The Entrepreneurial Multiplier and the First Industrial Revolution: In New England

For illustrations of the entrepreneurial multiplier at work, we can look to the familiar ground of the first Industrial Revolution. In cotton textiles during the late-eighteenth and early-nineteenth centuries, the first major innovation involved the application of waterpowered machines to the spinning of yarn; this early development of the factory movement prompted British entrepreneurs to develop new waterpowered looms to weave the cloth. ^{Footnote 12} While the British government tried to prevent other nations from stealing the central ideas of the factory movement, Samuel Slater learned the secrets of the factory production of cotton yarn, immigrated to America, and in the early 1790s put the ideas into practice in a mill in Pawtucket, Rhode Island. ^{Footnote 13} The entrepreneurial multiplier has seldom respected national frontiers, lending to innovation a transnational dimension long before the British Parliament looked to free trade rather than mercantilism as a national policy. Slater’s success attracted a wave of imitators, à la Schumpeter, as “cotton mill fever” hit New England. These entrepreneurial sequences were important to New England, and to the entire American economy of that era. Soon, there were many new businesses making cotton yarn, and the industry continued to expand and change.

The entrepreneurial multiplier process generated entrepreneurial sequences in several different ways. Profits from innovation encouraged emulation. Growing businesses and work forces also created local opportunities to establish new retail stores, boarding houses, and taverns: opportunities that had not existed before. Meanwhile, the mills were developing new mechanical capabilities and knowledge that spilled over into other enterprises, and successful innovation generated capital that begat further innovations, large and small. The entrepreneurial multiplier process was cumulative, broad, and powerful. ^{Footnote 14} The length of the sequences was primarily a product of the economic applicability of the technologies, business systems, and patterns of demand in a market-oriented society.

Firms such as the Boston Manufacturing Company (BMC), which produced both yarn and cloth in Waltham, Massachusetts, introduced some of the most important changes. Waterpowered weaving, as well as spinning, gave the new enterprise an advantage over its American competitors. Unlike most of the young firms in the industry, the BMC was unusually successful in the years immediately following 1815, when competition from Britain cut into U.S. markets. The firm’s sales increased from slightly under $2,000 that year to $345,000 by 1822. By the following year, the firm’s assets were up nearly twenty-fold over the first year of operations. Profitable in good times and bad, the BMC was a model entrepreneurial firm.

The BMC spawned a number of other entrepreneurial ventures, large and small, that did not attract much attention at the time, and have often not been able to win a place in our general economic and business histories. Some of these ventures were retail businesses that serviced the mill workers, handled the products of the mills, and provided special services to firms such as the BMC. ^{Footnote 15} That famous mill innovated in labor relations by employing “mill girls,” who were housed in dorms or boarding houses and were paid in cash. Between 1810 and 1820, Waltham’s population increased by 65 percent, and cash flowing into the local economy attracted new stores. ^{Footnote 16} In 1820 the local economy was also strengthened when Boston Associates established the Waltham Bleachery and Dye Works, a company that would remain in business for 131 years. ^{Footnote 17} Another ancillary business was the Newton Chemical Company, which was led by one of the BMC founders. ^{Footnote 18} The BMC was either directly or indirectly responsible for the development of these new enterprises, all of which strengthened the local and regional economies, fostered a culture friendly to innovation, and nurtured a political environment conducive to entrepreneurship.

Another innovation on the creative side of “creative destruction” was the early development of the machine-tool industry, a sequence that would have long-term implications for the national economy. Cotton textile producers needed machines, at first wood and then metal, and most initially built their own in rudimentary machine shops on-site. Individual craftsmen began to build equipment, and then they created firms to supply the rapidly expanding industry. Luther Metcalf, of Medway, Massachusetts, a cabinet-maker and later retailer of “spirituous lyquors,” was typical of the lot. ^{Footnote 19} He caught the “cotton-mill fever,” and then founded a machinery business that supplied spinning machines and related equipment to the BMC when it got started in business in 1814. ^{Footnote 20} The BMC went on to build its own waterpowered looms and to finance a well-equipped, basement machine shop. As the BMC moved fully into operations, it began to look for additional work for its machine shop. In 1817 the shop started to provide machinery for other mills, and within a few years was a profitable business. Under Paul Moody’s direction, the machine shop was able to draw on the resources of the Boston area, including its iron foundries and other machine shops. ^{Footnote 21} In the meantime, it became a training ground for future mechanics, much as Slater’s mill had been in previous decades and much as the railroad shops would be in the future. ^{Footnote 22}

The BMC machine shop became a potent source of innovations in textile production and in other sectors of the economy. Fortunately for students and historians, George Sweet Gibb studied this history in detail, so we can draw on his account—as well as Thomas Navin’s book on the Whitin Machine Works—for more information on how the entrepreneurial multiplier worked in those years. ^{Footnote 23} Between 1814 and 1824, the BMC’s shop matured into a leading source of machinery for one of the fastest growing industries in the United States. Improvements in the machinery—a series of process innovations—gradually increased the productivity of the BMC mills. ^{Footnote 24}

The mills and machinery businesses were so successful between 1821 and 1824 that the Boston leaders of the enterprise looked to the Merrimack River and Lowell, Massachusetts, for a new and larger opportunity to expand their mills and their machinery enterprise. ^{Footnote 25} Successful in the new site, the machine shop was employing almost three hundred men by 1835. ^{Footnote 26} New mills and a thriving machine shop brought a sharp increase in population in Lowell and in new startup businesses. ^{Footnote 27} By 1832 a complex, local economy had replaced the farmland along the Merrimack.

In a manner that would later be incorporated in business-cycle theory, however, the cotton-mill business inevitably leveled off and then declined after the Lowell mills were built. ^{Footnote 28} By the time that happened, the machine shops were already developing new capabilities that would sustain a profitable business and foster entirely new sequences. Two of their special talents were the use of waterpower and the transmission of energy to a manufacturing operation. Major changes were taking place in the efficiency of water wheels, and the shops developed new skills in using water turbines. Now organized as one part of the Locks and Canals Company, the shops had, as their name indicates, also become significant contributors to the engineering of canals and their locks. In 1834 they moved into another major field when they took on locomotive construction for a new steam line: the Boston and Lowell Railroad. Drawing from the British models, the shops turned locomotives into a large part of its business. By 1838 these shops were the third-largest producers in the country, and there were thirty-two locomotives in operation, most of them in New England. ^{Footnote 29} By this time, despite the depression that had begun the previous year, the machine shops were important contributors to three of the essential elements of American industrialization and economic growth: manufacturing; canal transportation, and the railroad.

