Harold C. Livesay
Entrepreneurial Dominance in Businesses
Large and Small, Past and Present
Reiterating and broadening a theme broached by its author
over a decade ago, this article seeks to redirect the attention
of business historians to the central role of the individual
entrepreneur in American economic history. In both giant corporations and small start-up firms, in the late twentieth century and the early nineteenth, it argues, the presence—or
absence—of intelligent, organized, and creative entrepreneurs
has determined the success or failure of companies much more
clearly than has the nature of their organizational charts.
B
etween 1977 and 1980 I published three discussions of the
entrepreneur in American business past and present.1 In the first
of these, "Entrepreneurial Persistence through the Bureaucratic Age,"
I proposed a two-fold thesis:
1)
[Individuals sometimes do control bureaucracies—even massive,
modern, industrial bureaucracies—so effectively that the organization becomes an instrument of personal will. In such cases . . .
[the] firm becomes a dynamic agency for growth . . . because
the inherent power of its bureaucratic management vastly multiplies, rather than stifles, the entrepreneurial spirit of its chief. . . .
The success of these highly personalized enterprises shows that
individual entrepreneurs have survived and prospered in an age
characterized by anonymous bureaucracies.2 Together with other
HAROLD C. LIVESAY is Clifford A. Taylor Professor in Liberal Arts at Texas A&M
University.
1
Harold C. Livesay, "Entrepreneurial Persistence through the Bureaucratic Age," Business History Review 51 (Winter 1977): 415-43; American Made: Men Who Shaped the American Economy (Boston, 1979); "Entrepreneurial History," in The Encyclopedia ofEntreprtneurship,
ed. Calvin A. Kent, et al. (Englewood Cliffs, N.J., 1982), 7-14.
2
I used here in 1977 a loose definition of "entrepreneurs" as growth-oriented, innovative practitioners of aggressive management, and that definition applies throughout the
pages that follow. Practicing entrepreneurship does not depend on ownership, but it does
Business History Review 63 (Spring 1989): 1-21. © 1989 by The President and Fellows
of Harvard College.
Downloaded from https:/www.cambridge.org/core. IP address: 88.99.165.207, on 14 Jun 2017 at 12:31:44, subject to the
Cambridge Core terms of use, available at https:/www.cambridge.org/core/terms. https://doi.org/10.2307/3115424
Harold Livesay / 2
forms of business organizations, they have kept American capitalism vibrant and growing.
2)
[W]hile the passage of time adds many once-individualistic enterprises to the ranks of massive corporations run—and often run
well—by cadres of anonymous managers, . . . new firms continue
to appear and grow under the command of a controlling
owner. . . . [This] process has been a continuing feature of the
American industrial economy. Its vitality suggests that capitalism contains not the seeds of its own destruction, but rather the
seeds of its own regeneration, that its evolution is a cyclical one
in which depersonalized, bureaucratic anonymity is a stage often
occupied by individual firms, rather than the terminus of an
inevitable linear progression [culminating in] some form of
bureaucratized socialism or fascism.3
In the dozen years that have passed since the publication of
"Entrepreneurial Persistence," I believe that enough evidence has
accumulated to refine and reinforce its central ideas and to mandate
a re-examination of American business history in their light. The study
of large-scale organizations leaves too many recent phenomena unexplained and inexplicable.
Entrepreneurship in Large Firms and Small
Individuals do indeed often control massive corporate bureaucracies.
Many prevail without benefit of the ownership position enjoyed by
the characters—Andrew Carnegie, Howard Stoddard, and Henry Ford
II—on whom I based my case in "Entrepreneurial Persistence," though
dominant managers often benefit from the patronage of a major owner;
Ford chairman Phil Caldwell, for example, could count on the support of William Clay Ford while remaking the Ford Motor Company.
The long-run success of major corporations has depended (and continues to depend) more on their susceptibility to such management
and on their ability to attract and hold people with the right combination of talent and personality than on any particular form of cordepend on control, which in the best-run firms depends on performance. I am aware of
the large literature concerned with defining the term, but I am not concerned with lexicography here, rather with a type of behavior and those who exhibit it. Nor do I care
whence cometh the entrepreneur and why, though that fascinating question has received
considerable attention as well.
3
Livesay, "Entrepreneurial Persistence," 419.
Downloaded from https:/www.cambridge.org/core. IP address: 88.99.165.207, on 14 Jun 2017 at 12:31:44, subject to the
Cambridge Core terms of use, available at https:/www.cambridge.org/core/terms. https://doi.org/10.2307/3115424
Entrepreneurial Dominance / 3
porate organization. History has shown repeatedly that, given the right
manager, any form of organization can work or be reorganized until
it does work, whereas the wrong people can cripple the most vigorous
firm despite the presence of a structure thought to be self-correcting.
In fact, once stagnation has set in, revivification has rarely occurred
through a reshuffling of organization charts. Far more often renewal
has resulted from the arrival of a galvanic personality, such as John
Sculley at Apple Computer.4
Some firms run by impersonal bureaucracies have, as I suggested
in 1977, "generate [d] dynamic innovations that propel the economy
forward . . . exhibiting] enormous creative energy," as exemplified
by Du Pont's development of nylon.5 That such behavior has, however,
far more often characterized firms dominated by entrepreneurial
individuals, has been virtually taken for granted by business historians
about the past, with its larger-than-life figures such as Andrew Carnegie, Henry Ford, and Pierre du Pont, but ignored or misapprehended
in the modern corporate age. In fact, after studying some 1,700 large
American firms, David L. Birch, the doyen of contemporary small
business scholars, concludes that "these larger businesses grow primarily by adding new branches, not by encouraging innovation"; thus
"growth by larger companies is overwhelmingly a function of creating more copies of a good thing. . . . Very little growth comes from
innovation within [existing facilities]." Regardless of "the source of
growth," Birch "discovered a fascinating characteristic shared by an
uncommonly high number of large businesses that keep growing. To
a striking extent, they are companies that are still managed (directly
or indirectly), by the entrepreneurs or families who founded them."6
As business historians have shown in myriad case studies, most
big companies began as innovative, growth-oriented small firms. In
the process, however, business historians have overlooked a vital feet
of small business history by focusing, as I did myself in the second
4
Because of recent events in the arena of finance capitalism, I want to emphasize here
that by "galvanic personality" I mean individuals committed to preserving the firm by
improving its operating efficiency, not those "raiders" whose only interest lies in manipulating
the stock market value of a firm, breaking it up by selling its assets piecemeal, and like
activities. These people care nothing for business organizations as such and often destroy
decades of painstaking work overnight. They do, however, demonstrate the principle that
individuals can conquer structures, even very large ones.
5
Livesay, "Entrepreneurial Persistence," 419.
6
Including the number one "star" of the Fortune 500 "Return on Equity 1979-1988"
list, Liz Claiborne, Inc. See Birch, "Down But Not Out," INC, May 1988. Birch's group
included 1,700 firms with at least ten locations and five hundred employees; 57 percent
had more than a thousand employees.
