth of the individuals in the four groups examined
was sustained over time and brought with it a status and a power which
was also forged through association in the spheres of local government,
politics, civic patronage, and philanthropy. Politically, the members of
these insurance groups were predominantly, though not exclusively, Tory
and high church. Of 19 Manchester insurers whose affiliation is known,
16 were Tories. At least six directors belonged to the exclusive highchurch ‘Broughton Archers’, and two others were members of John
Shaw’s, the other Tory club in Manchester frequented by insurance men.
However, there were also three Whig MPs on the board, including the
radical merchant and calico printer Richard Potter, friend of Cobbett
and O’Connell, who for three years sat in the board room with the leader
of the Manchester yeomanry at Peterloo, Hugh Hornby Birley. Potter
was also one of a cluster of wealthy Cross Street Unitarians among the
largely Anglican group.44
The Manchester insurers were at the heart of the oligarchy which
governed the town during the decades preceding its incorporation. Three
of the five members of the sub-committee appointed in 1827 to draft
41
Beresford, East end, west end, pp. 341-3; Sprittles, ‘New Grange, Kirkstall’.
Earle, Earle of Algernon Tower.
43
Rogers, Wiltshire and Somerset woollen mills, pp. 78, 219-20.
44
London School of Economics, Richard Potter Collection, Misc. 146/4, Diary 1824-8.
42
 Economic History Society 2001
business networking in the industrial revolution
667
a bill for parliamentary representation for Manchester were insurance
directors.45 Those holding seats on the insurance board between 1824
and 1829 also included nine borough reeves of Manchester and 15
police commissioners. Ten out of the first 30 Manchester improvement
commissioners appointed in 1828-9 were insurance directors, and other
board members were scattered across various municipal committees. The
group was also involved in a wide range of cultural and philanthropic
activities, with 27 ‘hereditary governors’ of the Manchester Institution,
13 officers of the Manchester Infirmary, and up to five present on each
of a number of other committees and societies.
In Liverpool 13 of the 17 Fire Office proprietors were freemen of the
African Company, the oldest trade organization in the town, founded in
1750.46 The group also furnished four mayors of Liverpool, and, in the
year of the Fire Office’s foundation, eight of the 44 members of the
parish committee.47 Public activity might have been greater, however, but
for the time consumed by business affairs. In some families with several
male siblings, such as the Tarletons, there was a division of labour.
Thomas Tarleton was chiefly preoccupied with the family trading business. His brothers John and Clayton were also principally merchants, but
both became involved in politics. Clayton, somewhat reluctantly, followed
his father’s example and became mayor in 1792, while John stood,
unsuccessfully, as a Tory candidate in the parliamentary election of 1796,
defeated by his brother Banastre, who had first entered Parliament as
the Whig member for Liverpool in 1790.48
The boardroom of Leeds & Yorkshire Assurance was also dominated
by a well-established Tory, largely Anglican, mercantile elite, which had
dominated Leeds for much of the previous century. However, also like
its Manchester counterpart, the Leeds firm brought together protectionist
Tories, Whigs and free trade Liberals around the boardroom table.
Benjamin Gott, leader of the Tory millowners, his friend Henry Hall,
the founder in 1831 of the anti-reform Leeds True Blue Constitutional
Association, and Benjamin Sadler, the father of the Tory candidate at
the Leeds election of 1832, sat next to John Marshall junior, Sadler’s
successful Whig opponent in the 1832 election, and to Marshall’s father,
elected Whig MP for Yorkshire in 1826. Where Tories, Whigs, and
Liberals mixed, so too did the members of the town’s leading congregations. As well as high-church Anglicans such as the Gotts and the
Becketts, there were evangelical Anglicans, Unitarians, a cluster of Quakers, Baptists, and Independents, and one Catholic, the silk and cotton
spinner James Holdforth. Many of these men served on Leeds corporation, both before and after the Municipal Reform Act of 1835. At least
14 of the first officers of the insurance company were aldermen or
45
Turner, ‘Manchester reformers and the Penryn seats’.
Calculated from Liverpool RO, 352/MD1, Committees Book of the African Company of
Merchants, 1750-1820.
47
Calculated from the list of mayors in Baines, History of Liverpool, and from Peet, ed., Liverpool
vestry books.
48
Richardson, American material from the Tarleton Papers.
46
 Economic History Society 2001
668
robin pearson and david richardson
assistants to aldermen around the time of the foundation of Leeds &
Yorkshire Assurance, including seven of the 12 aldermen holding office
in 1822, and three directors and a trustee were mayors of Leeds between
1820 and 1825.49
Thus, as in Manchester, a presence in the boardroom of the Leeds
insurance office brought political and religious antagonists together. It is
also the case that cultural and philanthropic activities were shared across
the political divide. This was especially true of the growing number of
medical institutions in Leeds. Seven of the 14 members of the management committee formed to supervise the new public dispensary opened
in 1824 were Leeds & Yorkshire directors, and the insurance board also
provided the senior officers of the Lying-In Hospital opened that year,
as well as those of the Infirmary and the House of Recovery.50 In addition,
the insurance company provided the leading officials—presidents, vicepresidents, and treasurers—for over a dozen other philanthropic and
cultural organizations in the borough ranging from the Philosophical Hall
and the Leeds Mechanics’ Institute to the Stranger’s Friend and the
different horticultural societies.