As with the mills, the shops were contributing to additional entrepreneurial sequences at the local level, especially in Lowell, Massachusetts, a new urban center. The new enterprises included thirty-four boarding houses, bakeries, bars, hardware stores, a bank, dressmakers, a hotel, a shoe store, a livery stable, and more. ^{Footnote 30} None of these tiny enterprises were economically significant above the local level, but their combined effect was to create an entrepreneurial culture attuned to market relationships and the transitions fostered by innovation. ^{Footnote 31} Insofar as they were successful, these micro-entrepreneurs enjoyed the positive, material sanctions that gave heft, political resonance, and lasting power to that culture. The enterprisers who started these little businesses needed to look no further than their own experiences to understand entrepreneurship.

Where do these entrepreneurial undertakings belong in history? Schumpeter ignored them, as do most economic and business historians. The late Alfred D. Chandler, long the world’s premier business historian, focused scholarly attention on the largest, most profitable businesses of the nineteenth and twentieth centuries. The Chandler paradigm certainly helps us understand some of the most dynamic institutions of the first and second industrial revolutions. However, what neither Chandler’s nor Schumpeter’s histories provide is a grasp of the broad, ideological, and cultural impact of rapid industrialization. Looked at individually, the network of startup enterprises in Lowell and elsewhere were of vital importance only to the men and women who started the businesses and to their customers. Looked at collectively, these businesses were important at the local, state, and regional levels because they helped to shape and sustain the distinctive economy, culture, and politics of early nineteenth-century Massachusetts. ^{Footnote 32} Collectively, they strengthened what Max Weber called “the spirit of capitalism.” ^{Footnote 33}

The culture of entrepreneurship was embedded within a broader culture that favored social, geographical, and economic mobilities as well as innovation. That very diffuse set of values helped Americans deal with the fact that most entrepreneurial ventures fail and most of the successful ones appear to become less innovative over the long run. The entrepreneurial culture allowed the society to handle conflicting experiences; for example, subsidies to enterprises, or the myth of the self-made man, cooperation, and competition, for another; and there were many more, including, of course, slavery and democracy. The culture of innovation was durable but not impenetrable. It was widespread in early America but certainly not universal.

Not everyone benefitted from the impressive record of the entrepreneurial multiplier at work, and, of course, those who did benefit received very unequal shares of the income and wealth being generated by the BMC, the mills in Lowell, and the machine shops in Waltham and Lowell. ^{Footnote 34} Investors who caught the “cotton-mill fever” propelled the industry ahead in surges that were always followed by depressions that brought down employment and incomes of the working class. ^{Footnote 35} While the budding machine-tool industry was less vulnerable after it diversified its product line, it too experienced sharp fluctuations that brought cuts in employment on the shop floor. Businessmen of that era would have thought it strange to contemplate any other arrangement or questions about the unequal distribution of misery. There were, nevertheless, questions raised in 1819, when the mill girls went on strike over a wage cut. ^{Footnote 36} The recovery that followed, however, and the influx of immigrants looking for factory wages soon erased or suppressed the immediate social discontent over the insecurity of industrial work. This was also true because of the routine use of blacklisting to prevent discontented employees from moving from one job to another.

For much of the nineteenth century, these conditions would continue, creating a counterpoint to the entrepreneurial culture and ultimately to the politics of capitalism. The tension between these cultures and their associated ideologies would become a central issue in the politics of America, as well as all of the other industrializing nations. ^{Footnote 37} The resolutions would ultimately produce the “varieties of capitalism,” which were, in reality, the varieties of the political half of political economy. ^{Footnote 38} While the political and cultural ramifications of innovation should not be analyzed using a multiplier, they should certainly not be left out of a long-term perspective on this aspect of the history of capitalism. That is true even though for many decades, America’s unfolding economic opportunities and mobility trumped the desire for social and political changes in what was one of the world’s fastest growing industrial economies.

Political change was particularly difficult to achieve in a society in which the new industrialists and the established commercial class had so much power. That control was reflected in the ease with which the Boston Associates were able to get state charters passed for their new enterprises. Incorporation had previously been used largely for infrastructure improvements in which the social interest loomed large. Bridges and piers were advantageous to the many, not just a small coterie of businessmen. However, a charter or the tariff protection won in 1816 was another thing entirely. The social benefits were indirect and in the future; the economic return was direct and of overwhelming benefit to the industry’s investors. A glimmer of the balance of power could be seen when the state authorized the railroad from Boston to Fitchburg: the BMC investors’ agent specified the exact route of the line when it passed through Waltham. ^{Footnote 39}

There were, thus, political grumblings and caveats about the mills and machine shops, but none of these interrupted the flow of profits and dividends from the operations of the shops at Lowell. The Locks and Canals Company had land and waterpower to sell, as well as growing markets for its textile machines and locomotives. The entrepreneurial sequence in machine tools appears to have provided the major source of income to the Locks and Canals firm, even during the deep downturn after the Panic of 1837. When the machine-tool operations were finally sold in 1845, the company’s founders could reflect on its contributions to the region’s economic advances: the solid establishment of a successful regional cotton-textile industry; the expansion of Waltham’s local economy and the creation ab ovo of the city of Lowell; and the manufacture of many of the locomotives for a growing rail network in New England.

More difficult to total are the social and political outcomes from this sequence: the balance sheet in this case clearly included liabilities as well as assets. There were surges of socio-economic discontent with each economic downturn, and the depressions appeared to be getting longer and deeper. They produced periodic efforts to find some means of ensuring a greater measure of economic security for the working classes and some glimmers of an anti-capitalist movement that would continue to develop with every downturn of the business cycle. As these problems became more severe, it got harder to drown out the voices calling for change. Nevertheless, as the nation’s transportation and communication improvements continued and growth in the manufacturing and service sectors carried America into a second Industrial Revolution, the culture and polity were still primarily amenable to change and supportive of entrepreneurship.

In Lombardy

Although the economic and political settings in Lombardy were very different than those of New England, the entrepreneurial multiplier was at work in northern Italy, producing sequences similar to those in nineteenth-century America. Unlike New England, Lombardy had a very significant textile industry before waterpowered spinning and weaving transformed the industry. The silk industry was well established and had long been selling its goods in upper-class markets in Italy and the rest of Europe. Capital was available for investment, and there were no significant guild impediments to production in the countryside, where abundant sources of waterpower were available. The region had a flourishing agriculture and an expanding manufacturing sector rooted in several districts within the countryside, scattered in a number of small towns, in the suburbs, and in the city of Milan. What’s more, the industry was deeply embedded in international trade networks, and Lombardy’s businesses were intentionally trying to keep pace with European economic progress. ^{Footnote 40}

Beginning in the late-eighteenth century, a growing number of local merchants and entrepreneurs of the textile sector, in both silk and cotton, gradually expanded their volume of sales on a regional level and extended their transnational connections. The wars of the French Revolution and Napoleon’s campaigns impinged upon trade and the local economy, but after the Restoration (in 1815) of Austrian rule, the traders and merchants of Lombardy began to explore aggressively the new technologies of textile manufacturing. ^{Footnote 41} Enlarged domestic and international markets encouraged innovations in both production and commerce. From then on, economic growth in Lombardy was increasingly due to investments in silk and cotton, which in turn forced further innovations and offered incentives for new investments across industries and sectors throughout the region.