Downloaded from https:/www.cambridge.org/core. IP address: 88.99.165.207, on 14 Jun 2017 at 12:31:44, subject to the
Cambridge Core terms of use, available at https:/www.cambridge.org/core/terms. https://doi.org/10.2307/3115424
Harold Livesay / 4
part of my thesis, on small firms as the acorns from which the tall
trees have grown.7
Small business remains the source from which most successful big
businesses spring, but alongside this fact has emerged another of equal
significance: small business has had and continues to have a dynamic
impact on the economy while still in its small business state. Small business currently constitutes four-fifths of the total business population,
provides half of the country's jobs, and a like share of its gross national
product. In addition, it generates a large proportion—probably about
half—of the net new jobs created in the economy, about half of the
innovations reaching the market, and spends its R&D dollars three
or four times more effectively than its Brobdingnagian brethren. In
times past, all these figures were of course larger still.8
Regardless of firm size, then, dominant individuals hold the key
to enduring success. In all but the tiniest companies, they must function through an organization; therefore, they must know how to build
teams, run them, and rebuild them when required. Functioning thus,
they play a role often appreciated only in the failure that attends its
absence, a role difficult to define tidily, a role that has carried many
names, but that these days most often sports one of its older titles—
"entrepreneurship"—loosely defined (as I have defined it here) as the
art of aggressive management, practiced by an innovative, growthoriented manager. This part and the characters who play it have long
been elements of the business historian's repertoire, though lately displaced from the footlights by the scenery, consisting largely of corporate office blocks.
7
And in the chapter, "Lilliputians in Brobdingnag," that I contributed to Small Business in American Life, ed. Stuart Bruchey (New York, 1980), 338-51.
Like many other apparently simple terms, "small business" turns out to defy easy definition, particularly historically, as Harold G. Vatter shows in "The Position of Small Business in American Manufacturing, 1870-1890," in Bruchey, Small Business, 152-68. For
the purposes here, small business means a firm with fewer than five hundred employees.
8
Precise quantification of small business's contributions forms the core of an ongoing
debate that we need not enter here. For the optimistic case, see David L. Birch, Job Creation in America: How Our Smallest Companies Put the Most People to Work (New York, 1987);
"Small Businesses Big Clout," Dun's Renew, March 1980. For a skeptical discussion of Birch's
numbers (though not the general case he makes for small business importance), see "The
Hyping of Small Firm Job Growth," Wall Street Journal, 8 Nov. 1988. On innovation see,
"Sources of Innovation: A Fresh Perspective on the Role of Big Companies and Small,"
INC, June 1989.
I have used conservative figures in each category. For the historian's purposes, even the
most cautious estimates loom larger than anything appearing in business history texts on
the twentieth century.
Downloaded from https:/www.cambridge.org/core. IP address: 88.99.165.207, on 14 Jun 2017 at 12:31:44, subject to the
Cambridge Core terms of use, available at https:/www.cambridge.org/core/terms. https://doi.org/10.2307/3115424
Entrepreneurial Dominance / 5
In a recent book review Louis Galambos observed, "Entrepreneurship is a hot subject. . . . Three decades after the lights were turned
off in Harvard University's Research Center in Entrepreneurial History, entrepreneurship has arrived as a major economic, political, and
academic concern in the United States."9 Although certainly capturing the sense of activities elsewhere, Galambos's statement assuredly
does not apply to history, and especially not to business history, where
interest in the entrepreneur and the entrepreneurial functions has
waned to near invisibility. Alfred Chandler, whose work has so
influenced the field around the globe, reflects the trend in book titles
from his first (Henry Varnum Poor, 1958) to his latest (Scale and Scope,
1990). Explomtions in Entrepreneurial History long ago transmogrified
itself into Explomtions in Economic History, a kettle of quantitative voodoo and cookery. A survey of the last ten years of the Business History
Beview shows articles focused on entrepreneurship outnumbered at
least eight-to-one by specimens of the "Organizational Synthesis."10
Altogether business history has, in recent years, acted much like a neutron bomb, wiping out the people while leaving the buildings intact.
The study of history, like history itself, has of course always been
cyclical, and for that reason alone one might confidently predict the
return of the historical entrepreneur. More potent reasons present
themselves, however, for the power of the phenomenon that Carl
Becker called "retrospective symmetry" will soon persuade historians
that drawing on flowing wells of entrepreneurial study in other disciplines may help refurbish historical explanations of business behavior.
In the last thirty years we have witnessed the failure or poor performance of many large-scale business institutions, particularly in the
United States. At the same time, the dynamic impact of individual
entrepreneurs on businesses small, medium, and large in the United
States and elsewhere clearly has fired a vigorous resurgence of capitalism. These events demand explanation in historical terms; that is after
all what historians do. However, the dominant modes of analysisorganizational synthesis and technological determinism, whether
Chandler's brand or Marx's—have about spent their explanatory power
9
Louis Galambos, review of Leadership and Innovation: A Biographical Perspective on
Entrepreneurs in Government, ed. Jameson W. Doig and Erwin C. Hargrove, Business History
Beview 62 (Autumn 1988): 547-49.
10
For a two-part survey of this genre, by Louis Galambos, published in the Business History Eeview, see "The Emerging Organizational Synthesis in Modern American History"
44 (Autumn 1970): 270-90, and "Technology, Political Economy, and Professionalization: Central Themes of the Organizational Synthesis" 57 (Winter 1983): 471-93.
Downloaded from https:/www.cambridge.org/core. IP address: 88.99.165.207, on 14 Jun 2017 at 12:31:44, subject to the
Cambridge Core terms of use, available at https:/www.cambridge.org/core/terms. https://doi.org/10.2307/3115424
Harold Livesay / 6
with respect to these phenomena. Fortunately, the copious efforts
in entrepreneurial research carried out by scholars of business, together
with the flourishing of popular interest in entrepreneurship and those
who practice it, have produced a massive volume of material in recent
years. Much of this is rubbish, as might be expected, but a surprising
amount of it distills into insights that can inform historical analysis.11
The contrasting trends in historical and non-historical writing on
business, as well as the timing of those trends, had particular impact
on the course of my own research. Immediately after the publication
of the last of my pieces on entrepreneurship, I became a minor academic official and slipped into the intellectual twilight enshrouding
petty bureaucrats everywhere.12 During this interlude I maintained
a reduced research activity that focused on two different problems.
The first was the discrepancy between the tale spun by institutional
business historians (me among them) of the evolution of American
management into ever-higher forms, and the obvious mediocrity of
that management, mercilessly exposed in the contest for the globalincluding the American—market since the end of the Korean War.
This discrepancy concerned me, not because I believe historians have
the power or obligation to predict the future, but because it suggested
the need to refine our understanding of the past.13
The second problem emerged from my exploration of the process
through which independent and small business inventors have (and
far more often have not) succeeded in marketing their innovations
in the United States since the energy crisis of the early 1970s. This
project involved not only the use of the historian's traditional primary
and secondary sources, but also extensive interaction with some four
hundred contemporary inventors, including interviews with the inven11
My purpose here is not to survey the truly massive literature on entrepreneurship,
either scholarly or popular, that has emerged in recent years; the widespread availability
of computerized databases in any case seems to me to render such lists largely superfluous.