We know less about the non-economic affiliations of the proprietors of
the Salamander office. As with the groups in Leeds, Liverpool, and
Manchester, however, it is certain that many were active in municipal
government and the politics of their respective boroughs. Several Salamander proprietors, for instance, were members of Devizes common council
during the early nineteenth century, including Stephen Neate and William
Hughes who served as mayor in 1816 and 1820 respectively, and William
Salmon who served as town clerk and chamberlain. They were prominent
in civic festivities and in expressions of the town’s patriotism. Four of
the ten members of the corporation’s committee to organize the peace
celebrations in 1814 were Salamander shareholders, as were in 1820 all
six of the Devizes committee to prepare a loyal address to George IV,
in the wake of the Cato Street conspiracy to assassinate the cabinet.51
From an analysis of the contested Wiltshire polls of 1818 and 1819 it is
also clear that political divisions ran through the body of Salamander
proprietors. For example in the contested by-election of 1819, 22 Salamander men voted for J.D. Astley, the candidate of the traditional ‘clubs’
interest, while 19 voted for his opponent, the ‘independent’ and future
reformer John Benett.52 Thus in the west country, as in the north of
England, political differences did not get in the way of mutual business
interests when it came to investing in new, tertiary activities, such as
insurance.53
49
The latter were Christopher Beckett (1820), Lepton Dobson (1822), Thomas Tennant (1824),
and Henry Hall (1825). This, however, is a very incomplete count. Baines, Directory of the county
of York, 1824.
50
Anning, ‘Leeds public dispensary’, pp. 132-5; Baines, Directory of the county of York, 1824.
51
Cunnington, Annals of the borough of Devizes.
52
Victoria county history: Wiltshire, 5, pp. 200-8; Wiltshire poll book, 1819.
53
Trainor came to a similar conclusion for Glasgow, that despite political divisions within the
elite, party affiliation ‘did not—except during brief periods of excitement—significantly interfere with
its routine activities’: Trainor, ‘The elite’, p. 243.
 Economic History Society 2001
business networking in the industrial revolution
669
II
Insurance was by no means the only business interest cementing these
networks. By far the most impressive feature of the four groups was not
kinship ties, interlocking business partnerships or shared social, cultural,
and political activities, but the way the members of these groups diversified together into other non-core business ventures, which contributed to
the building of a local and regional economic infrastructure with considerable capital strength. The original sums raised for each of the insurance
foundations were by themselves impressive. Liverpool Fire Office began
with a capital of £80,000 in 1777, of which an unknown proportion was
paid up. In 1823, £18,000 was paid up on the shares of the reconstructed
Salamander office, and a year later £100,000 was subscribed for Leeds &
Yorkshire shares, and £200,000 for the shares of the Manchester Assurance Office.54 Other paths of capital investment and credit, however,
were also paved by the collective diversification of the insurers. In Manchester, eight members of the committee for the Manchester-Leeds railway
of 1825 became insurance directors. Nearly one-third of the members of
the board of Manchester Gas Works in 1832 were on the board of the
insurance company. Six insurers also sat on the boards of Manchester
banks from 1828, and another five had connections with local banking.
Several were involved in local turnpikes and canals. Moreover, the
resources of the insurance office were mobilized to support a range of
interrelated ventures in the town and region. The insurance directors, for
instance, lent £15,000 to the Manchester Police Commissioners on security of the gasworks, £20,000 to the Market Street Commissioners against
highway rates, and £15,000 to the Manchester-Leeds railway against
tolls. In each case they were in effect lending to themselves and their
colleagues, transferring capital from one of their local services to another.
In 1831, when the Manchester insurance office offered Macclesfield Canal
Company £5,000, the loan was accepted by a fellow director, Gilbert
Winter, in his capacity as canal company chairman. A similar loan to
the Manchester-Buxton turnpike was negotiated by Francis Philips, a
relative of another Manchester insurer.
As in Manchester, the connections between the Leeds insurance office
and other public utilities were extraordinarily close. Nine of the 20
members of the original Leeds gasworks committee of 1818 became
directors of the Leeds & Yorkshire, and the insurance boardroom contained several other officers and proprietors of the Leeds Gas Light
Company, which commenced with a capital of £20,100. When a rival
oil gas company opened in Leeds in 1824, its chairman and treasurer,
respectively John Gott and Henry Greenwood, sat together on the board
of the insurance office with their colleagues from the coal gas company,
54
Leeds Mercury, 1 April 1777; Royal Insurance plc, Leeds, Leeds & Yorkshire Fire & Life
Assurance Company, Circular of Resolutions passed at a General Meeting of Shareholders, 6 May
1824; Guildhall Library, London, MS. 11935e, Sun Fire Office, Take-over papers, Salamander,
Deed of settlement, 8 Jan. 1823; Guildhall Library MS. 16217, Manchester Fire & Life Assurance
Company, Deed of settlement, 1 June 1824.
 Economic History Society 2001
670
robin pearson and david richardson
despite their open competition for business. Nor, given their many other
common economic interests, need we find it surprising that Tories and
Whigs could work together on the question of providing a new waterworks
for Leeds, despite the political froth which rival projects produced.