Increasing investments in textiles gave birth to a long series of entrepreneurial sequences across the century, much as they did in New England. ^{Footnote 42} Under the pressure of international competition, Lombardy entrepreneurs invested in technological innovations that involved local carpenters, artisans, and hydraulic mechanics, some of whom created small family firms in Milan, Como, Lecco, and Bergamo. ^{Footnote 43} These companies specialized in essential pieces of machinery, including reels, thrown silk mills, and steam-heated boilers, as well as essential pieces of machines and various iron and wood tools. The firms were decisive for the further evolution of the mechanical sector. The mechanical enterprises founded in the first part of the nineteenth century became extremely skilled at producing more efficient hydraulic wheels, agriculture machines, and advanced mechanisms for silk production processes.

The major differences between New England and Lombardy stemmed from the breadth of the market. There was no shortage of entrepreneurial talent in northern Italy, and finances were available. However, the domestic market was smaller than in America. As a result, the Italian machine-tool industry was unable to construct high-quality cotton-textile machinery at competitive prices. Cotton textiles represented a sharp break with the past in Lombardy because the goods were cheaper and the profit margins tighter in middle- and lower-income markets. New England and Lombardy both followed the normal industrialization pattern of gradually moving up the value chain, from low-cost to higher-cost fabrics. Until World War I, however, Lombardy cotton entrepreneurs continued to import their technology from the well-recognized mechanical centers abroad. In that sense, the sequences of ancillary innovations in northern Italy were, for a time, more truncated and less productive than those in America.

Nevertheless, the Lombardy cotton factories laid a foundation for further technical innovation. They each built workshops and employed a combination of skilled foreign “instructors” and local mechanics, carpenters, and lathe turners. Some of the indigenous mechanics became key figures in the organization of new firms. Their family workshops came to be the crucial vehicles of new technologies coming from England and northern Europe. They were later responsible for technological “spill-overs” in other industries. ^{Footnote 44}

The leading silk and cotton firms were controlled by a handful of influential entrepreneurs based in Milan. Their financial resources and links to the commercial networks enabled them to keep in their hands the biggest part of the business, including its financing, production, and trade. Often they coordinated operations in several plants across the elevated plains and hills, wherever they could find hydraulic power and relatively cheap labor. As they gained economic strength and accumulated wealth, some of those involved in silk commerce became bankers, on the lookout for additional remunerative investments and ways to diversify their holdings. ^{Footnote 45} In this and other regards, the silk industry built on Lombardy’s traditional strength in upper-class markets for relatively fine goods, while cotton textiles moved the region into new modes of production, labor relations, and patterns of distribution. The contrast between Lombardy and New England was thus, in part, a function of the contrasting business traditions and institutions of the two economic regions, as well as the relative size of their markets. ^{Footnote 46}

Capital from silk, and to a lesser extent from cotton production, began near mid-century to flow to other economic sectors. In 1846 textile resources helped to finance the firm Elvetica, which took on a role in building the region’s first railways (the Milan-Monza and Lombard-Venetian lines), and whose production included boilers, fireboxes, locomotives, and freight cars. The main partners of the company were part of the local business élite, including distinguished silk “merchants” transformed into bankers (men such as Enrico Mylius, Giovanni Esengrini, and Francesco Decio); cotton industrialists (including Francesco Amman); and noblemen-entrepreneurs such as Emanuele Kevenhuller, a shareholder of the lighting and gas company of Milan. A year later, in 1847, Giovanni Noseda, a wealthy and renowned silk banker, was the main financier of a new company, Grondona, which made coaches, freight cars, and wagons. Noseda supplied both capital and loans to the enterprise. ^{Footnote 47}

Entrepreneurship in Lombardy fostered conflicts as well as economic growth, along lines initially similar to those that developed in New England. The textile entrepreneurs had political and economic power, and they exercised that power in ways that had both negative and positive effects on the region. The positive side was their role in the lengthy struggle against Austrian authority. What they sought, and eventually achieved, was a relatively conservative “revolution” that pushed out the Austrians but left the region’s social and economic relations largely unchanged. They were already struggling to maintain their control of their workers. In some cases they had built mill villages in an effort to promote entrepreneurial paternalism, stymie class conflict, and keep the legitimacy of private property off the political agenda. For a time they succeeded, but they would give ground later in the nineteenth century.

After the unification of Italy in 1870, the capital accumulated in Lombardy spurred the establishment of new financial institutions and limited companies. This process began with a great fervor: twenty-one new banks were established in Milan in 1871–1873, and while some failed in a short time, others survived and deepened the region’s financial resources. Among the administrators and financiers were the well-known names of the wealthiest industrialists: for silk, De Vecchi, Gavazzi, Gnecchi, Pedroni, and Ronchetti; and for cotton, Cantoni, Turati, and Ponti. Many of them invested capital in a series of new enterprises: Pirelli & C., an innovative rubber firm; ^{Footnote 48} Lanificio Rossi, in wool; Società Richard in porcelain china; and Cotonificio Canapificio Nazionale and Cotonificio Cantoni in cotton and hemp. ^{Footnote 49}

The Cantoni family enterprise was typical of the firms of this era. Costanzo Cantoni, one of the first cotton merchant-entrepreneurs, shifted to the factory system in the 1830s. During the following decade, he expanded his factory in Legnano (reaching 3,546 spindles by 1845); established weaving and bleaching divisions, as well as a dyeing plant; and, together with his son, Eugenio, and the financial help of Ponti and Turati, built a large factory in Castellanza that was vertically integrated and supplied with all the advanced technology then available. Eugenio, like Samuel Slater, took advantage of the foreign technology he had studied in Switzerland, Austria, Germany, France, and England. ^{Footnote 50}

In the 1850s, Costanzo transferred the direction of the firm to his son. By that time, Eugenio (1824–1888) had access to ample capital to invest in other economic sectors beyond cotton. In 1854–1856 he took part in the business group that acquired the Lombardo-Veneto railways, after the Austrian government decided to sell the line. Following Italy’s unification, Eugenio made two crucial decisions: first, he transformed the family enterprise into a limited company (1872); then, he supported the organization of several other firms: Banca di Busto Arsizio (1872), Lanificio Rossi (1872), Reiser, and Linificio e canapificio nazionale (both 1873). ^{Footnote 51} In 1874 he built a workshop with the first objective to assure speedy repairs for cotton factory machinery. In 1875 this undertaking evolved into Cantoni-Krumm e C, with Luigi Krumm, a technician with experience in Lombardy’s cotton sector. The following year Cantoni invited Franco Tosi to join the venture and, in a couple of years, the company became an important mechanical enterprise and an innovative entity in the industrial structure of Lombardy.

