¹ Landes, David S., The Wealth and Poverty of Nations (New York, 1999), 290–91;Google ScholarCameron, Rondo and Neal, Larry, A Concise Economic History of the World (Oxford, 2003, 4th ed.), 242–43Google Scholar.

² Beer, John Joseph, The Emergence of the German Dye Industry (Urbana, Ill., 1959), 73.Google Scholar

³ For example, see , Beer, The Emergence of the German Dye IndustryGoogle Scholar; Meyer-Thurow, Georg, “The Industrialization of Invention: A Case Study from the German Chemical Industry,” Isis 73 (1982): 363–81;Google ScholarPubMedMurmann, Johann Peter, Knowledge and Competitive Advantage (Cambridge, U.K., 2006)Google Scholar; Homburg, Ernst, “The Emergence of Research Laboratories in the Dyestuff Industry, 1870–1900,” British Journal for the History of Science 25 (1992): 91–111;Google ScholarReinhardt, Carsten, “Forschung in der chemischen Industrie: Die Entwicklung synthetischer Farbstoffe bei BASF und Hoechst,” PhD diss., Bergakademie Freiberg, 1997Google Scholar; Reinhardt, Carsten, “An Instrument of Corporate Strategy: The Central Research Laboratory at BASF, 1868–1890,” in The Chemical Industry: Industrial Growth, Pollution, and Professionalization, ed. Homburg, Ernst et al. (Dordrecht, 1998), 239–59Google Scholar.

⁴ Church, Roy and Tansey, E. M., Burroughs, Wellcome & Co.: Knowledge, Trust, Profit, and the Transformation of the British Pharmaceutical Industry (Lancaster, U.K., 2007), 168–69;Google ScholarHounshell, David A. and Smith, John Kenly, Science and Corporate Strategy: Du Pont R&D, 1902–1980 (Cambridge, U.K., 1988), 11Google Scholar; Swann, John P., Academic Scientists and the Pharmaceutical Industry (Baltimore, 1988), 14, 20–23.Google Scholar Corporate research laboratories emerged in other industries and in other countries at the turn of the century. For example, the leading American electrical-engineering firms General Electric and AT&T, as well as the chemical firm Eastman Kodak, started such ventures before World War I: see, e.g., Birr, Kendall, Pioneering in Industrial Research: The Story of the General Electric Research Laboratory (Washington, D.C., 1957)Google Scholar; and Reich, Leonard S., The Making of American Industrial Research: Science and Business at GE and Bell, 1876–1926 (Cambridge, U.K., 1985).Google Scholar Research units were also active in the large German electrical-engineering firms Siemens and AEG. However, those firms did not start their centralized research laboratories until 1920. See Erker, Paul, “Zur Geschichte der Industrieforschung in den europäischen und amerikanischen Elektrokonzernen, 1890–1913,” Zeitschrift für Unternehmensgeschichte 35 (1990): 73–94Google Scholar.

⁵ Weatherhall, Miles, In Search of a Cure: A History of Pharmaceutical Discovery (Oxford, 1990), 36.Google Scholar

⁶ Wimmer, Wolfgang, “Wir haben immer was Neues”: Gesundheitswesen und Innovation in der Pharma-Industrie in Deutschland, 1880–1935 (Berlin, 1994), 150–51;Google ScholarReinhardt, Carsten, “Vom Alizarinblau zum Thallin: Pharmazeutisch-chemische Forschung der BASF in den achtziger Jahren des 19. Jahrhunderts,” in Brückenschläge: 25 Jahre Lehrstuhl für Geschichte der exakten Wissenschaften und der Technik an der Technischen Universität Berlin, 1969–1994, ed. Schütt, Hans-Werner and Weiss, Burkard (Berlin, 1995): 253–76.Google Scholar BASF launched Thallin, Kalle & Co. brought out Antifebrin, and Bayer came out with Phenacetin.

⁷ Liebenau, Jonathan, Medical Science and Medical Industry: The Formation of the American Pharmaceutical Industry (Baltimore, 1987), 51CrossRefGoogle Scholar; Galambos, Louis and Sewell, Jane Eliot, Networks of Innovation: Vaccine Development at Merck, Sharp & Dohme, and Mulford, 1895–1995 (Cambridge, U.K., 1995), 16–17;Google Scholar, Church and , Tansey, Burroughs, Wellcome & Co., 170Google Scholar.

⁸ Moreover, the break-up of the price and marketing convention for red dyes in 1885, and the rising prices for inputs due to a changing coke-production technology, caused financial distress for the dyestuff producers, giving them a strong incentive to branch out into new markets. See Liebenau, Jonathan, “Ethical Business: The Formation of the Pharmaceutical Industry in Britain, Germany, and the United States before 1914,” Business History 30 (1988): 116–29CrossRefGoogle Scholar.