A fine entry into the work of business scholars is Frontiers of Entrepreneurship Research, the
published (and refereed) proceedings of the Babson College Entrepreneurship Research Conference, which has appeared annually since 1981. Popular journals include INC and Venture, as well as a recent spate of publications specializing in black enterpreneurs, women
entrepreneurs, and other specific groups. Even Fortune and the Wall Street Journal, those
bastions of corporate America, have devoted significant space to the topic, as have Time,
Newsweek, and network television.
12
Chair of the History Department at SUNY-Binghamton, 1980-81; head of the Virginia Tech History Department, 1981-87.
13
Tom McCraw wrote of Alfred Chandler, " H e knows that from the historical accounts
he has written it would have been difficult to predict the severe competitive problems American companies encountered beginning in the 1960s." See Thomas K. McCraw, ed., The
Essential Alfred Chandler (Boston, 1988), 20.
Downloaded from https:/www.cambridge.org/core. IP address: 88.99.165.207, on 14 Jun 2017 at 12:31:44, subject to the
Cambridge Core terms of use, available at https:/www.cambridge.org/core/terms. https://doi.org/10.2307/3115424
Entrepreneurial Dominance / 7
tors themselves and with involved parties such as family members,
patent attorneys, business partners, and others.14
Although my research perspectives thus diverged to the extremities of the spectrum of firm size, the resulting perceptions nevertheless converged on a singlefocalpoint: the entrepreneurial role. Indeed,
I emerged from my administrative interlude with an intensified curiosity about that role and the means, past and present, of obtaining
it for businesses large and small.
Business history in the 1970s and 1980s added little to the
knowledge of entrepreneurial behavior, so I undertook an excursion
through the recent, non-historical literature on entrepreneurship referenced in footnote II. 15 There I found a number of perceptions with
inescapable and useful implications for my own work and for that
of business historians generally.16
14
The secondary sources revealed, among other things, that as far as understanding the
process of marketing innovations goes, the "history of technology" has, as Glenn Porter
warned me years ago, about the same value as topology. From economic history, by contrast, we have a masterly understanding of the interactions among science, technology, and
business, including a model of the innovation process that inventors themselves validate,
in Hugh Aitken, Syntony and Spark (1976; Princeton, N.J., 1985).
Profiling the inventors and their technologies falls outside the scope of this paper. For
the purposes here it suffices to say that: 1) all of them were independent or small business
inventors whose technologies survived a rigorous National Bureau of Standards screening
that rejected the technically infeasible and commercially improbable; and 2) only five or
six did not fit tidily within the Aitken model in terms of the outlook and qualifications
with which they confronted the problem of converting an idea into an innovation. For
additional information see Harold C. Livesay and Marcia L. Rorke, "A Federal Program
for Inventors: The Energy-Related Inventions Program," in Strategies and Practices for Technological Innovation, ed. Dennis Gray, et al. (Amsterdam, 1986), 221-33.
15
Writing in 1984, Louis Galambos said, "Historians have broken with the . . . sociological theory of bureaucracy . . . by bringing the creative individual—the leader of an organization with substantial discretionary power, for instance, or the 'translators' who moved
across institutional boundaries—back into history." He offered, however, only three examples of this counterpoint to the "Organizational Synthesis": Aitken's Syntony and Spark
(1976), my "Entrepreneurial Persistence" (1977), and his own America at Middle Age (New
York, 1982), small weight indeed to throw on the scale after several dozen citations to the
dominant motif. I am, nevertheless, delighted to be counted among the few who broke
from so weary a theory (though I was in fact unconscious of having ever followed it).
For my journey through the non-historical literature, James Thomson's "City of Dreadful
Night" (especially lines 710-24) might serve as an apt metaphor.
16
I do not mean great revealed truths, or unexpected bolts from the blue, but rather
the kind of marginal increments to understanding by which history moves forward, as well
as the added perspective gained from a different viewpoint, as one may see new things in
a skyline by viewing it from a new vantage point. For Louis Galambos's account of his
own frustrated efforts to reconcile the literature of business history with the observable
deficiencies of American management, see his "What Have CEOs Been Doing?" Journal
of Economic History 47 (June 1988): 243-58. Galambos too found fertile soil in an adjoining field, in his case the literature of antitrust.
Downloaded from https:/www.cambridge.org/core. IP address: 88.99.165.207, on 14 Jun 2017 at 12:31:44, subject to the
Cambridge Core terms of use, available at https:/www.cambridge.org/core/terms. https://doi.org/10.2307/3115424
Harold Livesay / 8
The Entrepreneur Outside the Historical Literature
First among these perceptions is the overwhelming focus on the
individual, not on the institution, that pervades discussions of firms
of all sizes, not just those of traditionally entrepreneurial dimensions.
Even in the largest of institutions, indeed specifically in the largest
of all industrial institutions, General Motors, organization appears as
an apparatus that the individual not only can but must control. A
company's success depends not on the inherent strength of the structure, but on the CEO's ability to bend it to his will, to make it an
effective instrument of his perceptions.
In this literature people matter above all else, and they matter in
terms of personality, not in terms of roles such as "middle manager"
or "top management." Roger Smith survived in the same General
Motors milieu that gagged on John Delorean; the crucial difference
between General Motors and Ford lies not in their organizational structures (though they are not in fact identical), but in the presence at
Ford of people named Phil Caldwell, Donald Peterson, and "Red"
Poling with specific talents and characteristics, who were free to run
the Ford Motor Company because Henry Ford II wanted it that way,
and who have succeeded, whereas people named Roger Smith, Ross
Perot, and Robert Stempel have thus far failed as heirs to Alfred Sloan.17
The second refinement derived from recent literature on
entrepreneurs is that within their ranks, however defined, a distinction exists between those whose goal is growth and those whose goal
is stability. For some this may be the distinction between the
entrepreneur and the manager, or between "creative" and "routine"
entrepreneurs. The Schumpeterian version of the entrepreneur as innovator dominates American business history, and mostfigurespast and
present who fit the Schumpeterian mold have fallen into the growthoriented category as well. In fact, their obsession with growth appears
to have spawned their drive to innovate, rather than vice versa. Contemporary studies of successful entrepreneurs show, for example, that
they have little interest in technology per se, see it as an instrument
17
For a sampler of this sort of discussion, see "Ford Legacy Includes Management Plan:
Patriarch's Strategy is Basis of Stability Today," Wall StreetJournal, 30 Sept. 1987; "Donald
Peterson: A Humble Hero Drives Ford to the Top," Fortune, 4 Jan. 1988; "GM's Unlikely
Revolutionist" [Roger Smith], Fortune, 19 March 1984; "Is Perot Good for General Motors?"