Tosi (1850–1898) was a young engineer who had studied at Zurich’s Polytech and worked for a short time in the Italian operations of some German mechanical businesses. He had solid technical expertise and a strong business instinct. He put his knowledge and his money into the business, and steadily grew the firm’s output to include mechanical looms, many other items of textile equipment (for cotton, wool, linen—and the full industrial plant if needed), agricultural machinery, hydraulic engines, illuminating gas plants, industrial boilers, and steam engines. The production of steam engines, in many models, was particularly successful. ^{Footnote 52} In 1881 the firm was renamed Franco Tosi. ^{Footnote 53}

In Italy, as in America, the machine-tool industry spawned by textile production using waterpower and then steam power had significant entrepreneurial multiplier effects on the local, regional, and then national economies. Here, too, the multiplier was generating opportunities for further innovation, new capabilities, and the capital to sustain additional investments. Here, as well, there was a vibrant entrepreneurial culture and politics. The major differences between New England and Lombardy continued to flow from the size of their markets. Nevertheless, by the end of the 1870s, Italy’s strength in luxury goods had been supplemented, although certainly not replaced, by important investments and technical capabilities in mass-production industries such as cotton textiles. Eugenio had founded a new and larger Cotonificio Cantoni S.p.A. with the involvement of twenty-nine major Lombardy businessmen. ^{Footnote 54} His efforts, and those of other Lombardy businessmen and technicians, had laid a foundation for a new wave of innovations in communications, transportation, and manufacturing. On balance, the Italian and American experiences with the first Industrial Revolution followed similar patterns.

The Second Industrial Revolution in America’s Midwest

In the latter half of the nineteenth century, a distinctive new wave of innovation transformed the developed economies. Changes in transportation and communications opened new national and international markets. New electrical, chemical, and electro-chemical industries arose, as did giant firms attuned to the growing markets and the opportunities for mass production and mass distribution of standardized goods and services. ^{Footnote 55} Urbanization fostered further specialization, much as Adam Smith had predicted. Growth across a broad front in America and Europe spawned increasingly complex and elongated sequences of entrepreneurship. ^{Footnote 56}

One of the new industries was aluminum. Like cotton textiles in the first Industrial Revolution, aluminum was a major innovation that launched numerous entrepreneurial sequences in the years following its introduction as a commercial product in the United States and France. ^{Footnote 57} Charles Martin Hall discovered his new and inexpensive way to recover the metal in 1886, and two years later he and a team of American investors founded The Pittsburgh Reduction Company. ^{Footnote 58} Unlike the BMC, the aluminum venture did not start with adequate, commercially generated financial resources. The three Fs (family, friends, and fools) did not provide Hall and his partner, Alfred E. Hunt, a metallurgist, with the capital they needed, but they were able to interest three Pittsburgh businessmen and a local chemist in their new company. ^{Footnote 59} The firm started with $20,000. Additional financing came from other local businessmen, including the Mellon brothers, well-to-do Pittsburgh bankers who had acquired substantial capital by investing in local real estate. ^{Footnote 60}

After fighting off two patent challenges and settling out of court after a third decision, the new firm solved a series of technical problems, and it invested and reinvested enough capital to make the company a profitable mass-production enterprise with tightly controlled markets. Renamed the Aluminum Company of America (Alcoa) in 1907, the firm was, by the end of World War I, a large and successful producer of a metal that had been transformed from a laboratory curiosity to an industrial product with substantial potential for further development. ^{Footnote 61}

As this new industrial firm emerged, it soon began to foster additional entrepreneurial sequences, much as the BMC had in the early-nineteenth century. Seeking space for expansion, the aluminum company also followed the BMC model by creating a town at New Kensington, Pennsylvania, on the Allegheny River to the north of Pittsburgh. New sequences of innovation in and near that location followed quickly: in addition to the usual retail establishments, there was a new Braeburn Alloy Steel company. ^{Footnote 62} The search for new applications for aluminum reached to Wisconsin, where there were several aluminum cookware firms; to Ohio, where there was a new aluminum sign-lettering business; and also to Illinois, where there was a new Illinois Pure Aluminum Company. ^{Footnote 63} Many of the early ventures in aluminum products failed, as many startups did and still do, but the enthusiasm for the potential of a metal that was lighter than steel and a good conductor of heat and electricity did not wane.

As the Pittsburgh Reduction Company expanded output and lowered costs and prices, the business sought additional production sites. The next big move was to Niagara Falls, where cheap electricity was the attraction. Shortly, there was a second plant at Niagara Falls, and then a third, as well as a plant at Massena, New York. ^{Footnote 64} The Tennessee River was next, and here the firm, now Alcoa, established dams, power plants, and smelters, and founded the town of Alcoa, Tennessee. Upstream vertical integration into bauxite, the firm’s major raw material, took the business further westward to another new town: Bauxite, Arkansas. ^{Footnote 65} The ore from Arkansas was refined into “alumina” in another new plant in East St. Louis, Illinois. ^{Footnote 66}

Through its early history, the enterprise was protected by its patents, by a stiff tariff on imported aluminum, and by its membership in an international cartel that left the United States market to Alcoa’s control. At the end of World War I, Alcoa was the sole producer in America of aluminum ingots. Alcoa’s response to that large and growing market was to emphasize mass production rather than improvement in the quality of their product. ^{Footnote 67} Without acquiring significant scientific prowess, the firm nevertheless steadily improved its production processes and achieved the greater efficiency and lower costs that further buttressed its monopoly position. Alcoa’s process improvements were a credit to good engineering rather than good science.

As this suggests, the firm, again like the BMC, had substantial power to shape its environment. It had fiercely resisted unionization of its plants. In the legal and political environment of that era, it had no real difficulty in establishing its particular combination of a holding company and an operating company structure. It exercised near absolute authority in its company towns.