⁹ Wimmer, “Wir haben immer was Neues”; Wimmer, Wolfgang, “Innovation in the German Pharmaceutical Industry, 1880 to 1920,” in The Chemical Industry: Industrial Growth, Pollution, and Professionalization, ed. Homburg, Ernst et al. (Dordrecht, 1998), 281–291Google Scholar.

¹⁰ Wimmer, “Wir haben immer was Neues”; Kobrak, Christopher, National Cultures and International Competition: The Experience of Schering AG (Cambridge, U.K., 2002)Google Scholar.

¹¹ , Church and , Tansey, Burroughs, Wellcome & Co., 168–69;Google ScholarLiebenau, Jonathan, “Industrial R&D in Pharmaceutical Firms in the Early Twentieth Century,” Business History 26 (1984): 329–46, 337CrossRefGoogle ScholarPubMed.

¹² , Liebenau, Medical Science and Medical Industry, 41, 59–60.Google Scholar

¹³ Mowery, David C., “Firm Structure, Government Policy, and the Organization of Industrial Research: Great Britain and the United States, 1900–1950,” Business History Review 58 (Winter 1984): 504–31.CrossRefGoogle Scholar

¹⁴ Jahresbericht für das Betriebsjahr 1896–1897, Merck Record Office (henceforth MRO, F3/1b). The annual reports (Jahresberichte) are typewritten internal reports prepared by each department of the firm for the owner-managers.

¹⁵ Jahresbericht für das Betriebsjahr 1897–1898, MRO F3/2a.

¹⁶ Carl Emanuel Merck, Emanuel August Merck, and particularly Willy Merck published several articles in one of the leading academic journals, the Berichte der deutschen chemischen Gesellschaft (today the European Journal of Inorganic Chemistry), during the 1880s.

¹⁷ Bernschneider-Reiff, Sabine, “Was der Mensch thun kann...”: Die Geschichte von Merck–Das älteste pharmazeutische Unternehmen der Welt (Darmstadt, 2002), 64–65.Google Scholar American readers should note that Merck & Co., Whitehouse Station, U.S., was founded in 1891 as the U.S. subsidiary of the German firm E. Merck. After Merck's U.S. subsidiary was confiscated during World War I, Merck & Co. became an independent company. Today, the firms are not linked, but they share the same name. Merck & Co. has the right to use the name in the United States, but outside the United States, it is known as Merck Sharp & Dohme (MSD). Merck KGaA, in turn, has the right to use the name outside the United States and operates in the country as EMD (for E. Merck, Darmstadt). The early history of MSD is analyzed by Galambos and Sewell, Networks of Innovation.

¹⁸ Jahresberichte für die Betriebsjahre 1897–1898, 1900–1901, 1914; MRO F3/2a, MRO F3/5a, and MRO F3/18a.

¹⁹ Ungewitter, Claus, Die großen Chemie-Konzerne Deutschlands (Berlin, 1931)Google Scholar; Galambos and Sewell, Networks of Innovation, 25; , Church and , Tansey, Burroughs, Wellcome & Co., 91Google Scholar.

²⁰ Jahresbericht für das Betriebsjahr 1896–1897, MRO F3/1b; Jahresbericht für das Betriebsjahr 1902–1903, MRO F3/7c; Jahresbericht für das Betriebsjahr 1912, MRO F3/16d. Until 1906, Merck's business year ran from 1 July to 30 June. It was changed to the calendar year beginning in 1907.

²¹ Jahresbericht für das Betriebsjahr 1912, MRO F3/16d.

²² , Wimmer, “Wir haben immer was Neues,” 143.Google Scholar

²³ Ibid., 185.

²⁴ , Kobrak, National Cultures and International Competition, 364.Google Scholar

²⁵ , Galambos and , Sewell, Networks of Innovation, 25Google Scholar; , Church and , Tansey, Burroughs, Wellcome & Co., 231Google Scholar.

²⁶ , Reinhardt, Forschung in der chemischen Industrie, 286, 365–66;Google ScholarMarsch, Ulrich, Zwischen Wissenschaft und Wirtschaft: Industrieforschung in Deutschland und Großbritannien (Paderborn, 2000), 66Google Scholar.

²⁷ , Hounshell and , Smith, Science and Corporate Strategy, 100.Google Scholar

²⁸ Interessengemeinschaft: Verträge und Korrespondenz, MRO H5/43.