The management boards of most of the new commercial and retailing
facilities established as subscription companies in Leeds during the 1820s
were also dominated by the insurance men. The South Market company
was established in 1823 with a capital of £22,000 and 100 shareholders.
The two promoters of the company and at least 10 of the 18 trustees in
1830 were Leeds & Yorkshire directors.55 Altogether, some 16 of the
first 41 officers of the insurance company were subscribers or trustees in
1830. Similarly, there was a high level of insurers’ involvement in the
Commercial Buildings company established in 1824 with a capital of
£34,000 and 155 shareholders. No fewer than 30 insurance men were
to be found as proprietors, which is not surprising given that the property
had already been earmarked to contain the new head office of the
insurance company. All four of the trustees of the Central Market
company were also Leeds & Yorkshire directors.56
As in the north of England, west country insurers were actively involved
in developing the local infrastructure. Two of Salamander’s founding
proprietors, the brewer James Gent and the banker William Salmon, were
members of the original committee of Devizes corporation who negotiated
with the Kennet & Avon Canal Company in 1794 over the right to cut
the canal through corporation land.57 In 1807 four of the nine members
of the corporation’s committee to negotiate the lease of a site for a wharf
on the canal were insurance office shareholders. Two years later a group
of 13 lessees of this land formed itself as a wharf company and entered
into final negotiations with the corporation. No fewer than 10 of the 13
were Salamander proprietors or their relatives. Unsurprisingly, given the
dominant presence of Salamander names in local government and the
overlapping membership of the wharf company and the corporation, the
latter agreed to let the land. A further example of this interlocking
political and economic power occurred in 1826 when one acre of land
held by the wharf company was chosen as the site for the new Devizes
gas works. The choice of the site was approved by the corporation upon a
motion moved by William Salmon and William Hughes, both Salamander
proprietors and both members of the wharf company. The price
demanded by the wharf company was agreed by the corporation, with
the money to be raised by selling further corporation land on lease.58
Within the small matrix of Liverpool insurers were three business
clusters. The first centred on the firm of Thomas Parke and B.A.
55
We are extremely grateful to Dr Kevin Grady for providing copies of his transcripts of the trust
deeds of South Market, the Corn Exchange, Central Market, and the Commercial Buildings in
Leeds, from which this and the following calculations have been made. For these commercial
amenities, see Grady, ‘Profit, property interests and public spirit’.
56
Mayhall, Annals of Yorkshire, pp. 314, 325-6.
57
Cunnington, Annals of the borough of Devizes, app. L; Victoria county history: Wiltshire, 5, p. 175.
58
Cunnington, Annals of the borough of Devizes, pp. 25, 31, 37, 82.
 Economic History Society 2001
business networking in the industrial revolution
671
Heywood which invested in more than 50 slaving voyages in the triangular
trade during the 1780s. Their shipping investments also frequently overlapped with those of a second partnership, that of Thomas Staniforth
and Joseph Brooks junior.59 The third cluster of investments was largely
separate, that of the Tarleton brothers who had shares in 16 ships listed
in the registry sample. In the late 1780s and early 1790s the Tarletons
had their own powerful firm with Daniel Backhouse, which operated
almost entirely independently of other Liverpool Fire Office proprietors.
Liverpool insurers traded with each other and their cargoes were sometimes carried together on ships in which they were not always shareholders.60 They drew bills on each other, sold shares in ships, and their
families bought each other’s property. Some also invested in cloth mills,
sugar refineries, theatres, turnpikes, and other ventures. The banker
Richard Heywood, for example, joined another insurance colleague and
merchant, Gill Slater, as part-owners of a hotel and coffee room in
Liverpool’s Lord Street.61
However, what distinguished the Liverpool insurers from the other
groups examined here was not the diversification of their business activities, but the geographical and commercial range of their trading connections. The slave trade generated the most extensive connections of all.
Shippers of slaves had to maintain regular correspondence with dealers,
planters, and agents in the Caribbean and American ports and on the
African coast, in order to advise their captains of the optimum markets
in which to trade. In addition many slavers constructed remarkably
extensive networks of domestic suppliers which have seldom been the
subject of research.
Liverpool mercantile connections were thus local, regional, national,
and international, and the insurance men were positioned at the centre
of these. In addition, their moves into other ventures, sometimes individually or with family members, sometimes in conjunction with fellow
insurance proprietors, identify them as belonging to a capital as well as
a trading network. The close interlocking of business interests in Liverpool, Leeds, Manchester, and the west country demonstrates the power
of the collective diversification of mercantile and manufacturing elites
into the service sector of their local economies. Other localities witnessed
the same phenomenon in this period. The proprietors of the first Newcastle Fire Office, for example, were a powerful group of bankers, coal
owners, and manufacturers, who were prominent also as members of
common council and as electors. The insurance office, founded in 1783,
purchased the town’s water works in 1797 and opened Newcastle’s first
59
Staniforth and Brooks shared with Heywood and Parke in at least a dozen slaving voyages
between 1784 and 1788. Figures calculated from Eltis et al., Transatlantic slave trade.