Fortune, 6 Aug. 1984; "General Motors: What Went Wrong?" (which includes a section
on "What would Sloan say?"), Business Week, 16 March 1987; "Bumps Ahead for a Car
Guy" [Bob Stempel, named GM President in 1987], Fortune, 28 Sept. 1987.
Downloaded from https:/www.cambridge.org/core. IP address: 88.99.165.207, on 14 Jun 2017 at 12:31:44, subject to the
Cambridge Core terms of use, available at https:/www.cambridge.org/core/terms. https://doi.org/10.2307/3115424
Entrepreneurial Dominance / 9
with which to achieve growth, and will abandon any particular innovation without remorse the moment a better profit engine appears.18
This growth orientation may mean expansion of a firm's total
volume through innovation, merger, acquisition, addition of new technology, or the construction of new facilities. Alternatively, it may mean
growing new products or services to replace old ones (that is, some
version of the "milk the cash cows to feed the rising stars while you
kill off the dogs" theory). Failing these strategies, stagnation puts a
firm on the long road toward oblivion, from which rescue depends
on the arrival of an entrepreneurial manager. History offers many examples, such as the Ford Motor Company during 1923-46 and 1979-82
and Data General in the 1980s. Ford's knights arrived just in time
in the form of Henry Ford II and Ernie Breech, and again in Phil
Caldwell and Don Peterson. Data General's have yet to appear; consequently the firm, which grew from a volume of $150 million in 1968
to $3.5 billion in 1978, and was projected to keep growing at a 30
percent annual rate thereafter, instead shrank to $1.4 billion in 1988.19
Not surprisingly, then, those judged "entrepreneurial" in business literature, both scholarly and popular, have exhibited a
commitment—often a ferocious commitment—to growth. In the pages
of Frontiers ofEntrepreneurship Besearch, INC, and Venture, the aggressive people and companies bear obscure names, but in Fortune and
similar journals high-visibility names—Carl Icahn, Ross Perot, Frank
Lorenzo, Ken Olsen; GE, Emerson Electric, Honda, Kodak—dominate
in stories bearing captions such as "these killers will do just about
anything for another percentage point of market share."20
18
Arnold Cooper, "The Entrepreneurship-Small Business Interface," in Kent, et al.,
Entrepreneurship, 193-205; Jeffrey A. Timmons, et al., "Opportunity Recognition: The
Core ofEntrepreneurship," in Frontiers ofEntrepreneurship Research (1987), 109-23; Marcia
L. Rorke, et al., "Roles and Responsibilities of the Private Sector in Applied RScD" (Report
to the National Science Foundation, 1984); Harold C. Livesay and Marcia L. Rorke, "Private Sector Investment in Applied R&D," paper presented to the 1985 meeting of the American Association for the Advancement of Science.
One of the venture capitalists I interviewed, pronouncing one of his brethren's articles
of faith, said, " I don't give a damn about any particular technology. I'm not in the technology business; I'm in the money business."
Growth, as used here, usually means growth in sales, profits, and assets. Sometimes,
however, as critics such as Richard Barnet, Joyce Kolko, Charles Perrow, David E. Noble,
and others suggest, decisions about technology stem from a drive to achieve growth of
power, including power over workers, public policy, and governments.
19
The Ford story has been told many times over. For a summary, see "Donald Peterson," Fortune. Data General information from Tracy Kidder, The Soul ofa New Machine (New
York, 1981), 15, and Fortune, 24 April 1989, 364.
20
"Companies That Compete Best," Fortune, 22 May 1989.
Downloaded from https:/www.cambridge.org/core. IP address: 88.99.165.207, on 14 Jun 2017 at 12:31:44, subject to the
Cambridge Core terms of use, available at https:/www.cambridge.org/core/terms. https://doi.org/10.2307/3115424
Harold Livesay /10
Such entrepreneurs, planning for, achieving, and managing growth
in constantly changing business environments, offer the only hope
for long-run survival in a competitive arena. Companiesfollowingstatic
policies, or organizations that baffle individual attempts to whip them
into action, can survive only where tariff or other barriers prevent effective competition from aggressively managed rivals. Bearing these
precepts in mind, John Sculley's decision to launch an Apple Computer invasion of IBM's traditional customer base seems more logical
than daring, while it comes as little surprise that Seymour Cray's Cray
Research, Ken Olsen's Digital Equipment, Rod Canion's Compaq,
and Sculley's Apple, each in its market segment, could prosper competing against IBM in the post-Watson era.21
The third perception derived from entrepreneurial literature is that
as a firm grows it must develop an organization to manage the full
scope of its activities— searching for markets, marshalling goods and
services to penetrate them, setting goals, making long-range plans,
allocating resources, achieving growth—but that organization, although
necessary to avoid failure, is not sufficient to guarantee success. Only
the presence of dynamic individuals can assure an unrelenting commitment to quality, innovation, and growth through all stages of a
firm's development. Growth-oriented small businesses usually begin
life as vehicles for the talent of the founding entrepreneur.22 In fact,
such firms emerge so often as the articulation of an entrepreneur's
creative will, applied to an innovation, and targeted on a market perception, that the late Al Shapero defined an entrepreneur simply as
"somebody who invents a business and knows how to make it grow."23
21
"Apple Bites Back," Fortune, 20 Feb. 1984; "John Sculley Rises in the West," Farturn, 9 July 1984; "Apple's Pitch to the Fortune 500," Fortune, 15 April 1985; "Calculated
Move: Apple Computer Tries to Achieve Stability But Remain Creative," Wall Street Journal, 16 July 1987; "America's Most Successful Entrepreneur" [Ken Olsen of Digital Equipment], Fortune, 22 Oct. 1986; "Compaq's Grip on IBM's Slippery Tail," Fortune, 18 Feb.
1985; "The Hottest Entrepreneur in America . . . " INC, Feb. 1986.
22
The distinction between stability and growth orientations in small businesses is crucial and often neglected in the massive literature on small business. Growth-oriented,
entrepreneurially managed small enterprises constitute a minority of the total small business population. Most small firms never get beyond the early growth stage: 80 percent
have five or fewer employees. Few small business proprietors even want to grow, perhaps
as few as one percent. See Cooper, "The Entrepreneurship—Small Business Interface,"
193-205; Jon Stanworth, "Relationships Between the Small Business Sector and the State,"
in Australian Small Business and Entrepreneurship Resetmh, ed. K. M. Renfrew and R. D. Back
(Newcastle, Australia, 1987), 1-22.
23
Al Shapero and Lisa Sokol, "The Social Dimensions of Entrepreneurship," in Kent,
et al., Entrepreneurship, 72-90. Shapero was William H. Davis Professor of Free Enterprise
at Ohio State University and a colleague on the inventors project. For a discussion of the
Downloaded from https:/www.cambridge.org/core. IP address: 88.99.165.207, on 14 Jun 2017 at 12:31:44, subject to the
Cambridge Core terms of use, available at https:/www.cambridge.org/core/terms. https://doi.org/10.2307/3115424
Entrepreneurial Dominance
/11
After the initial stage of establishing a business, subsequent growth
depends on the ability of the "pioneer" to develop the firm's product
or service while building and structuring a management team.24 This
view is regarded as self-evident truth among such crucial growth partners as venture capitalists, who have a maxim: "Far better a thirdrate product in the hands of a first-rate entrepreneur than the reverse,"
and a corollary that goes, "I don't care about the titles or the arrangement of the boxes [on an organization chart]; I care about the names
that go in the boxes, especially the top box."
