Firm survival and the rise of the factory


Among the most long-lasting innovations of the Industrial Revolution was the organization of industrial production within the confines of the factory system. The factory system combined three distinct characteristics: discipline and supervision (“factory discipline”), division of labor and coordination, and the use of non-human power sources. The debate over the relative importance of these factors date back to the 19th century and have been a long-running debate among business and economic historians. Although the transition from the artisan shop to the factory remains at the heart of accounts of industrialization, the literature suffers from the absence of data that enables longitudinal quantitative comparisons of how alternative systems of organizing industrial production performed during early industrialization. Moreover, the bulk of the debate has concerned Britain during its industrialization despite the fact that the factory became the universal mode of organizing industry throughout the later industrializers.

In this project, we use new longitudinal data on the universe of Swedish industrial plants established between 1864—when free entry was established—and 1900 to study the rise of the factory during early industrialization. As a matter of accounting, the rise of the factory can be due to either an entry of new plants organized as factories, a conversion of existing smaller plants into larger mechanized production units, or an advantage of the factory in terms of firm survival. We will descriptively examine the rise of the factory across urban/rural regions and across industries focusing on whether new plants increasingly started out as factories, or whether entrepreneurs running smaller non-mechanized units over time learned how to reorganize production relying on a centralized power source. Then we turn our focus to potential differences in firm survival asking whether factories were more likely to survive relative to other forms of organizing production in artisan shops or manufactories. Here the project further aims to understand what can account for the expected survival advantages of the factory: for example, a larger reliance on cheap sources of labor (children and women), a higher rate of innovation or technology adoption, differences in geographical location, larger production units, or differences in ownership? Together, the project will provide the first systematic longitudinal study of the shift from the artisan shop to the factory.