60
Cf., for instance, the voyage accounts drawn up in autumn 1771 for three vessels, a Barbados
packet, the ship ‘Meredith’ and the snow ‘Juno’, where cargoes of wine, rum, and iron were carried,
respectively, for Staniforth (as partner in his firm Staniforth, White, Macbell & Co) and Gill Slater,
for Benjamin Heywood (in partnership with his brother Arthur) and Slater, and for Heywood,
Samuel Shaw, and Thomas Case (as partner in his firm Gregson, Case & Co). PRO, Chancery,
C109/401, Papers of Samuel Sandys, Voyage Book no. 1.
61
Liverpool RO, Holt and Gregson Papers, 942 HOL, vol. 8, p. 127.
 Economic History Society 2001
672
robin pearson and david richardson
gas works in 1817, a classic concentration of network capital in utilities
and financial services.62 Thus, easier capital movements across different
sectors of local and regional economies were the products of collective
diversification, encouraged by the accelerated information flows and
reduced information costs, which, in turn, were the result of permeable
business networking. In effect, a self-reinforcing system emerged, capable
of generating considerable economic gains as well as promoting economic change.
III
Casson has pointed out that as information costs change, so does the
institutional structure of the economy.63 In late eighteenth-century Britain,
association created capital and credit networks, which enhanced trust and
reduced information costs. This in turn led to credit expansion on the
one hand, and capital deepening and diffusion via collective forms of
economic diversification on the other, accompanied by the increasing use
of the joint-stock form of business organization. Non-economic forms of
association assisted these changes. Kinship ties are usually deemed the
most important. Increasingly, however, other forms of association—social,
religious, political, cultural—which emerged during industrialization and
urbanization, reinforced the web of business connections, and contributed
to the development of common value systems among groups which came
to form the middle class, the ‘moral system (which) was needed to supply
the personal loyalties necessary to the development of firms outside the
family’.64 The ‘embeddedness’ of business in social relations and value
systems reduced the level of conflict in trade and eased the settlement
of disputes. The transparency of (middle-class) public behaviour in eighteenth- and early nineteenth-century towns also helped to reduce the freerider problem which always accompanied networks—hence the importance of the public life of urban elites in this period, with their charitable
works, cultural patronage, civic ceremonies, and voluntary subscription
societies. Other members of the elite and many outside the circle could
generally see who was expending their energies and money and where,
and confer an appropriate degree of approbation. As Offer has recently
pointed out, ‘regard’ provides a powerful incentive for trust, and may
itself be seen as a ‘transaction benefit’. The juxtaposition of transparency
and ‘regard’ helped to create what Fukuyama has called a ‘radius of
trust’, whose parameters were determined by the size of the business
network itself, and its capacity to expand with the economy at large.65
There may have been a number of reasons why such networks were
formed in the first place. In shipowning, overseas trading, or diversifi62
Rennison, ‘Supply of water to Newcastle’; Campbell, ‘Gas lighting in Newcastle’.
Casson, ‘Institutional economics’.
Fukuyama, Trust, p. 154, citing N. Rosenberg and L. E. Birdsell Jr., How the west grew rich
(New York, 1986), p. 114.
65
Offer, ‘Between the gift and the market’, p. 454; Fukuyama, Trust, pp. 155-7, 181, 204-5. Cf.
Habermas, Structural transformation.
63
64
 Economic History Society 2001
business networking in the industrial revolution
673
cation into other capital-intensive ventures, the most obvious reasons are
risk sharing and resource pooling. Asking why networks were formed also
raises questions of recruitment and selection. In all four groups examined,
the insurers were not newcomers, but belonged to an established elite of
mercantile and manufacturing dynasties whose members had associated
for decades. Kinship ties were of some importance. In all four places,
however, the personal associations crucial for maintaining a large and
varied pool of contacts from which to select trustworthy and acceptable
partners for capital ventures had necessarily to extend beyond kin, if only
for reasons of risk sharing. As yet we know little about why particular
individuals came together in partnerships, or why certain partnerships
and individuals allied themselves in shipping syndicates or in insurance,
gas, water, canal, property, and banking companies.
Where networks were fairly informal, as they seem to have been in
most of their manifestations, they were also held together by shared
values and by the socialization of members. Contrary to Adam Smith’s
view, it is doubtful whether economic self-interest was, by itself, enough.
Here the economics of regard took over. Contrary, however, to Offer’s
assumption that the resources of personal networks were unable to cope
with ‘large-scale projects’, the evidence from insurance, public utilities,
and the slave trade suggests that networking and the economy of regard
in industrializing Britain stretched well beyond the reach of kinship
relations and small partnerships.66 Indeed, it might be the case that the
broader the scope of association, the stricter and more specific were the
unwritten rules of access to networks. For where relations between creditors and debtors, or between co-investors, were tied up with networks,
so too were issues of trust. From their correspondence it is clear that
Liverpool merchants, for instance, based their trust on their judgement
of ‘conduct’, as well as on the identification of attributes based on
common values, of which solidity, respectability, probity, and independence were among the most important.67 The underlying importance of
shared values helps to explain, for instance, why in early nineteenthcentury Manchester and Leeds, despite important religious and political
divisions within the middle class, the elites generally acted in business
matters as tight knit oligarchies with a common and largely pragmatic
political economy, which had not yet fully embraced the free trade
theories of the Liberals in their midst.68 Thus, men of different political
camps cooperated in the insurance boardrooms in campaigns such as
those against a local currency and stamp duties, and in many cultural
and philanthropic activities. As Trainor has argued for Glasgow, cultural
institutions provided a further ‘solvent’ for internal differences, while
66
Offer, ‘Between the gift and the market’, p. 468.