²⁹ , Hounshell and , Smith, Science and Corporate Strategy, 14.Google Scholar

³⁰ Interessengemeinschaft: Verträge und Korrespondenz, MRO H5/43.

³¹ There are my own calculations. Jahresbericht für das Betriebsjahr 1902–1903, MRO F3/7a; Jahresbericht für das Betriebsjahr 1903–1904, MRO F3/8a; Jahresbericht für das Betriebsjahr 1904–1905, MRO F3/9a.

³² Detailed figures about the research budget are not available for later years. However, the number of researchers in the central laboratory was more or less constant until World War I. Therefore, the expenditures for in-house research probably remained constant. Expenditures for external research, on the other hand, increased substantially. In 1912, for example, Merck spent about 300,000 marks to compensate outside inventors.

³³ Grilliches, Zvi, “Patent Statistics as Economic Indicators: A Survey,” Journal of Economic Literature 28 (1990): 1661–1707,Google Scholar reviews the usefulness of patents as an indicator for innovations. More specific for the German historical context are Grupp, Hariolf, Dominguez-Lacasa, Iciar, and Friedrich-Nishio, Monika, Das deutsche Innovationssystem seit der Reichsgründ ung (Heidelberg, 2002)CrossRefGoogle Scholar; and Metz, Rainer and Watteler, Oliver, “Historische Innovationsindikatoren: Ergebnisse einer Pilotstudie,” Historical Social Research 27 (2002): 4–129Google Scholar.

³⁴ See Seckelmann, Margrit, Industrialisierung, Internationalisierung und Patentrecht im Deutschen Reich, 1871–1914 (Frankfurt am Main, 2006),Google Scholar for a detailed account of the history of Germany's patent law. The number of patents granted in 1893–95 was 14 percent higher than the number of patents granted in 1890–92. Patents for the chemical and pharmaceutical industries (technology classes 12 and 22) increased by 87 percent.

³⁵ , Liebenau, Medical Science and Medical Industry, 35Google Scholar; Lee, Jeho, “Innovation and Strategic Divergence: An Empirical Study of the U.S. Pharmaceutical Industry from 1920 to 1960,” Management Science 49 (2003): 143–59CrossRefGoogle Scholar.

³⁶ Löw, Carl, Die chemische Fabrik E. Merck, Darmstadt: Ein Rückblick auf die Geschichte der Firma in Wort und Bild (Darmstadt, 1952), 47.Google Scholar

³⁷ The Imperial Patent Office allocated the patent classification according to the industry of use, not the industry of origin.

³⁸ Keeping a patent in force was expensive in the German empire. The owner of a patent had to pay an annual fee, which increased from 50 marks for the first year and another 50 marks for the second year to 100 marks for the third year, 150 marks for the fourth year, and so on. The fee for the fifteenth and final year was 700 marks. Thus, the cumulative fee for fifteen years of protection was 5,300 marks, about 6.5 times the annual per capita income in 1913.

³⁹ Merck also owned many foreign patents. In 1903, the firm held sixty-seven German and fifty-six foreign patents. Jahresbericht für das Betriebsjahr 1902–1903, MRO F3/7c.

⁴⁰ Streb, Jochen, Baten, Jörg, and Yin, Shuxi, “Technological and Geographical Knowledge Spillover in the German Empire, 1877–1918,” Economic History Review 59 (2006): 347–73.CrossRefGoogle Scholar

⁴¹ Carsten Burhop, “The Market for Patents in Imperial Germany,” paper presented at the 2008 meeting of the Economic History Association.

⁴² Lancet, 5 Mar. 1904, 539.

⁴³ Jahresbericht für das Betriebsjahr 1902–1903, MRO F3/7c.

⁴⁴ Letter from Merck to Fischer, 7 Feb. 1908. Interessengemeinschaft: Korrespondenz 1906–1908, MRO H5/15.

⁴⁵ Jahresbericht für das Betriebsjahr 1903–1904, MRO F3/8c.

⁴⁶ Jahresbericht für das Betriebsjahr 1905–1906, MRO F3/10c.

⁴⁷ Jahresbericht für das Betriebsjahr 1904–1905, MRO F3/9c.

⁴⁸ Jahresbericht für das Betriebsjahr 1896–1897, MRO F3–1b; Jahresbericht für das Betriebsjahr 1912, MRO F3/16a.

⁴⁹ , Wimmer, “Wir haben immer was Neues,” 185.Google Scholar

⁵⁰ Swann, Academic Scientists and the Pharmaceutical Industry.