Like other prominent monopolists and oligopolists in America during the second Industrial Revolution, however, Alcoa’s relations with the federal government were unstable. A surge of agrarian unrest and a progressive reform movement created demands for more active governments at the local, state, and federal levels in America. As a new regulatory administrative state took hold, the political environment for entrepreneurship became more complex and negative; new questions were asked of businesses and new constraints were imposed on business behavior. The local, state, and federal governments in America had long favored innovation with subsidies, tariff protection, and relatively lax regulations. ^{Footnote 68} Now, however, entrepreneurial politics and culture were under serious attack in this first great surge of reform in American political economy. The federal and state antitrust laws properly reflected the attitudes of many Americans toward large concentrations of economic power. The public had become suspicious of the so-called “trusts” without being particularly attracted to radical ideologies that looked to the demise of big business and the capitalist system. ^{Footnote 69} In 1911 the U.S. Department of Justice issued an antitrust complaint against Alcoa, but the firm’s leaders were not interested in fighting national authority. They quickly reached an agreement with the government, signed a consent decree, and protected their monopoly. ^{Footnote 70}

Meanwhile, Alcoa’s contributions to the entrepreneurial multiplier across a wide expanse of America was fostering innovation in a new basic metal, feeding the American hunger for material progress, modulating the fear of “creative destruction,” and building a new series of great fortunes that further exacerbated the nation’s skewed distribution of income, wealth, and power. The firm’s environmental footprint would eventually prompt additional political responses, but in these early years of the second Industrial Revolution, there was far more interest in the nation’s rise to global industrial leadership than there was in the rise of industrial pollutants. Soon, however, that too would change, and local, state, and federal power would be exercised in an effort to protect the environment. ^{Footnote 71}

While the progressive reform movement challenged entrepreneurial authority on several fronts, the culture and politics of innovation still had broad appeal in America. They were actually bolstered in this same era by the rise of the professions in urban America. The professions were themselves sites of transformation. All of them lauded change and developed social systems that rewarded creativity. Science and engineering in America were transformed, as were the institutions of higher education that provided professional training and began to generate research. Although the United States at first lagged far behind Germany in developing university-based technical research, American schools began to close the gap in the twentieth century and then to move ahead in many fields after World War II.

Alcoa took advantage of this surge in science and engineering to improve its production processes and to develop new uses for aluminum. ^{Footnote 72} Like most American manufacturing firms, it first tried to use consultants instead of developing in-house technical capabilities. However, the company needed its own technicians just to deal effectively with the consultants. In short order, Alcoa started to build its own staff, starting with engineers, and then chemists and metallurgists. Soon Alcoa had a central laboratory capable of generating new products and processes, and guiding the business of buying innovations. This task became all the more important after the company’s patents expired in 1909. European competition had pushed ahead of the United States in aluminum quality and in the diversity of its products. Following World War I, Alcoa’s technical department attempted to catch up, and it eventually became a major source of new products, improved processes, and fundamental research. ^{Footnote 73} It also became a source of the opportunities that brought new firms into the business of using aluminum to make everything, from airplanes to automobile parts, and from window castings to cooking ware and aluminum foil. ^{Footnote 74} The process was multiplying entrepreneurial opportunities, knowledge, and capital across a broad front.

In France

The virtually simultaneous discovery in 1886 in France and the United States of the modern electrolytic method of producing aluminum made it possible to start production of the metal on a large scale in both nations. In both countries, this technological innovation launched an impressive array of entrepreneurial sequences in subsequent years. In France, unlike the United States, the new process was picked up and promoted by existing chemical enterprises. These businesses had developed to serve the glass industry and the regional textile districts in the first half of the century. One of the important firms was Pechiney, which, in the 1920s, became the major French producer of aluminum. An engineer, Henri Merle, had launched the firm (at first as Société Henri Merle et C.ie) in 1855 as a caustic soda Leblanc factory to supply the Lyon textile district. He raised the capital needed locally. Investors included J.-B. Guimet, a pigment producer in Lyon; private Banque Dugas, among the founders in 1835 of the Banque de Lyon, and from 1848 a branch of the Banque de France; and Piaton, a local notary from Lyon. Merle built his first soda factory in Salindre (Languedoc-Roussillon), near coal and limestone mines, and a new railroad, the Paris-Lyon-Mediterranée, which could bring salt from the Mediterranean. ^{Footnote 75}

Very soon, Merle began to diversify beyond soda. He manufactured sulphuric acid, chlorine, and chlorates; and from 1860 until 1890, the business produced aluminum using a chemical process discovered in 1855 by the French scientist Henri Sainte-Claire Deville. The Deville process permitted the company to obtain pure aluminum from its compounds by treating them with sodium instead of the expensive potassium. As a result, for the first time, aluminum became a commercial metal in France. ^{Footnote 76}

This chemical process cut down the cost for producing the metal from bauxite, but the aluminum was still too expensive to permit widespread use. Although enough was then known about the properties of aluminum to indicate a promising future, the enterprise, which in 1860 became the unique aluminum producer on industrial scale in the world, still only produced around two tons per year until 1889. By that time, Merle had died and A. R. Pechiney was running the firm, renamed in 1897 to Société des Produits Chimiques d’Alais et de la Camargue. Later, the company changed its name to Pechiney, which is the name we will use now to avoid confusion. ^{Footnote 77}

Although Pechiney had been the first enterprise to attempt large-scale production of aluminum, it was not the first in Europe to adopt Héroult’s innovative process. In 1886, twenty-three-year-old L. T. Héroult offered his new method to Pechiney. Héroult was a close friend of Louis Merle, the young son of Henri, the former director of the company. However, Pechiney and his son-in-law, Alfred Rangod, who was managing the firm at that time, made a conservative and expensive decision to stick with the company’s chemical process. Pechiny said he “did not like electricity.” ^{Footnote 78} This decision—comparable to the decision by America’s Western Union Company not to buy the Bell telephone patents for $100,000—had unfortunate consequences for Pechiney. Héroult sold his patent to a Swiss enterprise, which started aluminum production on a large scale and soon internationalized its business. In France, the Swiss firm operated as the Société Électrométallurgique Française, and nicknamed Froges, which was after the place where it founded its first plant, near Grenoble, in about 1888. ^{Footnote 79} Froges was thus the first in France to adopt the new technology and it quickly surpassed Pechiney. The Swiss business became the leading French producer of aluminum.

Near the end of the century, Pechiney and his son-in-law realized they had made a serious mistake. Unlike Western Union, however, they were able to recover from their blunder. In 1897 they acquired Calypso, an electrolysis factory using the Hall process, and incorporated this into their business. In 1890 the Bernard brothers had founded Calypso, at Saint-Martin-la-Porte in the Mourraine Valley. From that time on, the Pechiney strategy gave aluminum first place in both production and investments. In 1907, still using the Hall process, Pechiney founded a second aluminum plant in the Mourraine Valley (later dubbed la Vallée de l’Aluminium), at Plans de Saint-Jean. The company began at the same time to look to international markets.