Cf, for instance, the comments of Robert Hodgson in a letter to Thomas Earle, 23 March
1793, Merseyside Maritime Museum, Earle Papers.
68
Turner concludes that the politics of commerce in Manchester in this period ‘were in many
cases cautious and non-partisan’: Turner, ‘Before the Manchester School’.
67
 Economic History Society 2001
674
robin pearson and david richardson
public life and civic ritual enhanced the prestige, legitimacy, and integration of these elites.69
The opportunities for cooperation appear to have been increasing
during the early nineteenth century, as the web of businessmen’s associational life extended and became more complex. In 1824, only a few
weeks before the launch of the Manchester insurance office, one of its
founders, the cotton merchant Benjamin Braidley, calculated in his diary
that he spent over 36 hours each week ‘on matters totally unconnected
with my own business’, including committee meetings, correspondence,
social calls, and charitable and educational work.70 The interconnected
circuits of political, business, and social activities that existed in the
insurance boardrooms and at proprietors’ meetings provided their members with numerous and regular occasions to meet and discuss the state
of the markets, profits, and opportunities to diversify. As yet, however,
we do not know whether these networks became more closed and oligarchic as the period progressed, ultimately breaking down. We are, on the
one hand, mindful of Devine’s suggestion that the decision of Glasgow’s
West India merchants to establish formal associations after 1807 indicated
not strength but a recognition of their relative weakness in the city.71 On
the other hand, Trainor reports a continuation of cohesion, vitality, and
influence among elites in late Victorian Glasgow and the Black Country,
despite the increasing size and diversity of those elites, and Berghoff
has indicated the continued existence after 1870 of pluralistic elites in
Birmingham, Bristol, and Manchester.72 If this evidence is accepted, there
may be a case for identifying inertia as a causal factor in the survival of
networks, though clearly not in their origin. As with the factors determining the location of the individual firm, networks too can be seen as the
product of elements, such as personal friendships, intermarriage, political
and business ties, which reinforce the initial decision of network members
to associate, and raise the costs of relocating association elsewhere.73
Even where the original reasons for people coming together disappear,
the information advantages brought by such clustering may remain.
This article has concentrated upon identifying and analysing capital
networks, the products of that ‘exclusive corporation spirit’ which, it has
been argued, contrary to Smith, was a catalyst for economic growth.74 It
is beyond the scope of this article to attempt to measure, rather than
merely suggest, the economic impact of these networks. This may have
manifested itself, for example, in internal borrowing costs which were
lower than the market rate. Alternatively the relative ease with which
share capital was raised for joint stock ventures may have been related
to the density of network relations in a particular region, which may in
69
Trainor, ‘The elite’, pp. 246-7.
Braidley, Memoirs, pp. 39-40.
71
Devine, ‘Eighteenth-century business elite’.
72
Trainor, ‘The elite’, pp. 255-64; idem, Black Country elites, pp. 361-2; Berghoff, ‘Regional variations’.
73
On inertia in the locational decisions of firms, see Blair, Urban and regional economics, p. 21.
74
Smith, Wealth of nations, I, p. 462.
70
 Economic History Society 2001
business networking in the industrial revolution
675
turn have been reflected in the price of shares. The comparative mortality
rate among joint stock projects in different regions might also provide a
means of measuring the importance of networking. The cost of making
mistakes when diversifying into new activities and entering new markets
was likely to have been reduced by information sharing and collective
action between capitalists. New business ventures such as gas, water, or
insurance required considerable inputs of technical knowledge, as well as
market information and accounting skills. In some cases, such as gasworks, the costs to investors and company directors of acquiring the
relevant engineering skills were defrayed by contracting out. Other skills,
however, such as how to fix a price for gas or how to set an insurance
premium rate for a warehouse full of different combustibles, had to be
learned, albeit with some help from accountants and surveyors. The value
of sharing commercial, industrial, and financial expertise across a group
might be seen in the relative success of the four insurance offices examined
above, as they competed with the giant metropolitan companies in some
of the most hazardous fire insurance markets in Britain.75
The evidence from an analysis of the insurance offices alone demonstrates that collective diversification was part of the agenda of merchants,
manufacturers, and professionals in several places at different times during
the course of the industrial revolution. We cannot, as yet, explain why
the individuals concerned diversified into insurance when they did, but
the types of diversification described in this article could not occur
without networking. The greater prominence of collective diversification
in Liverpool compared with, for example, Manchester during the late
eighteenth century may partly be the result of the local experience of
syndicate formation between individuals and partnerships in shipping and
trade.76 However, there were other regions, the north-east and the west
country for example, where investors from mercantile, industrial, and
financial backgrounds came together in the 1780s and 1790s to establish
insurance offices and other joint-stock projects. By the 1820s the series
of diversifying ventures in insurance, banking, gas, water, canals, railways,
and commercial property undertaken by merchants and manufacturers in
Manchester and Leeds reflected their comfortable familiarity with risksharing and resource-pooling behaviour. It also signified their collective
support for the construction of a range of services and utilities to serve
the needs of the local economy. This had little to do with altruism. The
evidence from Manchester suggests that it was partly a way out of
constraints on growth, particularly financial constraints, experienced in
the cotton industry, as dividends from gas and insurance could be
channelled back into shareholders’ core businesses.77 However, a large,
75
For a detailed analysis of the Manchester Assurance Company’s underwriting performance and
market share, see Pearson, ‘Taking risks’.