Success, even success on the grand scale of an IBM or an Apple
Computer, requires an enormous organization to perform its routine
functions, but one cannot count on that organization to provide sustained, aggressive, innovative managerial drive. Those qualities demand
an individual, usually not the founder, nor even the entrepreneur who
drove the firm from local to regional and then to national markets,
but an individual nonetheless. In business history, the passage from
the "entrepreneurial stage" to the "managerial stage" of development
often signals the passage from personality to anonymity. In the popular
literature this handoff, when properly done, transfers the torch from
one master hand to another, for no organization outgrows its need
for strong leadership. The crucial points in a firm's history thus come
not when it must decide whether to adopt a decentralized, functionally
departmentalized organization, but when a Thomas Watson, Jr., passes
from the scene, or when the company that Steven Jobs built outgrows his ability to manage it.
The conclusions that I drew from my own research into the pygmies and giants of contemporary American business resonated strongly
with many of the lessons embedded in the non-historical literature
of entrepreneurship. The fate of the inventors in my study certainly
bore out these axioms: the presence of entrepreneurial skill in the
inventor or one of his associates did not assure success, but the absence
of it proved an insuperable obstacle that no degree of technical sophistication in the invention itself could overcome.25
role of such activities in American industrialization, see Harold C. Livesay a n d Glenn Porter,
Merchants and Manufacturers (Baltimore, M d . , 1970).
24
"Pioneer" is used in Alfred Chandler's sense of the term as in his "Scale, Scope, and
Organizational Capabilities," in McCraw, Chandler, 472-504.
25
Much to the dismay of the inventors themselves, most of whom genuinely believe
the Emersonian mousetrap myth. See Marilyn A. Brown, et al., Evaluation of the EnergyRelated Inventions Pn&mm (Oak Ridge, Tenn., 1987); M. A. Brown and S. A. Snell, The
Energy- Belated Inventions Program: An Assessment of Recent Commercial Progress (Oak Ridge,
Downloaded from https:/www.cambridge.org/core. IP address: 88.99.165.207, on 14 Jun 2017 at 12:31:44, subject to the
Cambridge Core terms of use, available at https:/www.cambridge.org/core/terms. https://doi.org/10.2307/3115424
Harold Livesay /12
The Failure of Organization as Entrepreneur
At the other extremity of scale one confronts the argument, salient
in recent business history, that among American big businesses some
"managerial" forms of organization nourish entrepreneurial strategies in a bureaucratic structure run by a "top team . . . recognizable
. . . by its functions and activities—rather than by the personality traits
of its members." This team consists of "executives . . . not necessarily possessed of charisma" people who, indeed, "need no charisma
and usually have none."26 This collection of faceless, nameless organization persons (the cast of individually identified characters in Chandler's Visible Hand includes virtually none who debuted after 1925)
nevertheless managed to promote "technical and organizational innovation in a systematic fashion" in giant companies that "were
administered efficiently (or they would not have survived)," and
invested most of the human and financial resources that went into
non-government research and development.27
At first blush this notion of an entrepreneurial dybbuk in the corporate body seems good news indeed (except perhaps for the drudges
filling the cadres). However, it proves hard to sustain in light of the
last thirty or so years and of the evidence accumulated in the
entrepreneurial and business literature, which suggests that large firms
perform technical innovation, including research and development
however defined, much less efficiently than small ones; that organizational innovation often reflected not a drive for efficiency, but rather
"the search for security" revealed when organizations "used their
power to protect themselves, reducing risks by bringing under control the relevant parts of their environment"; and that successfully
controlling "the relevant parts of their environment" made it possible to "survive" without being competitive, let alone efficient, in international terms.28 The last three decades have wrought changes in
Term., 1988). These are reports published for and submitted to the Office of Conservation
and Renewable Energy, U.S. Department of Energy, by Oak Ridge National Laboratory.
See also Marcia L. Rorke and Harold C. Livesay, "A Longitudinal Study of the EnergyRelated Inventions Program," a report submitted to the program director in December
1986 by Mohawk Research Corp. Copy available from authors.
26
Alfred D. Chandler, Jr., and Fritz Redlich, embracing Werner Sombart, in "Recent
Developments in American Business Administration and Their Conceptualization," in
McCraw, Chandler, 127-28 (originally published in the Business History Review 35 (Spring
1961): 1-27.
27
Galambos, "Organizational Synthesis II," 492, 473. By referring to Galambos's summar)' of the argument, I do not imply that he endorses it unequivocally; indeed, he has
reservations and refinements to bring, both here and in America at Middle Age.
28
See sources in footnote 8. A few business historians have recently turned their attenDownloaded from https:/www.cambridge.org/core. IP address: 88.99.165.207, on 14 Jun 2017 at 12:31:44, subject to the
Cambridge Core terms of use, available at https:/www.cambridge.org/core/terms. https://doi.org/10.2307/3115424
Entrepreneurial Dominance /13
American business that suggest not so much that business historians'
analyses posited causalities that were "wrong," but rather that we overlooked or underestimated some powerful factors that emerged only
with the passage of time.
For example, business historians generally underestimated the
impact of public policy, especially any policy that remained relatively
consistent over extended periods of time. A case in point: we have
left the Cold War largely to political and diplomatic historians.29 We
need, however, to consider the effect on American business's competitive position in its home market of the federal government's postSecond World War reversal of a policy almost two centuries old: nurturing a dynamic American capitalism by maintaining mostly closed
markets and mostly open borders. Here is President Dwight Eisenhower, addressing the situation in 1957:
Consider the Japanese problem . . . 90 million people that we want
to be our friends. . . . They are inventive, they are industrious, they
are good workers. More and more of our own industries . . . insist
on either higher tariffs or stiffer quotas, to stop Japanese goods flowing in here; and then we say to Japan, "Now you mustn't trade with
[China], which has been your traditional trading area."
Now what is Japan going to do? . . . How are they going to keep
. . . going? I do not say that the sole answer is in . . .us taking more
of their stuff. . . but I do say that if we are going to keep Japan our
friends, on our side of the Iron Curtain, you can't. . . just. . . block
them so they have no place to go except into the arms of somebody
where we don't want them to go.30
Japan and Germany have remained bulwarks against Bolshevism,
and from the standpoint of capitalist political economy, the decimation of the American capacity to produce radios, television sets, and
optics may have been a bargain price. From the business historian's
perspective, however, these events suggest that public policy may well
tion to the question of big business attempts to "institutionalize innovation." In general
the results support a pessimistic assessment of such firms' abilities to achieve major breakthroughs with new products or processes, although there has been fair success making marginal improvements of existing ones. See Margaret Graham, RCA and the VideoDisc: The
Business of Research (New York, 1986); David Hounshell and John Smith, Science and Corpomte Strategy: Du PmtR&D, 1902-1980 (New York, 1988). Quotations are from Galambos,
"Organizational Synthesis II," 492. This list of course says nothing of the reckless abuse
of the natural environment through which many businesses achieved short-run "efficiency"
for themselves at a long-run cost yet to be determined but sure to be staggeringly large.