On the eve of World War I, Pechiney transformed all of its aluminum plants from the Hall to the Héroult process. By that time, the enterprise’s capital had increased from 3.6 million francs (in 1896) to 17 million. It still was a medium-sized firm by European standards, and especially when compared to Saint-Gobain or to the large French metallurgy companies. It was significantly smaller than the German chemical firms Bayer, Hoesch, and BASF, and the Belgic Solvay. It was, however, a profitable business, in part due to the successful combination of extensive resources of bauxite (abundantly available in Provence and Bas Languedoc) and hydroelectrical power, concentrated in the Pyrenees and along the Alps. ^{Footnote 80}

The industry thus became concentrated in the southeast of France. The Société Électrométallurgique Française also built two new aluminum factories, at La Praz in 1893 and at La Saussax in 1905. With the plant at Prémont (built in 1907), which was owned by a third chemical company (Henry Gall et de la Montlaur), five of eight of the nation’s aluminum plants were concentrated in the same area. Outside of the Mourraine Valley, there were three other factories: at Chedde (opened 1906), Auzat (in 1907)—both owned by Bergès-Bouchayer—and L’Argentiere (in 1910). ^{Footnote 81} That was where Pechiney built a great hydroelectric plant, which serviced its production of aluminum. ^{Footnote 82}

Although achieving economies of scale and integration, the French firms, like those of Germany, emphasized the high quality of their products substantially more than Alcoa did. This was an adjustment both to their domestic markets and their human resources, much as occurred at Alcoa in the early phase of its operations. ^{Footnote 83}

The new industry, with its huge investments in hydropower constructions and in aluminum plants and equipment, transformed the economic and social environment of these mountains areas. The entrepreneurial multiplier was at work. Several new hydroelectric centrals were built to supply the industry, and soon every factory had its own waterfall, electrical source, and surrounding small enterprises. Industry pumped money into the communities to the benefit of their local businesses after Pechiney acquired and founded new electrical plants at Saint-Felix (1902) and Pontamafrey (1910). Little by little, every waterfall was exploited.

For a long time, the companies had to deal with the regular fluctuations in the supply of water, which expanded in the summer and shrank in the winter and spring. That was not the industry’s only problem, as issues also arose with labor. While industrial work gave additional income to local peasants, they continued to desert the factories and go back to agricultural work when they were needed, usually in the summer. This was when production was normally growing and factory hands were most needed. The firms responded by bringing in seasonal workers from Italy (Piedmont) and Africa (Maghreb). To facilitate this addition to the workforce, the businesses began to provide welfare services, houses, and other accommodations to the workforce. The firms, as a result, became deeply involved with their local communities and exercised significant local authority, as was the case in early New England.

Their authority was tested, but not overcome, as it became clear that the production of aluminum caused dangerous pollution in the air and water of the valley. This affected the workers inside the factories and outside of them, impacting the local communities and their economy based on forests, livestock, and cereals. From the very beginning of the twentieth century, inspectors of water and forests and those on municipal councils began to protest the pollution. ^{Footnote 84} There is little evidence, however, that these protests brought about significant changes in the industry until after World War II, when a surging environmental movement in France, throughout Europe, and in the United States forced the businesses to change. This pattern was similar in France and the United States.

In both countries, demand for aluminum was increasing and new uses were being found for this relatively light, malleable, and corrosion-resistant metal. ^{Footnote 85} French output between 1900 and 1914 experienced significant expansion, even though it lagged the growth in world output. ^{Footnote 86} The golden age of this new product would take place after World War II, especially for Duralumin alloy (first patented in 1910) in cars and airplanes. Research and development contributed to this growth, particularly in the laboratories closely tied to the factories. This alignment favored improvements in process. Especially important were innovations that saved on energy and coal: the cistern of Héroult, which in 1888 had a single anode, used 3,000 amperes and consumed from 80 to 90,000 kilowatts per ton. By 1914 the French factories had cisterns with anodes of 10,000 amperes that consumed only 30,000 kilowatts per ton. ^{Footnote 87} Other science-based innovations followed, particularly in aluminum alloys. ^{Footnote 88}

In France, the early industry was less concentrated than it was in the United States, but the enormous set-up costs and large energy requirements fostered both vertical and horizontal integration. Up-stream integration brought control of the different stages of the process, from mining bauxite, to refining alumina, to producing aluminum. The French approach to competition differed from that of the United States, but the long-term results were much the same: oligopoly based on cartels and then a trend toward monopoly. ^{Footnote 89}

In the case of Pechiney, these developments accelerated in 1906 after Adrien Badin succeeded A. R. Pechiney as head of the company. Badin helped manage the creation of aluminum’s domestic and international cartels, internationalized Pechiney’s distribution, and, finally, launched a merger strategy that made his company once again the top French producer. Badin led the successful effort in 1910 to establish the Comptoir de vent de l’Aluminium Française, which divided the French market as follows: 44 percent to Froges, 33 percent to Pechiney, 15 percent to the group Bergès-Bouchayer, and 8 percent to Ugine. The French cartel was, in turn, part of an international agreement that stabilized market shares for the world.

Already cooperating under the Comptoir, Pechiney and Froges launched two new branches in Norway (in 1911) and in North Carolina (in 1912). The Banque Franco-Americaine, the Crèdit Lyonnais, and the Banque Dreyfus all supported this venture into the large American market. ^{Footnote 90} Nevertheless, the last two banks left the business during World War I, and the lack of financial support led to a decision to sell the U.S. plant to Alcoa. ^{Footnote 91}

Pechiney was more successful in France. The aggressive Badin led Pechiney’s 1914 acquisition of Bergès-Bouchayer’s plant at Auzat, and it absorbed the rest of the group in 1916. In the wake of World War I and the Versailles peace treaty, Badin completed his grand strategy of merger by acquiring the Société Électrométallurgique Française in 1921 and organizing the new Compagnie de Produits Chimique et Electrochimiques Alais, Froges et Camargue. For the second time in its history, and for a long time thereafter, Pechiney was the dominant French producer of aluminum.

Although the markets for the new metal in France and the United States were significantly different, as were the politics and the industry’s scientific resources, the entrepreneurial multiplier worked in France much as it did in the United States. The successful enterprises played a growing role in their respective national economies and fostered new sequences of innovation. Concentration and the cartels doubtless slowed the process, but they certainly did not stop it in either country. By the end of the interwar era, aluminum was one of the success stories of the second Industrial Revolution and of the entrepreneurial multiplier in Europe and America.