76
In contrast to the larger group behind the Liverpool Fire Office, the first insurance office in
Manchester was established in 1771 as an arm of a local bank, Byrom, Sedgwick & Allen, and its
fate was ultimately tied to the resources of the bank. It was sold to the London-based Phoenix
Assurance during the banking crisis of 1788.
77
Pearson, ‘Collective diversification’.
 Economic History Society 2001
676
robin pearson and david richardson
interlocking web of institutions also reinforced the political as well as the
economic power of the elite. The loan to the Manchester gasworks from
the insurance office is one of the best examples of this, for the money
was crucial in bolstering the political position of the insurance directors
and their allies outside the boardroom at a time when the gasworks
issue was central in the struggle between the governing oligarchy and
Manchester’s radicals.78 Thus, while collective economic diversification
was contingent upon networking and/or oligarchic formation, this form
of diversification could also strengthen networks and oligarchies. The
conventions of association—the proliferation of joint-stock companies with
their constitutions and by-laws—complemented the trust creation which
was the result of everyday social and business contacts. One invested
money in ventures only where one’s fellow investors were known personally, and where they were deemed respectable, solid, and trustworthy,
and also where an additional security was provided by the formal and
informal codification of association.
It may be argued that the phenomenon of like-minded businessmen
from similar backgrounds coming together to establish capital intensive
ventures is probabilistic and unsurprising, indeed unworthy of comment.
Yet the degree of pluralism was so high and the membership of economic,
political, and social institutions so concentrated, that it is remarkable that
so little weight has hitherto been attached to this in accounts of the
British industrial revolution. Recently, business historians have been paying greater attention to the social and communal context within which
enterprises, especially family firms, operated, though there remains a
lingering propensity in some quarters to characterize the industrial revolution primarily in terms of individualistic entrepreneurship.79 The thrust
of this article suggests instead that the collective nature of business
diversification complemented the collusive character of British capitalism
in the late eighteenth and early nineteenth centuries. In the 1790s, for
instance, collusion was rife, and on occasion formalized, between both
Liverpool and Manchester merchants in the Manchester cotton market.80
Exploring further the links between Manchester and Liverpool may reveal
the extent to which such cooperation occurred across the business networks of both towns.81 There is, of course, evidence of trade associations
and pricing agreements, as well as concentration and integration, in a
broad range of industries—iron, pins, glass, salt, paper, brewing, tobacco,
as well as fire insurance—in the late eighteenth and early nineteenth
centuries, and it has been argued elsewhere that these were not merely
a sporadic or ‘ephemeral’ phenomenon on the path to ‘perfect’ markets
78
On the gasworks issue see Redford, Local government, pp. 287-310; Turner, ‘Gas, police and
the struggle for mastery in Manchester’.
79
Wilson, British business history, pp. 24-5, 45. For a recent reassertion of the orthodox view that
the culture of individualism was the key to the British industrial revolution, see Temin, ‘Is it kosher
to talk about culture?’
80
For an example, see Liverpool RO, Tarleton Papers, 920 TAR/4/16, C. Tarleton to T. Tarleton,
16 March 1792.
81
The authors are currently involved in the early stages of a project to examine the ManchesterLiverpool economic axis during the industrial revolution.
 Economic History Society 2001
business networking in the industrial revolution
677
82
in the Victorian era. From this perspective, inter-firm cooperation and
collective action taken with the aim of reducing risk, cutting information
costs and labour costs, and raising prices and profits, characterized British
business during the industrial revolution. The business networks examined
in this article, with their joint-stock ventures facilitating the flow of capital
and credit between different sectors of local and regional economies, may
be regarded as part of this broader picture, notwithstanding Adam Smith’s
qualified dismissal of the utility of joint stock companies.83 It may be
time to construct a model of British economic development in which the
industrial revolution is seen, not as the triumph of Anglo-Saxon individualism, near perfect competition, and freer trade, but as a reordering of
imperfect markets upon the triple foundations of, first, permeable business
networks rooted in regional economies (but with multiple links to the
international economy); second, the proliferation of joint stock partnerships after 1760, especially in the service, transport and utility sectors of
local and regional economies, often with a quasi-public status and a near
monopolistic position in their markets; and third, regional and transregional price associations and oligopolies in many sectors of the domestic economy.
University of Hull
82
83
Pearson, ‘Taking risks’, pp. 61-3.
Smith, Wealth of nations, II, p. 758.
Footnote references
Amdam, R. P. and Bjarnar, O., ‘Regional business networks and the diffusion of American management and organisational models to Norway, 1945-65’, Bus. Hist., 39 (1997), pp. 72-90.