29
A n exception is Paul Tiffany's Decline of American Steel ( N e w York, 1988), which examines these issues closely with respect to the U.S. steel industry.
30
Quoted in ibid., 175-76.
Downloaded from https:/www.cambridge.org/core. IP address: 88.99.165.207, on 14 Jun 2017 at 12:31:44, subject to the
Cambridge Core terms of use, available at https:/www.cambridge.org/core/terms. https://doi.org/10.2307/3115424
Harold Livesay /14
have played a crucial but little-discussed role in the effective liquidation of these once-significant American industries and perhaps in the
evisceration of many others.
Public policy, then, exemplifies one relatively under-studied element in modern American business history, but scarcely sufficient
by itself, or as a factor added to our state-of-the-art knowledge of that
history, to explain changes of the magnitude of the last thirty years.
As I contemplated those events, especially juxtaposed to the
experiences of my independent and small business inventors, I was
convinced that recent history has in many cases validated Schumpeter's
forewarning about the impact of bureaucracy on entrepreneurial energies in large firms as they mature.31
In fact, the decline of American big business, especially in basic
industries, often seemed clearly to manifest the asphyxiation of
individual entrepreneurship, particularly in mature firms. In the 1960s
when American business—in many industries for the first timeconfronted a foreign competition not hopelessly handicapped by tariff
barriers, war, postwar devastation, global depression, or inadequate
production capacity, they soon proved themselves to be not the burnished corporate bastions of awesome managerial power, flexibility,
and reach that Americans and others had thought.32 On the contrary,
shorn of the protections historically provided by policy and circumstance, many big American firms were exposed as tubs of inefficiency,
incapable of prompt, effective counterattack. Indeed, the sluggish
American corporate response to foreign intrusion in its home market
pointed to systemic deficiencies in its structure, deficiencies with deep
(if hitherto unseen) historical roots. Several of these symptoms—glacial
development of new products, public trumpeting of managerial selfpity, cries for various types of government assistance, failure to adopt
new technologies when available, spread of the "Not Invented Here"
syndrome—pointed clearly to an absence of entrepreneurial vigor.
Surely the success of the Volkswagen Beetle and the flood of other
automobile imports that followed should have snapped the vaunted
American competitive spirit into a crackling innovative defense of its
31
Though this impact has not led to the decline of capitalism in the United States, at
least partially for reasons I suggested in "Entrepreneurial Persistence" in 1977, or in the
world generally, where it waxeth mighty even at this moment.
32
For two views of that power and its potential, see Jean-Jacques Servan-Schreiber, The
American Challenge (New York, 1968), and Richard J. Barnet and Ronald E. Muller, Global
Reach: The Power of the Multinational Corporations (New York, 1974). For the ' 'Oh wow!''
view of American management prowess, a quick perusal of Fortune, Business Week, or Barron's in the late 1950s^and early 1960s should suffice.
Downloaded from https:/www.cambridge.org/core. IP address: 88.99.165.207, on 14 Jun 2017 at 12:31:44, subject to the
Cambridge Core terms of use, available at https:/www.cambridge.org/core/terms. https://doi.org/10.2307/3115424
Entrepreneurial Dominance /15
most cherished industry. "Can Detroit Catch Up?" asked Fortune on
8 February 1982. The article concluded that a positive outcome
depended on management's ability to "jack up productivity." What
happened instead can be summarized by the titles of two Wall Street
Journal articles: "Detroit Rode Quotas to Prosperity" (29 January
1986); and "Despite Record Profits, Big Three Auto Firms Seek More
Protection" (24 January 1989). These reflect the fact that the "Big
Three," while accomplishing modest improvements in quality and
productivity, simultaneously fled to the last refuge of scoundrels by
crying for government protection. And, having received it (and a rising price umbrella in the bargain) in 1981, finally returned to a
prosperity massively subsidized by the taxpayers through the federal
tax siphon. This outcome showed that the firms' instincts were to
avoid competition rather than meet it, and that "bringing under control the relevant parts of their environment" (in this case import barriers and the tax laws) mitigated the consequences of managerial
incompetence.
Thus genuine global competition exposed U.S. firms as incapable of competing, as bloated house cats rather than as the Darwinian
tigers they imagined themselves to be. Moreover, it exposed the failure
of many American firms to find the institutional substitute for
individual entrepreneurship that Alfred P. Sloan had viewed as the
antidote to the bureaucratic arteriosclerosis that Schumpeter had seen
as capitalism's undoing.33 Indeed, few firms in the last thirty years
have better demonstrated organizational stifling of entrepreneurial
imagination than Sloan's own General Motors, whose cascading fortunes brought to the chairmanship Roger Smith, the "archetypal man
in the grayflannelsuit [who] turned out to be a closet entrepreneur,"
determined to put "his own stamp on the world's largest car
company."34
" Alfred P. Sloan, Jr., My Tears with General Motors (Garden City, N.Y., 1963), especially chaps. 23 and 24.
34
"GM's Unlikely Revolutionist," Fortune, 19 March 1984. The path that led to these
and other troubles clearly emerges in the pages of J. Patrick Wright, On a Clear Day You
Can See General Motors (Grosse Pointe, Mich., 1979), and in a series of Fortune articles on
the subject. See, for example, the issues of 22 Aug. 1983; 19 March, 6 Aug., and 15 Oct.
1984; 8 July, 28 Oct., and 11 Nov. 1985; 10 Nov. 1986; 28 Sept. 1987; 15 Feb. 1988;
13 Feb. and 13 March 1989. A summary of events appears in "General Motors: What Went
Wrong," in Business Week, 16 March 1987. For a negative assessment by the leading Wall
Street analyst of the automobile industry, see Maryann Keller, Rude Awakening (New York,
1989). The irony is, of course, that Sloan not only did not create a structure that transcended personalities, but worse yet he created one that depended for its vigor on a single
personality—his own.