⁵¹ Furman, Jeffrey L. and MacGarvie, Megan J., “Academic Science and the Birth of Industrial Research Laboratories in the U.S. Pharmaceutical Industry,” Journal of Economic Behavior and Organization 63 (2007): 756–76.CrossRefGoogle Scholar

⁵² The drug Peronial earned a profit of 26,014 marks until 1913. Hydrogen peroxide earned a profit of 21,447 marks.

⁵³ Jahresbericht für das Betriebsjahr 1897–1898, MRO F3/2c. Two of them, Emil Fischer and Richard Willstätter, received the Nobel Prize for chemistry in 1902 and 1915, respectively.

⁵⁴ , Hounshell and , Smith, Science and Corporate Strategy, 37–38;Google Scholar, Galambos and , Sewell, Networks of Innovation, 18Google Scholar.

⁵⁵ Chandler, Alfred D. Jr., in Shaping the Industrial Century: The Remarkable Story of the Evolution of the Modern Chemical and Pharmaceutical Industries (Cambridge, Mass., 2005), reviews the literature.CrossRefGoogle Scholar

⁵⁶ Mowery, David C., “The Relationship between Intrafirm and Contractual Forms of Industrial Research in American Manufacturing, 1900–1940,” Explorations in Economic History 20 (1983): 351–74.CrossRefGoogle Scholar

⁵⁷ Aghion, Philippe and Tirole, Jean, “The Management of Innovation,” Quarterly Journal of Economics, 109 (1994): 1185–209.CrossRefGoogle Scholar

⁵⁸ Swann, Academic Scientists and the Pharmaceutical Industry, ch. 2.

⁵⁹ Borscheid, Peter, Naturwissenschaften, Staat und Industrialisierung in Baden (1848–1914) (Stuttgart, 1976).Google Scholar

⁶⁰ Wetzel, Walter, Naturwissenschaften und chemische Industrie in Deutschland: Voraussetzungen und Mechanismen ihres Aufstiegs im 19. Jahrhundert (Stuttgart, 1991), 147–208.Google Scholar

⁶¹ Scientific research was conducted only by men at that time.

⁶² Verträge Prof. Dr. Martin Freund, MRO R5/23.

⁶³ Aghion and Tirole, “The Management of Innovation.”

⁶⁴ Similar product specific accounts were also kept by Bayer and Hoechst (Wimmer, “Wir haben immer was Neues,” 120, 185–86). At Merck, only one conflict regarding the accounts is documented for the pre–World War I period.

⁶⁵ This is documented in various letters of Freund, Merck, and the competing pharmaceutical firm Knoll. Merck-Knoll/Stypticin-Stypta/Prof. Freund, 1906–07, MRO F1/47.

⁶⁶ Letter from Merck to Freund, 20 Dec. 1906; Merck-Knoll/Stypticin-Stypta/Prof. Freund, 1906–07, MRO F1/47.

⁶⁷ Letter from Merck to Knoll, 12 Sept. 1907; Merck-Knoll/Stypticin-Stypta/Prof. Freund, 1906–07, MRO F1/47.

⁶⁸ Finally, Merck and Freund switched from profit-sharing to another form of variable compensation in 1912. Yet, the details of these negotiations are not documented in the files.

⁶⁹ Dozens of contracts are contained in Verträge mit Erfindern und Gelehrten A–K, MRO R 15/11; Verträge mit Erfindern und Gelehrten L–Z, MRO R 15/12; Anstellungsverträge und Erfinderverträge, MRO R1/42.

⁷⁰ Contract between Merck and Carl Böttinger, 12 Oct. 1898; Anstellungsverträge und Erfinderverträge, MRO R1/42; contract between Merck and A. Lindemann, 23 Apr. 1903; Anstellungsverträge und Erfinderverträge, MRO R1/42; contract between Merck and P.Römer, 6 May 1905; Anstellungsverträge und Erfinderverträge, MRO R1/42; contract between Merck and Georg Sobernheim, 10 Dec. 1901; Anstellungsverträge und Erfinderver-träge, MRO R1/42; contract between Merck and A. Ellinger, 10 Apr. 1912; Verträge mit Er-findern und Gelehrten A-K, MRO R 15/11.

⁷¹ See, e.g., Borscheid, Naturwissenschaft, Staat und Industrie in Baden, 206–7, for a case at BASF, and also Hoechst; Hounshell and Smith, Science and Corporate Strategy, 38; Mowery, David C., “Industrial Research and Firm Size, Survival, and Growth in American Manufacturing, 1921–1946: An Assessment,” Journal of Economic History 43 (1983): 953– 80, for Du PontCrossRefGoogle Scholar.

⁷² Jahresbericht für das Betriebsjahr 1897–1898, MRO F3/2a.

