June 21st, 2012 Alfred D. Chandler


Alfred_ChandlerAlfred DuPont Chandler, Jr. (September 15, 1918 – May 9, 2007) was a professor of business history at Harvard Business School, who wrote extensively about the scale and the management structures of modern corporations. Chandler graduated from Harvard College in 1940. After wartime service in Navy he returned to Harvard to get his Ph.D. in History. He taught at MIT and Johns Hopkins University before arriving at Harvard Business School in 1970.

 

Alfred Chandler used the papers of his ancestor Henry Varnum Poor, a leading analyst of the railway industry and a founder of Standard & Poor's, as a basis for his PhD thesis.

 

Alfred Chandler began looking at large-scale enterprise in the early 1960s. His Strategy and Structure: Chapters in the History of the Industrial Enterprise (1962) examined the organization of E.I. du Pont de Nemours and Company, Standard Oil of New Jersey, General Motors, and Sears, Roebuck and Co. He found that managerial organization developed in response to the corporation's business strategy.

 

This emphasis on the importance of a cadre of managers to organize and run large-scale corporations was expanded into a "managerial revolution" in The Visible Hand: The Managerial Revolution in American Business (1977) for which he received a Pulitzer Prize. He pursued that book's themes in Scale and Scope: The Dynamics of Industrial Capitalism, (1990) and co-edited an anthology on the same themes, with Franco Amatori and Takashi Hikino, Big Business and the Wealth of Nations (1997).

 

The thesis of each of these works is this: during the 19th century the development of new systems based on steam power and electricity created a Second Industrial Revolution, which resulted in much more capital-intensive industries than had the industrial revolution of the previous century. The mobilization of the capital necessary to exploit these new systems required a larger number of workers and managers, and larger physical plants than ever before. More particularly, the thesis of The Visible Hand is that, counter to popular dogma regarding how capitalism functions, administrative structure and managerial coordination replaced Adam Smith's "invisible hand" (market forces) as the core developmental and structuring impetus of modern business.

 

In the wake of this increase of industrial scale, three successful models of capitalism emerged, which Chandler associated with the three leading countries of the period: Great Britain ("personal capitalism"), the United States ("competitive capitalism") and Germany ("cooperative capitalism.")

 

Despite the important differences in these three models, the common thread in the successfully developed nations is that the large industrial firm has been the engine of growth in three ways. Its role has been first, to provide focal points for capital and labor on large scales; second, to become the educator whereby a nation learns the pertinent technology and develops managerial skills; third, to serve as the core around which grow medium and small firms that supply and serve it.

 

Along with economist Oliver Williamson and historians Louis Galambos, Robert H. Wiebe, and Thomas C. Cochran, Chandler was a leading historian of the organizational synthesis.

 

Bibliography of Alfred Chandler

Chandler, Alfred D., Jr. 1977, The Visible Hand, Cambridge, Mass. and London, England: The Belknap Press of Harvard University Press
Chandler, Alfred D., Jr. 1962/1998, Strategy and Structure: Chapters in the History of the American Industrial Enterprise. Cambridge, MA: MIT Press
Chandler, Alfred D., Jr. 1980, Managerial Hierarchies. Harvard University Press
Chandler, Alfred D., Jr. 1990, Scale and Scope. Cambridge, MA. The Belknap Press of Harvard University Press
Chandler, Alfred D., Jr. 2005, Inventing the Electronic Century. Harvard University Press
Chandler, Alfred D., Jr. 2005, Shaping the Industrial Century. Harvard University Press

 

Alfred Chandler's writings (complementing those of economists Ronald Coase and Oliver Williamson) offer greater insights into the information economy, the evolution of the web and innovation than those of digital gurus such as Nicholas Negroponte, Kevin Kelly or Don Tapscott.

 

Chandler's research centred on business organisation, ranging from legal structures such as the corporation to the use of electronic communications and information technology. He questioned much of the hype about the information society and the new economy, noting that any industrial economy is dependent on the systematic collection, storage and manipulation of information.

 

In The Visible Hand: The Managerial Revolution in American Business (Cambridge: Harvard Uni Press 1977) Chandler for example suggested that modern business emerged when administrative coordination did better than market mechanisms in enhancing productivity and lowering costs. A managerial hierarchy was a prerequisite for realising the advantages of coordinating multiple units within a single enterprise. The growing volume of economic activities that made administrative coordination more efficient than market coordination.

 

In line with comments by Weber, Veblen and Merton, Chandler commented that an effective managerial hierarchy becomes its own source of permanence, power, and continued growth. Such hierarchies tend to become increasingly technical, professional and independent of ownership. Major enterprises grew to dominate branches and sectors of the economy, and so doing, altered their structure and that of the economy as a whole.

 

In later works he suggested that the true revolution in information processing occurred during the fifty years from 1880 onwards, with the percentage of the workforce engaged in information-handling increasing from 6.5% to 24.5%. (As a point of reference 35% of the US workforce and 38% of the Australian in 1930 were employed in industry.) That is consistent with Coase's 1937 observation that changes like the telephone and telegraph which tend to reduce the cost of organising spatially will tend to increase the size of the firm.