Downloaded from https:/www.cambridge.org/core. IP address: 88.99.165.207, on 14 Jun 2017 at 12:31:44, subject to the
Cambridge Core terms of use, available at https:/www.cambridge.org/core/terms. https://doi.org/10.2307/3115424
Harold Livesay /16
Nor have these problems been confined to General Motors;
entrepreneurial responses—that is, the introduction of innovative
machinery, materials, or methods—to the challenges of the American automobile marketplace came largely from the Japanese, either
directly, as in Honda's CVCC engine and the management of its Marysville, Ohio, plant, or indirectly, as in Ford's "Quality Circles," as well
as in the almost universal aping of Toyota's "just-in-time" system.35
This tale unfolded with variations in other once-proud and powerful industries such as Big Steel, whose ultimate disappearance from
basic production seemed certain until avoided (or at least delayed)
by federal imposition of quotas on imported steel in 1984 and subsequently extended (into 1991 at this writing). This shelter led to a resurgence among Big Steel firms which, like the automotive Big Three,
reaped billions of dollars from peculiarities in the tax code.36
Entrepreneurship in "Small Steel": The Mini-Mills
The industry's vicissitudes did spur home-grown entrepreneurship,
but not in the ranks of Big Steel. Rather, innovation flourished in
the newly created "mini-mills" of Nucor Corporation and Chapparal
Steel, as well as in bits and pieces of plants abandoned by industry
goliaths such as USX and Armco, but recycled by firms such as the
Johnstown Corporation, McDonald Steel, and the Marion Steel Company. In fact, comparing the policies of Big Steel and the utterances
of its management with those of the mini-mill companies exposes a
stark contrast between entrepreneurship withering in big firms and
flourishing among small ones in the same industry.
Big Steel's management, dividing the blame between unfair foreign competition and its own recalcitrant labor force, modernized
35
Joel Kotkin, "Forget Lee Iacocca: Soichiro Honda for President," Washington Post,
23 Nov. 1986; "America's New No. 4 Automaker-Honda," Fortune, 28 Oct. 1985; "Ford's
Drive for Quality," Fortune, 18 April 1983; "Having a Hard Time with Just- In-Time,"
Fortune, 9 June 1986; "The Trouble with Managing Japanese Style," Fortune, 2 April 1984;
"The War on Inventories is Real This Time," Fortune, 11 June 1984; "Toyota Meets U.S.
Autoworkers," Fortune, 9 July 1984; "Japan's Gung-Ho U.S. Car Plants," Fortune, 30 Jan.
1989. These citations typify an almost countless array of journalistic outpourings on the
subject.
36
Steel's troubles generated press coverage similar to—though less extensive than—
Detroit's. See, for example, in the Wall Strut Journal, "Big Steel Pushes to Extend Import
Quotas" (30 Dec. 1987); "USX's New Chief Calls Jury 'Out on Steel' " (31 Jan. 1989);
"Steel Import Curbs: The Debate Goes On" (6 Feb. 1989); "U.S. Steel Quotas Extended,"
(26 July 1989).
Downloaded from https:/www.cambridge.org/core. IP address: 88.99.165.207, on 14 Jun 2017 at 12:31:44, subject to the
Cambridge Core terms of use, available at https:/www.cambridge.org/core/terms. https://doi.org/10.2307/3115424
Entrepreneurial Dominance
/17
slowly, shifting many of its resources to other industries such as oil
and chemicals. Others saw in the same circumstances an opportunity
for profitable steel-making. During the late 1970s and early 1980s,
as the president of Chapparal Steel's parent company observed in a
statement that described other new companies as well as his own,
"We went into the carbon-steel business when everyone else was going
out of it." As the big companies lobbied heavily for the maintenance
of protection against foreign competition, Nucor's chairman, Ken Iverson, argued against it, saying in 1986:
We've had this "temporary" relief for a long time. We had a voluntary
quota system in the early 1970s . . . trigger prices in the late 1970s
[and] as soon as prices began to rise so that steel companies began to
be profitable, they stopped modernizing. It's only under intense competitive pressure— both internally from the mini-mills, and externally
from the Japanese and the Koreans—that the big steel companies have
been forced to modernize.
Nucor, by contrast, sees "intense competitive pressure" as the spur
from which
come a lot of things that are beneficial: more of an orientation toward
technology, greater productivity, certainly a lot of changes in management structure [because] the real impediment to producing a higherquality product more efficiently isn't the workers, union or non-union;
it's management [that has] very deeply ingrained habits [not] open to
change.37
By combining a commitment to technology and confidence in
worker abilities, and by learning the "fun of innovating" and the virtues of "eliminating bureaucracy to push decision-making down to
the lowest level," these entrepreneurial steel firms have made quality
control a worker responsibility, cut costs while maintaining wages and
providing job security, and managed " t o bring research right into the
factory and make it a line function." 38 The result has been growth,
profits, and in some cases an ability to capture export markets. In
addition, these steel companies provide striking examples of the successful subordination of business structure to entrepreneurial will,
rather than the reverse.
37
Iverson quotations from "Steel Man: Ken Iverson," INC, April 1986; see also "Making
Money Making Steel in Texas," Wall Street Journal, 26 Jan. 1988; "Salvaging Profits from
Old Steel Mills," Fortune, 28 April 1986.
38
The summary of mini-mill management magic came from a Bethlehem Steel division
head trying to replicate the trick in his own sphere: quoted in "Salvaging Profits," Fortune;
the quotation about research is from "Making Money Making Steel in Texas," Wall Street
Journal.
Downloaded from https:/www.cambridge.org/core. IP address: 88.99.165.207, on 14 Jun 2017 at 12:31:44, subject to the
Cambridge Core terms of use, available at https:/www.cambridge.org/core/terms. https://doi.org/10.2307/3115424
Harold Livesay /18
Each of these new steel firms emerged as the embodiment of an
entrepreneur's market perception and in some cases began with little
else. "We didn't have any plant, didn't have any customers, didn't
have any employees or management," said Chapparal's founder. Starting from scratch, these pioneers shared a common view of organization: the less of it the better. In 1986, for example, Nucor, a member
of the Fortune 500 with annual sales of $758 million, had a corporate
staff of sixteen.
Reversing Sloan's "objective organization" ideal, the mini-mills,
like most innovative firms in other industries, bore the indelible,
unmistakable stamp of an individual personality: Iverson at Nucor,
Gordon Forward at Chapparal, John Sheehan at the Johnstown Corporation. Indeed, the structure of these businesses, like Carnegie Steel's
long ago, reflects and was designed to embody the dominant personality's subjective view of what constitutes an effective organization;
that is, it can carry out the firm's mission as its dominant principal
defines it and can change as he or she perceives the need for change.
The history of the American steel industry thus illustrates classic
cases of both the dominance and the disappearance of the "charismatic entrepreneur." Certainly the "hardened institutional fabrics and
routine forms of life" represented by Big Steel "prove[d] insufficient
for mastering a growing state of tension, stress, or suffering." When
entrepreneurs stepped forward, "people obeyed them because of faith
in their personally extraordinary qualities," a situation that "quickly
[gave] way to incipient institutions" necessary to "the routinization
of charisma." As these structures have developed, however, they have
thus far preserved the "sovereignty of the charismatic man" in a "situation [that] is direct and inter-personal," while managing an "adjustment to the conditions of the economy, that is, to the continuously
effective routines of workaday life."39
At least two of these "continuously effective routines of workaday life" have generated and continue to generate contradictions that
objective, impersonal organizations cannot readily resolve. The first,
emphasized by Louis Galambos:
Where . . . two functions—the search for security and the drive to
innovate—came into conflict, American institutions developed deep
fault lines—alternating, for example, between centralized and decentralized structures in an effort to achieve a satisfactory balance between
the need forflexibilityand the powerful drive for stability.