The Third Industrial Revolution

In the years following World War II, America’s Bell System developed the innovation that would launch a third Industrial Revolution in the United States and soon after in the rest of the world. The Bell System’s switching innovation, the transistor, set in motion the single most far-reaching entrepreneurial sequence in modern history. ^{Footnote 92} The digital revolution can be traced from the transistor, to the integrated circuit, to the Internet, and to a multitude of related innovations that are still today remaking political economies, societies, and cultures worldwide. ^{Footnote 93} The entrepreneurial multiplier in this case is very long, very complex, and continues to grow. The path of these sequences, charted by numerous historians and economists, is certainly tree-like. In manufacturing, distribution, and financial services, new enterprises continue to develop in the wake of the digital transformation. So, too, do smaller retail firms, down to the level of Internet cafés. Even in some of the poorest and least developed societies in the world, wireless communications and the Internet are changing the way people communicate; carry on economic activity; and engage with the world outside of their families, communities, and nations. ^{Footnote 94}

This recent burst of innovation has had important cultural, social, and political, as well as economic, effects in the United States. In the aftermath of the New Deal of the 1930s and the wartime expansion of government controls in the 1940s, it appeared to Schumpeter and other sagacious intellectuals that the drift toward socialism and away from market-oriented capitalism and the entrepreneurial culture was inevitable. ^{Footnote 95} America’s European allies were headed down that path in the aftermath of the war. Then, a formidable political and intellectual “re-formation” in America revived entrepreneurial values and again transformed the nation’s political setting. ^{Footnote 96} That context, however, continued to be characterized by formidable tensions between those Americans in quest of equity and economic security and those who emphasized the search for efficiency and for what Michael Lewis memorably labeled “the new new thing.” ^{Footnote 97} These tensions came to the surface and roiled American society in the years following the Great Recession of 2008.

Long before that episode of political and cultural struggle began, the digital revolution was decisively generating new opportunities, profits, jobs, services, and goods in the United States and the global economy. It is beyond our capabilities to follow the millions of digital sequences from the initial innovation at Bell Labs to the more recent entrepreneurial experiences in the United States, Asia, Latin America, and Europe. Others have tracked some, but not all, of these major sequences, as indicated in the materials cited in our endnotes. Instead, we will leap over the multitude of sequences stemming from the transistor and look at one sequence in particular: a very recent development that we believe provides a good illustration of what has happened and is continuing to happen in the information age. We will briefly examine 3D printing, an innovation that could well become a general-purpose technology, and is today continuing to evolve in the United States, Asia, and several countries in Europe. As we do so, we are jumping into “Wiki History Land,” where the factual base is skin-thin and the perspective is stunted. After applying a self-imposed “media-hype discount” of 50 percent, we can at least chart some of the outlines of this sequence.

Those who have not been following 3D printing in the press and other publications can turn to Chris Anderson’s recent book, Makers: The New Industrial Revolution, for a simple, non-technical explanation of the technology. As Anderson aptly observes, we can start by thinking about the laser printer that is probably in use at your home or office. That machine is a two-dimensional printer. You put computer instructions in the printer, and it applies ink to the page as instructed. Your letter, chapter, or lecture comes out (one hopes) in finished form. Now imagine that you add a third dimension to the instructions and the machine extrudes plastic or metal instead of ink. You now have a 3D printer. This is also called “additive manufacturing.” These machines are currently available in a variety of sizes, forms, and capabilities.

Charles W. Hull invented and patented the original machine in 1986, using an ultraviolet light beam to harden a light-sensitive liquid as it was applied, layer-by-layer, to make the product specified by the software. Hull founded 3D Systems to produce the machines, and today it is one of the two largest companies in the industry. ^{Footnote 98} There are now various different techniques for shaping either plastic or metal (laser sintering and laser melting, for example) and all have taken computer-assisted design (CAD) and computer-assisted manufacturing (CAM) to a new level in which the printer actually makes the object you want to produce. It makes them one at a time and as complex as your software design. Some of the printers build up the object, layer-by-layer, from the plastic or metal they extrude. Others cut the object from the material. If you do not want to develop software instructions, you can put the object you want to copy onto a 3D scanner that will produce the instructions you need.

Where is 3D printing being used? One of its most important uses is in producing prototypes for further development in other forms of manufacturing. It is also being used in making dental products, medical devices, architectural models, electrical circuits, and the tools and molds used in mass production. To those who see manufacturing moving away from standardized products and toward personalized, individualized products, 3D has great appeal. In its current form it favors customization, but that too may change with further technical development. New firms are entering the industry, including General Electric (GE), which now has a Rapid Prototyping Center. By 2020, GE plans to be producing more than 100,000 aviation parts using 3D printing. ^{Footnote 99} Even after applying our hype discount, it is significant that firms such as GE and Hewlett Packard (HP) have moved into the industry. HP announced in October 2014 that it would soon have available a 3D industrial printer that it claimed would cut costs by 50 percent while working ten times faster than existing machines. ^{Footnote 100} Like the early textile industry, 3D printing has produced a new system of manufacturing and a new machine-tool industry with substantial capabilities for further entrepreneurial development. There is currently interest in creating machines large enough to produce 3D automobiles.

As befits a relatively new industry in a new digital age in a very large, capital-rich America, funding for 3D entrepreneurial ventures has taken on new forms. ^{Footnote 101} In addition to the traditional ways of funding entrepreneurship—mortgages, credit cards, the three Fs, and the post-WWII venture capital companies—businesses making 3D printers have turned to newly created online crowdfunding campaigns These use the Internet to collect small amounts of capital from a relatively large number of people who do not know each other. One platform for crowdfunding is Kickstarter, which has been in business in the United States since 2009. Forty-one producers of 3D printers have gathered pledges of $18 million through Kickstarter, and the amount of capital raised in this way is continuing to grow. Large firms such as GE and HP can depend on internal financing, but the startup producers have turned, with apparent success, to public campaigns to promote their innovations. ^{Footnote 102}

Will 3D printing be a disruptive technology, à la Clayton Christensen? ^{Footnote 103} According to Lyndsey Gilpin, writing in TechRepublic, 3D will have a revolutionary impact on manufacturing in electronics, automobiles, jewelry, and military equipment, on medicine, and on many other aspects of production in the developed and the developing worlds. McKinsey Global Institute predicts that it will be a major factor in the global economy by 2025. ^{Footnote 104} The global market for printers and services has been estimated at $2.2 billion in 2012 (the growth rate was 29 percent over the previous year). ^{Footnote 105} In a report entitled “The Search for Creative Destruction,” investment firm Goldman Sachs focused on three transforming technologies: big data solutions; software-defined networking; and 3D printing, which “is expected to continue on its path of rapid acceleration.” ^{Footnote 106} Projections vary, but the historical trend for the years 2007–2011 is impressive: there were sixty-six 3D printers sold in 2007, and 23,265 sold in 2011, a dramatic increase. ^{Footnote 107}

Recent developments in bioengineering are especially interesting. As Jerome Groopman observed in a recent issue of The New Yorker, cell biologists using 3D printing are making progress toward the goal of printing functional body parts that can be used to replace failing organs. ^{Footnote 108} Researchers at Cornell University have already printed aortic heart valve conduits, and the Wake Forest Institute for Regenerative Medicine has implanted lab-grown bladders in patients. ^{Footnote 109} Work is currently being done to develop human tissue that could be used by pharmaceutical companies to cut the costs of safety and clinical tests for new drugs. ^{Footnote 110} Patenting has been vigorous in this field, and there are currently a number of relatively new companies exploring commercial applications. They include Materialise, a Belgian firm with offices around the world; Envision TEC; 3D Printsmith; and Organovo Holdings Inc., which is listed on the New York Stock Exchange and recently raised $24.7 million in equity.