Anderson, B. L., ‘Financial institutions and the capital market on Merseyside in the eighteenth and
nineteenth centuries’, in B. L. Anderson and P. J. M. Storey, eds., Commerce, industry and
transport: studies in economic change on Merseyside (Liverpool, 1983), pp. 26-59.
Anning, S. T., ‘The Leeds public dispensary’, Pub. Thoresby Soc., 54 (1973-7), miscellany 16, pp.
130-63.
Baines, E., History, directory and gazetteer of the county of York (Leeds, 1824).
Baines, T., History of the commerce and town of Liverpool (1852).
Beresford, M., East end, west end: the face of Leeds during urbanisation, 1684-1842 (Leeds, 1988).
Berghoff, H., ‘Regional variations in provincial business biography: the case of Birmingham, Bristol
and Manchester, 1870-1914’, Bus. Hist., 37 (1995), pp. 64-85.
Blair, J. P., Urban and regional economics (Homewood, Ill., 1991).
Braidley, B., Memoirs of Benjamin Braidley (Manchester, 1845).
Campbell, W. A., ‘Gas lighting in Newcastle’, Archaeologia Aeliana, 5th ser., XIII (1985), pp.
197-201.
Carnevali, F., ‘Between markets and networks: regional banks in Italy’, Bus. Hist., 38 (1996), pp.
84-100.
Casson, M., ‘Institutional economics and business history: a way forward?’, Bus. Hist., 39 (1997),
pp. 129-50.
Casson, M. and Rose, M. B., ‘Institutions and the evolution of modern business: introduction’,
Bus. Hist., 39 (1997), pp. 1-8.
Colli, A., ‘Networking the market: evidence and conjectures from the history of the Italian industrial
districts’, Eur. Yearbook Bus. Hist., 1 (1998), pp. 75-92.
Cookson, G., ‘Family firms and business networks: textile engineering in Yorkshire, 1780-1830’,
Bus. Hist., 39 (1997), pp. 1-20.
Corfield, P., The impact of English towns, 1700-1800 (Oxford, 1982).
Craig, R. and Jarvis R., eds., Liverpool registry of merchant ships (Manchester, 1967).
Crouzet, F., The first industrialists (Cambridge, 1985).
Cunnington, B. H., Some annals of the borough of Devizes (Devizes, 1925).
Curtin, P. D., Cross-cultural trade in world history (Cambridge, 1984).
 Economic History Society 2001
678
robin pearson and david richardson
Devine, T. M., The tobacco lords: a study of the tobacco merchants of Glasgow and their trading activities,
1740-1790 (Edinburgh, 1975).
Devine, T. M., ‘An eighteenth-century business elite: Glasgow-West India merchants, c. 1750-1815’,
Scottish Hist. Rev., 57 (1978), pp. 40-67.
Earle, T. A., Earle of Algernon Tower (1889).
Eltis, D., Behrendt, S. D., Richardson, D., and Klein, H. S., eds., The transatlantic slave trade: a
database on CD-Rom (Cambridge, 1999).
Farnie, D. A., ‘An index of commercial activity: the membership of the Manchester Royal Exchange,
1809-1948’, Bus. Hist., 21 (1979), pp. 97-106.
Fukuyama, F., Trust: the social virtues and the creation of prosperity (Harmondsworth, 1995).
Godley, A. and Ross, D. M., ‘Introduction: banks, networks and small-firm finance’, Bus. Hist., 38
(1996), pp. 1-10.
Grady, K., ‘Profit, property interests and public spirit: the provision of markets and commercial
amenities in Leeds, 1822-29’, Pub. Thoresby Soc., 54 (1976), miscellany 16, pt. 3, pp. 165-95.
Grandori, A. and Soda, G., ‘Inter-firm networks: antecedents, mechanisms and forms’, Organisation
Studies, 16 (1995), pp. 183-214.
Granovetter, M., ‘Economic action and social structure: the problem of embeddedness’, Amer. J.
Sociol., 91 (1985), pp. 481-510.
Greif, A. ‘Reputation and coalitions in medieval trade: evidence on the Maghribi traders’, J. Econ.
Hist., XLIX (1989), pp. 857-82.
Habermas, J., The structural transformation of the public sphere (Cambridge, 1992 edn.).
Hamilton, G. G., ed., Asian business networks (Berlin, 1996).
Harris, R., Industrialising English law: entrepreneurship and business organisation, 1720-1844
(Cambridge, 2000).
Howe, A., The cotton masters, 1830-1860 (Oxford, 1984).
Lovejoy, P. E. and Richardson, D., ‘Trust, pawnship and Atlantic history: the institutional foundations of the Old Calabar slave trade’, Amer. Hist. Rev., 104 (1999), pp. 333-55.
Macaulay, S., ‘Non-contractual relations in business: a preliminary study’, Amer. Sociol. Rev., 28
(1963), pp. 55-69.
Maifreda, G., ‘Networks and economic behaviour of the Milanese Jews in the nineteenth century’,
Eur. Yearbook Bus. Hist., 1 (1998), pp. 93-118.
Mann, J. de L., The cloth industry in the west of England from 1640 to 1880 (Gloucester, 1987).
Mayhall, J., The annals of Yorkshire, 1 (1859).
Morgan, C. J., ‘Demographic change, 1771-1911’, in D. Fraser, ed., A history of modern Leeds
(Manchester, 1980), pp. 46-71.