39
Quotations from H. H. Gerth and C. Wright Mills, From Max Weber (New York,
1946), 51-54.
Downloaded from https:/www.cambridge.org/core. IP address: 88.99.165.207, on 14 Jun 2017 at 12:31:44, subject to the
Cambridge Core terms of use, available at https:/www.cambridge.org/core/terms. https://doi.org/10.2307/3115424
Entrepreneurial Dominance /19
This "balance," when achieved, often leads to stalemate and stagnation, requiring resolution by a "leader . . . with substantial discretionary power."40
The second conundrum, which particularly plaguesfirmsattempting to develop and market new products or services—that is, any
"innovative" firm—comes sharply into focus in the work of Hugh
Aitken, who shows that "research," "development," and "manufacturing/marketing" take place in "three specialized systems of social
action—science, technology, and the economy."41 For an innovation
to reach the market, ideas, products, and resources must pass from
one to another of these specialized systems. Unfortunately, this transfer
does not take place on its own:
Just as there is differentiation of function among the three subcultures,
so there are differences in approved patterns of thought and action.
Effective transfer of information between any two depends on the
presence of individuals or institutions capable of functioning in both,
of being accepted to a degree by both, of talking in both languages
and of efficiently translating one into the other. The two way flows
of information . . . do not occur spontaneously or without human
intervention. The efficiency with which they take place, indeed, whether
they take place at all, depends on the functioning of these intermediating individuals and institutions.42
Once these tasks "were problems and opportunities for individuals,"
but have now often "become specialized areas of functional responsibilities within formal bureaucracies." However, "the trend toward
institutionalization of these relationships should not . . . be exaggerated. . . . Today, behind the screen of formal organizations . . . particular individuals still play vital and highly personal roles in transferring ideas among the three systems."43
Whereas business history in recent years has focused on the emergence of organizations designed and redesigned in the face of these
40
Galambos, "Organizational Synthesis II," 492, 493.
A i t k e n , Syntony and Spark, 3 2 9 .
42
Ibid., 330-31.
43
Ibid., 330. While employed at the Du Pont Experimental Station in Wilmington,
Delaware, I often witnessed the gulf between the science and technology subcultures as
represented by research chemists and chemical engineers. When I asked the project chemist
the difference between himself and an engineer he responded, "it's essentially the difference between civilization and barbarism, between poets and plumbers." To the same question
the engineer replied "Three hundred gallons and the difference between a sane person and
crazy one."
For a graphic description of one corporation's struggle to integrate these spheres, see
"AT&T's Bell Labs Adjusts to Competitive Era: New Emphasis on Marketable Research
Stirring Conflicts," Wall Street Journal, 13 Aug. 1985.
41
Downloaded from https:/www.cambridge.org/core. IP address: 88.99.165.207, on 14 Jun 2017 at 12:31:44, subject to the
Cambridge Core terms of use, available at https:/www.cambridge.org/core/terms. https://doi.org/10.2307/3115424
Harold Livesay / 20
and other vexations, the contemporary literature on business has
focused on the role of the individual manager and contains account
after account of big business entrepreneurs at companies like Wang
and Control Data straining to retain (or regain) the agility of their
firms' youth. In addition, we have case after case illustrating managers'
struggles to infuse massive corporate structures—including such top
ten companies as GM (1), Ford (2), GE (5), Chrysler (7), and Du
Pont (9)—with the entrepreneurial vigor that characterizes smaller,
younger enterprises.44 Even IBM (4), paragon of growth, innovation,
and aggressive marketing, found itself beset with difficulties of the
types cited by Galambos and Aitken when a corporate management
board of eighteen executives proved itself an inadequate successor to
the Watsons. As a result of weak integration of the research (science)
and development (technology) subcultures, IBM found "its technical expertise . . . too often stuck behind the laboratory door." After
missing major market niches such as laptop computers and technical
work stations, falling to third place in Japan, and sinking to singledigit annual growth rates, new (1985) chairman and CEO John Akers
"set out to remedy . . . IBM's shortcomings . . . by reinventing the
company." Describing the attendant transformation, Fortune typified
the popular business press's view of the proper relationship between
a dynamic manager and afirm'sbureaucracy—rigorous control: "Akers
has reorganized IBM's bureaucratic management structure and . . .
is transforming the IBM culture." "So sweeping are the changes,"
Fortune opined, "that Akers could stamp the most enduring mark
on the company since Thomas Watson, Jr. propelled it to world
dominance. . . . 'This is the most radical cultural change in IBM's
history.' " 4 5
Akers has committed the "reinvented" IBM basically to the same
principles by which Ken Iverson manages Nucor Steel, one-seventieth
IBM's size: "a new spirit of entrepreneurship," and "a systematic effort
to push responsibility down the ranks."46 For each of them, success
or failure will depend on subordinating the organization to its mission.
44
See, for example, "What Welch Has Wrought at G.E.," Fortune, 7 July 1986; "The
Mind of Jack Welch," Fortune, 17 March 1989; "Iacocca's Time of Trouble," Fortune, 14
March 1988; "Some Firms Fight Ills of Bigness by Keeping Employee Units Small," Wall
StreetJournal, 5 Feb. 1982; "New Chemistry: Bronfmans of Seagrams Take Increasing Role
in Du Pont Co. Affairs," Wall Street Journal, 17 July 1987. Numbers in parentheses are
Fortune 500 rankings for 1988. Obviously size confers no immunity.
45
" R e i n v e n t i n g I B M , " Fortune, 14 Aug. 1 9 8 9 .
46
Ibid.
Downloaded from https:/www.cambridge.org/core. IP address: 88.99.165.207, on 14 Jun 2017 at 12:31:44, subject to the
Cambridge Core terms of use, available at https:/www.cambridge.org/core/terms. https://doi.org/10.2307/3115424
Entrepreneurial Dominance / 21
Conclusion
IBM, Nucor, and firms like them demonstrate that across the size
spectrum of American businesses the struggle to manage a dynamic
and competitive "adjustment to the conditions of the economy" has
assumed a new urgency. Success most often attends small businesses
and those large firms that can emulate small business advantages, most
especially in the driving force of a dominant, visionary, growth-oriented
manager whose will can overcome the weakness of structure and harness its power. Business history long focused on such people until
the rise of the giant organization shifted its attention. The new and
widespread interest in entrepreneurs and entrepreneurship in fields
outside history has provided historians with abundant new materials
for study of our time-honored questions. In time the individual will
doubtless return to the appropriate place as the cause, not the casualty,
of organizations and of those who study them. When that happens,
the synergy between individual and organization, so potent a force
in business and in the economy, should have an equally dynamic
impact on their history.
Downloaded from https:/www.cambridge.org/core. IP address: 88.99.165.207, on 14 Jun 2017 at 12:31:44, subject to the
Cambridge Core terms of use, available at https:/www.cambridge.org/core/terms. https://doi.org/10.2307/3115424