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Small Business in America: A Historiographic Survey

  • Mansel G. Blackford (a1)

Abstract

Small businesses have held a paradoxical position in U.S. history: their particular forms and structures have received little scholarly attention compared to that devoted to big business, yet they have always been a significant part—social and cultural, as well as economic and political—of American life. This essay discusses the changing views on the role of small-scale enterprise in the United States, outlines the current state of historical research, and suggests profitable areas for future study.

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1 de Tocqueville, Alexis, Democracy in America, ed. Bradley, Phillips (New York, 1945 [1835]), 167. I am indebted to George David Smith for this quotation; see his From Monopoly to Competition: The Transformation of Alcoa, 1888–1986 (New York, 1988), 44.

2 United States, “The State of Small Business: A Report of the President” (Washington, D.C., 1988), vii and xi.

3 Hidy, Ralph, “Business History: Present Status and Future Needs,” Business History Review 44 (Winter 1970): 494.

4 United States, Small Business Administration (SBA), Annual Report on Small Business and Competition, 1988 (Washington, D.C., 1988), 19.

5 Zeigler, Harmon, The Politics of Small Business (Washington, D.C., 1961), 116.

6 Bunzel, John, The American Small Businessman (New York, 1962), 30.

7 SBA, Annual Report, 1988, 19.

8 Vatter, Harold G., Small Enterprise and Oligopoly: A Study of the Butter, Flour, Automobile, and Glass Container Industries (Corvallis, Ore., 1955), 109–10.

9 Robertson, Ross, “The Small Business Ethic in America,” in The Vital Majority:, Small Business in the American Economy, ed. Carson, Deane (Washington, D.C., 1973), 29.

10 Blackford, Mansel G., Pioneering a Modern Small Business: Wakefield Seafoods and the Alaskan Frontier (Greenwich, Conn., 1979), 20.

11 Small businesses are, however, becoming more involved in foreign markets in the 1990s than in times past. See: “The Little Guys Are Making It Big Overseas,” Business Week, 27 Feb. 1989, 94–96.

12 As a part of this investigation, historians need to explore further the variety of factors that in different eras have conditioned the formation and success or failure of businesses of varied scales. For early works on this topic see: Hutchinson, Ruth G., Hutchinson, Arthur R., and Newcomer, Mabel, “A Study in Business Mortality: The Life of Business Enterprises in Poughkeepsie, New York,” American Economic Review 28 (Sept. 1938): 497514; and Newcomer, , “The Little Businessman: A Study of Business Proprietors in Poughkeepsie, New York,” Business History Review 35 (Winter 1961): 477531. For a recent study, see Dunne, Timothy, “The Measurement and Analysis of Firm Entry and Exit in the United States Manufacturing Sector, 1963–1982” (Ph.D. diss., Pennsylvania State University, 1987).

13 Chandler, Alfred D. Jr., The Visible Hand: The Managerial Revolution in American Business (Cambridge, Mass., 1977), presents a masterly survey of the evolution of America's business system.

14 On the continuing significance of small firms in manufacturing, see Vatter, Harold G., “The Position of Small Business in the Structure of American Manufacturing, 1870–1970,” in Small Business in American Life, ed. Bruchey, Stuart (New York, 1980), 142–68.

15 On changes in farming in twentieth-century America, see: Shover, John L., First Majority, Last Minority: The Transformation of Rural Life in America (De Kalb, Ill., 1976), and Staten, Jay, The Embattled Farmer (Golden, Colo., 1987).

16 Kerr, K. Austin, “Small Business in the United States During the Twentieth Century,” unpublished paper presented at a conference on “Comparative Enterprise Management: The Lessons of Business History,” in Budapest, 13–15 June 1989, p. 2.

17 Brock, William A. and Evans, David S., The Economics of Small Business: Their Role and Regulation in the U.S. Economy (New York, 1987), 15. Brock and Evans defined small businesses as those with fewer than five hundred employees or less than $5 million in annual receipts.

18 Bunzel, The American Small Businessman, 59.

19 Brock, William and Evans, David S., “Small Business Economics,” Small Business Economics 1 (1989): 7.

20 SBA, Annual Report, 1988, xv–xvi, 19-20, 3233. The SBA defined small businesses as those with fewer than five hundred employees.

21 United States, Small Business Administration, Office of Advocacy, Small Business in the American Economy (Washington, D.C., 1988), 41.

22 Ibid., v.

23 Storey, D. J. and Johnson, S., Job Generation and Labour Market Change (London, 1987), 125. See also: Brock and Evans, “Small Business Economics,” 9–10, Carlsson, Bo, “The Evolution of Manufacturing Technology and Its Impact on Industrial Structure: An International Study,” Small Business Economics 1 (1989): 2137; and Felix R. Fitzroy, “Firm Size, Efficiency, and Employment: A Review Article,” Ibid.: 75–80.