As Steven Leckart reported in 2013, Organovo was able to print liver tissue. “Three factors,” he said, “are driving the trend: more sophisticated printers, advances in regenerative medicine, and refined CAD software. To print the liver tissue at Organovo,” Leckart said, “Vivian Gorgen, a 25-year-old systems engineer, simply had to click ‘run program’ with a mouse.” That product leaves Organovo a long way from making a fully functioning organ, but it is an astonishing step forward. ^{Footnote 111}

The extended, incredibly varied entrepreneurial sequences leading to these developments in bioengineering, and the millions of other similar innovations in the third Industrial Revolution, were taking place in political and cultural environments that very recently appeared to be loaded against the entrepreneur. Despite the late-twentieth century rise of neo-liberalism, a mature American regulatory state was scrutinizing many forms of business behavior that, one hundred years ago, had been free of political control. In the wake of the Great Recession, a very active federal government and a very active array of non-governmental organizations now have available, and are prepared to use, vast amounts of information on the economy and the actions of particular businesses and individuals. There is a mounting interest in squeezing risk out of the financial system that funds the American brand of capitalism. ^{Footnote 112} Class action lawsuits, opposition from environmental organizations, and an aggressive media impinge on private sector decisions that had once been easy to make on the basis of economic factors alone. ^{Footnote 113} Entrepreneurial profits and inequality of income, wealth, and opportunity are central issues on America’s political agenda. A society nervous about the economic future seems, on the surface, less concerned about the opportunity to build wealth by developing new products and services, new sources of raw materials, new markets, and new styles of organization.

Nevertheless, the rise of 3D printing and, indeed, the entire digital revolution indicate that entrepreneurship has not been choked off by a hostile culture and polity, the Wall Street Journal’s ongoing litany of laments notwithstanding. ^{Footnote 114} To the contrary, the adaptable entrepreneurs of 3D printing and all of the other digital innovations seem to be just as enthusiastic about change as were the early-nineteenth-century founders of cotton-textile mills and machinery firms and the inventors and investors who built the aluminum business in the early-twentieth century. In the United States, the incentives for entrepreneurship—an inherently risky undertaking in finance and industry—still apparently outweigh a cultural, media, and political environment increasingly focused on reducing risk in the global aftermath of the Great Recession of 2007–2009. ^{Footnote 115}

This is true in the European Union, too, where neither the Great Recession nor the recent problems with mass immigration have deterred 3D entrepreneurs. In a case of near-perfect historical symmetry, the United States has sparked a 3D movement in Europe two centuries after Britain provided America with the essential ideas it needed to start its first Industrial Revolution. In Italy, where a well-established and talented array of designers exists, 3D caught on quickly. Milan, the current style center of Europe, became for a time the leading 3D city in the world. The highly specialized manufacturing enterprises of northern Italy had been troubled for years by competition from China. The new 3D mode of production pumped new life into many of Italy’s small- and medium-sized businesses. Exports are increasing. Entrepreneurial sequences are beginning to multiply: in addition to producing the machines and the raw materials (plastic filaments, for instance) used in 3D production, Italian businesses are making products that range from furniture, to shoes, to eye glasses, to medical materials, and to automobile and airplane parts. ^{Footnote 116}

Other European Union members are quickly catching up with the leaders; as one might expect, Germany has made strides in machine tools, and both German and British companies have partnered with firms from other nations in efforts to advance the technology and find new applications for 3D production. ^{Footnote 117} In Britain, public–private alliances have been popular. Renishaw, a British precision-measuring firm, has developed a 3D business in products ranging from aerospace to medical care. ^{Footnote 118} If there is, indeed, going to be a 3D revolution in manufacturing, it will certainly have global dimensions.

Conclusion: So What?

By focusing on three industrial revolutions, we have stressed technological rather than institutional change, and emphasized endogenous rather than exogenous factors in shaping the entrepreneurial aspects of capitalism. ^{Footnote 119} Many of the major innovations since the late-eighteenth century have not been technological. Changes in the organization of firms (e.g., the unitary-form, the multidivisional-form, and, later, the network-form of business) encouraged innovation in many sectors of the industrial economies, as did the rise of management consulting since World War II. New sources of supply and of labor had similar effects. Nevertheless, from the perspective of the entrepreneurial multiplier, technological change has been the most productive of the long, highly varied sequences of innovation that we have examined.

These entrepreneurial sequences in America and Europe help us improve our ability to estimate the total impact on society of innovations such as those associated with early textile and textile machinery development, with the expansion of aluminum production, and in the recent past with the digital revolution and such innovations as 3D printing. The changes were revolutionary, in part, because they spread through the economy and fostered new opportunities, new capabilities, and new sequences of innovation long after the initial acts of entrepreneurship. They continued to promote growth and also to shape and reshape the society’s culture and polity. The resulting changes easily crossed national frontiers; transnational movements ultimately gave way to increasingly global patterns of interaction. The nation-state was still all-powerful in the military realm, but it could not contain the powerful force of entrepreneurial change. For economic and business historians, the multiplier seems to suggest that we should look beyond the firm and trace the sequences of innovation that will give a deeper historical understanding of how and why capitalism has evolved over the past three centuries. ^{Footnote 120} These sequences will also give us a better understanding of the economic, political, and cultural resilience of capitalism. The sequences remind us that the institutional setting influences the entrepreneur, but the influence works both ways: without the entrepreneur, there is a stage but not a play.

The entrepreneurial multiplier will force business and economic historians (as it has the authors of this article) to look again to social, urban, and cultural histories for a better understanding of the capitalist process. The entrepreneurial multiplier might also provide a new intellectual avenue between industrial and financial history and between history and the related behavioral sciences. Scholars in sociology, political science, management, and anthropology, as well as economics, are exploring to good effect the history of capitalism. An elaboration and discussion of the entrepreneurial multiplier will, we believe, facilitate further work in all of these disciplines and in business history.

While there are many varieties of capitalism and differing patterns of entrepreneurship, there are also some central aspects of the innovative process. ^{Footnote 121} It has, above all, promoted economic growth. “Crowding out” functions as a limiting factor, as does the destructive side of the creative destruction that normally accompanies innovation. The dual impact, however, of the classical multiplier and the entrepreneurial multiplier has normally, over the long term, yielded positive economic effects that distinguish capitalism from all of its predecessors and recent competitors. ^{Footnote 122} The adaptable entrepreneur and the resilient entrepreneurial culture have played, and continue to play, the lead role in that historical process.