 

For him the major information-processing innovations concern procedures rather than devices: standardisation, printed forms, consistent data collection and record-keeping. Adoption of IT was based on supersession of existing data-processing tools: punch-card tabulators, typewriters, adding machines.

 

Applications of his suggestions about communications include James Beninger's Control Revolution: Technological & Economic Origins of the Information Society (Cambridge: Harvard Uni Press 1989), James McKenney's Waves of Change: Business Evolution Through Information Technology (Boston: Harvard Business School Press 1995), Margaret Levenstein's Accounting for Growth: Information Systems and the Creation of the Large Corporation (Stanford: Stanford Uni Press 1998), JoAnne Yates' Control Through Communication: The Rise of System In American Management (Baltimore: Johns Hopkins Uni Press 1993) and Jeffrey Fear's Organizing Control: August Thyssen and the Construction of German Corporate Management (Cambridge: Harvard Uni Press 2005.

 

The European Corporation: Strategy, Structure, and Social Science (Oxford: Oxford Uni Press 2002) by Richard Whittington & Michael Mayer is an insightful and often engaging exercise in rescuing Chandler from the Chandlerists. A social network analysis of arguments by Chandler and Oliver Williamson is provided in Robert Freeland's The Struggle for Control of the Modern Corporation: Organizational Change at General Motors, 1924-1970 (Cambridge: Cambridge Uni Press 2001), complemented by Richard Langlois' The Dynamics of Industrial Capitalism: Schumpeter, Chandler, and the New Economy (London: Routledge 2007). Dissent is evident in Naomi Lamoreaux' The Great Merger Movement in American Business, 1895-1904 (Cambridge: Cambridge Uni Press 1985).

 

A perspective on application by managers and other theorists is provided by Henry Mintzberg's Strategy Safari: A Guided Tour Through The Wilds of Strategic Management (New York: Simon & Schuster 1998), co-authored with Bruce Ahlstrand & Joseph Lampel.
Life of Alfred Chandler

 

Biographies of Alfred Chandler

As yet there has no major biographical study of Chandler or collection of his correspondence.  A helpful concise account is found in The Essential Alfred Chandler: Essays Toward a Historical Theory of Big Business (Boston: Harvard Business School Press 1988), edited by Thomas McCraw. The book includes a complete bibliography up to 1987.

 

Writings of Alfred Chandler

Leviathans: Multinational Corporations and the New Global History (Cambridge: Cambridge Uni Press 2005) coedited with Bruce Mazlish

 

Shaping the Industrial Century: The Remarkable Story of the Evolution of the Modern Chemical and Pharmaceutical Industries (Cambridge: Harvard Uni Press 2005)

 

Inventing the Electronic Century: The Epic Story of the Consumer Electronics & Computer Industries (New York: Free Press 2001)

 

A Nation Transformed By Information: How Information Has Shaped the United States From Colonial Times to the Present (New York: Oxford Uni Press 2000) coedited with James Cortada incisive essays about publishing, telecommunications, management structures, productivity and economic growth

 

The Dynamic Firm – The Role of Technology, Strategy, Organization and Regions (New York: Oxford Uni Press 1998)

 

Big Business & the Wealth of Nations: (New York: Cambridge Uni Press 1997) coedited with Franco Amatori & Takashi Hikinoa collection of papers on corporate organisation, markets and government, notable for international comparisons and skepticism about dogma such as the Wiener thesis

 

Scale & Scope: The Dynamics of Industrial Capitalism (Cambridge: Harvard Uni Press 1994)�a continuation of Strategy & Structure, including UK and German enterprises

 

Managerial Hierarchies: Comparative Perspectives on the Rise of the Modern Industrial Enterprise (Cambridge: Harvard Uni Press 1980) coedited with Herman Daems

 

Managerial Innovation at General Motors (New York: Arno Press 1979)

 

The Visible Hand: The Managerial Revolution in American Business (Cambridge: Harvard Uni Press 1977) The landmark study of communications, management processes and institutional structures

 

Pierre S. Du Pont and The Making of the Modern Corporation (New York: Harper & Row 1971) with Stephen Salsburya deservedly influential study of corporate organisation and management styles

 

The Papers of Dwight David Eisenhower (Baltimore: Johns Hopkins Uni Press 1970-80) coedited with Stephen Ambrose, Louis Galambos and others the 11 volume official edition of the papers of the US President

 

Railroads, the Nation's First Big Business (New York: Columbia Uni Press 1965)

 

Strategy & Structure: Chapters in the History of the Industrial Enterprise (Cambridge: MIT Press 1962)

 

Henry Varnum Poor – Business Editor, Analyst & Reformer (Cambridge: Harvard Uni Press 1956) The definitive biography of the early US business analyst, progenitor of Standard & Poor's rating service

 

The Letters of Theodore Roosevelt (Cambridge: Harvard Uni Press 1951-54) coedited with Elting Morison & John Morton Blum. The four volume authorised edition of the correspondence of the big game hunter, conservationist and President.

 

References

http://www.caslon.com.au/biographies/chandler.htm

http://en.wikipedia.org/wiki/Alfred_D._Chandler,_Jr.

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