Morris, R. J., ‘The middle class and the property cycle during the industrial revolution’, in T. C.
Smout, ed., The search for wealth and stability (1979), pp. 91-113.
Morris, R. J., Class, sect and party: the making of the British middle class, Leeds 1820-1850
(Manchester, 1990).
Mosse, W. E., Jews in the German economy: the German-Jewish economic elite, 1820-1935 (Oxford,
1987).
Neale, R. S., Bath 1680-1850: a social history (1981).
Newton, L., ‘Regional bank-industry relations during the mid-nineteenth century: links between
bankers and manufacturers in Sheffield, c. 1850 to c. 1885’, Bus. Hist., 38 (1996), pp. 64-83.
Offer, A., ‘Between the gift and the market: the economy of regard’, Econ. Hist. Rev., L (1997),
pp. 450-76.
Parson, W., General and commercial directory of the borough of Leeds (Leeds, 1826).
Paz, D. G., ‘William Aldam: backbench MP for Leeds, 1841-1847: national issues versus local
interests’, Pub. Thoresby Soc., 2nd ser., 8 (1997), miscellany.
Pearson, R., ‘Collective diversification: Manchester cotton merchants and the insurance business in
the early nineteenth century’, Bus. Hist. Rev., 65 (1991), pp. 379-414.
Pearson, R., ‘Fire insurance and the British textile industries during the industrial revolution’, Bus.
Hist., 34 (1992), pp. 1-19.
Pearson, R., ‘Taking risks and containing competition: diversification and oligopoly in the fire
insurance markets of the north of England in the early nineteenth century’, Econ. Hist. Rev.,
XLVI (1993), pp. 39-64.
Pearson, R., ‘Ein Wachstumsrätsel: Feuerversicherung und die wirtschaftliche Entwicklung Groβbritanniens, 1700-1850’, Zeitschrift für Unternehmensgeschichte, 44 (1999), pp. 218-34.
Pearson, R., ‘Shareholder democracies? English stock companies and the politics of corporate
governance during the industrial revolution’, Eng. Hist. Rev. (forthcoming).
Peet, H., ed., Liverpool vestry books, 1681-1834, 1 (1912).
Prior, A. and Kirby, M., ‘The Society of Friends and the family firm, 1700-1830’, Bus. Hist., 35
(1993), pp. 66-85.
Pugh, R. B. and Crittall, E., eds., The Victoria history of the counties of England: Wiltshire, 5 (1957).
 Economic History Society 2001
business networking in the industrial revolution
679
Redford, A., Manchester merchants and foreign trade, 1794-1858 (Manchester, 1934).
Redford, A., A history of local government in Manchester, 1 (1939).
Rennison, R. W., ‘The supply of water to Newcastle upon Tyne and Gateshead, 1680-1837’,
Archaeologia Aeliana, 5th ser., V (1977), pp. 179-95.
Richardson, P. D., American material from the Tarleton Papers in the Liverpool Record Office (1974).
Rogers, K. H., Wiltshire and Somerset woollen mills (Edington, 1976).
Rose, M. B., ‘Networks and leadership succession in British business in the 1950s’, Eur. Yearbook
Bus. Hist., 1 (1998), pp. 57-74.
Ryan, R., ‘The Norwich Union and the British fire insurance market in the early nineteenth century’,
in O. M. Westall, ed., The historian and the business of insurance (Manchester, 1984), pp. 39-73.
Shimotani, M., ‘The formation of distribution Keiretsu: the case of Matsushita Electric’, Bus. Hist.,
37 (1995), pp. 54-69.
Smith, A., An inquiry into the nature and causes of the wealth of nations, II (Oxford, 1976),
Smith, D., Conflict and compromise: class formation in English society, 1830-1914 (1982).
Sprittles, J., ‘New Grange, Kirkstall’, Pub. Thoresby Soc., XLVI (1957), miscellany 13, pt. 1, pp.
22-35.
Temin, P., ‘Is it kosher to talk about culture?’, J. Econ. Hist., LVII (1997), pp. 267-87.
Trainor, R. H., Black Country elites: the exercise of authority in an industrialized area, 1830-1900
(Oxford, 1993).
Trainor, R. H., ‘The elite’, in W. H. Fraser and I. Maver, eds., Glasgow, II: 1830 to 1912
(Manchester, 1996), pp. 227-64.
Turner, M. J., ‘Manchester reformers and the Penryn seats, 1827-8’, Northern Hist., 30 (1994), pp.
139-60.
Turner, M. J., ‘Before the Manchester School: economic theory in early nineteenth-century Manchester’, History, 79 (1994), pp. 216-41.
Turner, M. J., ‘Gas, police and the struggle for mastery in Manchester in the eighteen-twenties’,
Hist. Res., 67 (1994), pp. 301-17.
Wilson, J. F., British business history, 1720-1994 (Manchester, 1995).
Wilson, R. G., Gentlemen merchants: the merchant community in Leeds, 1700-1830 (Manchester, 1971).
Wiltshire poll book (Warminster, 1819).
Official publication
Royal Commission on the Employment of Children in Factories, Supplementary Report, pt. II (P.P.
1834, XX, C1).
 Economic History Society 2001