⁷³ , Liebenau, Medical Science and Medical Industry, 41–44.Google Scholar

⁷⁴ The following discussion is based on the review of activity of this department during the years 1888–1899. Jahresbericht für das Betriebsjahr 1898–1899, MRO F3/3a. The 1898 edition of Merck's Digest, for example, was published in four languages (German, English, French, and Russian) and distributed in 27,000 copies to customers and scientists worldwide.

⁷⁵ , Meyer-Thurow, “The Industrialization of Invention”; Liebenau, Medical Science and Medical Industry, 44.Google Scholar

⁷⁶ Report of the Lancet Special Commission on the relative strengths of diphtheria antitoxic serums, Lancet, 18 July 1896, 182–95.

⁷⁷ , Church and , Tansey, Burroughs, Wellcome & Co., 170–71, 207–10.Google Scholar

⁷⁸ Ehrlich published his research on the measurement of serum strengths only in 1897, one year after the Lancet report. Before that date, only Hoechst and Schering used Ehrlich's method, since they had long-term research contracts with him. See Weatherhall, In Search of a Cure, 55–58. Naturally, Merck was not willing to disclose its serum quality through a test in Ehrlich's laboratory.

⁷⁹ Jahresbericht für das Betriebsjahr 1896–1897, MRO F3/1b.

⁸⁰ Jahresbericht für das Betriebsjahr 1900–1901, MRO F3/5c.

⁸¹ Jahresbericht für das Betriebsjahr 1902–1903, MRO F3/7a, and Jahresbericht für das Betriebsjahr 1908, MRO F3/12c.

⁸² Jahresbericht für das Betriebsjahr 1896–1897, MRO F3/1b.

⁸³ Between 1882 and 1893, Ehrenberg published several papers in the Journal für praktische Chemie (Journal of Applied Chemistry) and worked in the early 1890s in the scientific laboratory of the Chemische Fabrik von H. Trommsdorf in Erfurt. Jahresbericht für das Betriebsjahr 1897–1898, MRO F3/2c.

⁸⁴ Jahresbericht für das Betriebsjahr 1899–1900, MRO F3/4a.

⁸⁵ Meyer-Thurow, “The Industrialization of Invention.”

⁸⁶ Anstellungsverträge und Erfinderverträge, MRO R 1/42. Contracts of Merck with: Dr. Erich Ruderson (1 June 1914; 3,600 marks base salary; Dipl. Ing. Edmund Carl Burchard (1 July 1911, 4,500 marks fixed salary, unspecified profit share for inventions); Dr. A. Pister (10 Aug. 1914, 3,960 marks fixed salary); Dr. Ludwig Wolter (1 Dec. 1914; 2,400 marks fixed salary).

⁸⁷ , Borscheid, Naturwissenschaft, Staat und Industrie in Baden, 237Google Scholar; Haber, Lutz F., The Chemical Industry during the Nineteenth Century (Oxford, 1958), 188Google Scholar.

⁸⁸ , Hounshell and , Smith, Science and Corporate Strategy, 38.Google Scholar

⁸⁹ , Galambos and , Sewell, Networks of Innovation, 13–14.Google Scholar

⁹⁰ , Church and , Tansey, Burroughs, Wellcome & Co., 175–76.Google Scholar

⁹¹ Williamson, Jeffrey G., “The Evolution of Global Labor Market since 1830: Background Evidence and Hypothesis,” Explorations in Economic History 32 (1995): 141–96, 180.CrossRefGoogle Scholar

⁹² Mowery, “Firm Structure, Government Policy, and the Organization of Industrial Research”; Donnelly, James F., “Industrial Recruitment of Chemistry Students from English Universities: A Revaluation of Its Early Importance,” British Journal for the History of Science 24 (1991): 3–20CrossRefGoogle Scholar.

⁹³ Jahresbericht für das Betriebsjahr 1898–1899, MRO F3/3c; Jahresbericht für das Betriebsjahr 1902–1903, MRO F3/7c.

⁹⁴ Jahresbericht für das Betriebsjahr 1901–1902, MRO F3/6c.

⁹⁵ Jahresbericht für das Betriebsjahr 1899–1900, MRO F3/4c.

⁹⁶ Ibid.

⁹⁷ Jahresbericht für das Betriebsjahr 1908, MRO F3/12c.

⁹⁸ Jahresbericht für das Betriebsjahr 1897–1898, MRO F3/2b.

⁹⁹ Jahresbericht für das Betriebsjahr 1900–1901, MRO F3/5a.

¹⁰⁰ Jahresbericht für das Betriebsjahr 1909, MRO F3/13d.