24 As quoted in Blackford, Mansel and Kerr, K. Austin, Business Enterprise in American History (Boston, Mass., 1986), 1.

25 Seen by the author in Columbus, Ohio, 11 July 1989.

26 Rowland Berthoff, “Independence and Enterprise: Small Business in the American Dream,” in Bruchey, Small Business in American Life, 29.

27 Bunzel, The American Small Businessman, 13.

28 McCraw, Thomas K., Prophets of Regulation: Charles Francis Adams, Louis D. Brandeis, James M. Landis, and Alfred E. Kahn (Cambridge, Mass., 1984), chap. 3.

29 Much has been written on the chain store fight. See especially: Horowitz, David, “The Crusade Against Chain Stores: Portland's Independent Merchants, 1928–1935,” Oregon Historical Quarterly 89 (Winter 1988): 341–68; and Ryant, Carl, “The South and the Movement Against Chain Stores,” Journal of Southern History 39 (May 1973): 207–22. For an early contemporary account, see Farrington, Frank, Meeting Chain Store Competition (Chicago, Ill., 1922). For an introduction to the politics involved in the Robinson-Patman Act, see Posner, Richard, The Robinson-Patman Act: Federal Regulation of Price Differences (Washington, D.C., 1976).

30 See, for instance: Heath, Jim, “American War Mobilization and the Use of Small Manufacturers, 1939–1943,” Business History Review 46 (Autumn 1972): 295319; Otto Reichardt, “Industrial Concentration in World War II: The Case of the Aircraft Industry,” Ibid. 22 (Winter 1975): 129–34; and Vatter, , The U.S. Economy in World War II (New York, 1985), chap. 3. But, for a different perspective, see Rothwell, Roy and Zegveld, Walter, Industrial Innovation and Public Policy: Preparing for the 1980s and the 1990s (London, 1981), especially chap. 10.

31 Blackford, Mansel, “Small Business in America: Two Case Studies,” in Business and Economic History, ed. Uselding, Paul (Urbana, Ill., 1979), examines some of the difficulties encountered in doing research on small businesses.

32 Atherton, Lewis, “Itinerant Merchandising in the Antebellum South,” Bulletin of the Business Historical Society 19 (1945): 3559; The Pioneer Merchant in Mid-America (Columbia, Mo., 1939); and The Southern Country Store, 1800–1860 (Baton Rouge, La., 1949).

33 Clark, Thomas D., Pills, Petticoats, and Plows: The Southern Store (Norman, Okla., 1944); Jones, Fred Mitchell, “Middlemen in the Domestic Trade of the United States,” Illinois Studies in the Social Sciences 21 (1937): 181; and Jones, , “Retail Stores in the United States, 1800–1860,” Journal of Marketing 2 (Oct. 1936): 134–42.

34 Carson, Gerald, The Old Country Store (New York, 1954).

35 Taber, Martha, A History of the Cutlery Industry in the Connecticut Valley (Northhampton, Mass., 1955).

36 Marburg, Theodore, Small Business in Brass Manufacturing: The Smith & Griggs Co. of Waterbury (New York, 1956).

37 Soltow, James, “Origins of Small Business: Metal Fabricators and Machinery Makers in New England, 1890–1957,” Transactions of the American Philosophical Society 55 (Dec. 1965): 158.

38 Bruchey, Small Business in American Life. See also Carosso, Vincent and Bruchey, , eds., The Survival of Small Business (New York, 1979), which reprints several primary and secondary sources on the history of small business.

39 Blackford, Mansel, A Portrait Cast in Steel: Buckeye International and Columbus, Ohio, 1881–1980 (Westport, Conn., 1982); and Pioneering a Modern Small Business.

40 Geelhoed, E. Bruce, “Business and the American Family: A Local View,” Indiana Social Studies Quarterly 33 (Autumn 1980): 5867; see also: Geelhoed, , Bringing Wall Street to Main Street: The Story of K. J. Brown & Company, Inc., 1931–81 (Muncie, Ind., 1981). On the relationship between family business and small business in the 1980s, see Bork, David, Family Business, Risky Business (New York, 1986).

41 Fraser, Steven, “Combined and Uneven Development in the Men's Clothing Industry,” Business History Review 57 (Winter 1983): 522–47; Loveday, Amos Jr., The Rise and Decline of the American Cut Nail Industry: A Study of the Interrelationships of Technology, Business Organization, and Management Techniques (Westport, Conn., 1983); and Santos, Michael, “Laboring on the Periphery: Managers and Workers at the A. M. Byers Company, 1900–1956,” Business History Review 61 (Spring 1987): 113–33.

42 Ingham, John N., Making Iron and Steel: Independent Mills in Pittsburgh, 1820–1920 (Columbus, Ohio, 1991); Scranton, Philip, Figured Tapestry: Production, Markets, and Power in Philadelphia Textiles, 1885–1941 (New York, 1989); and Scranton, , Proprietary Capitalism: The Textile Manufacture at Philadelphia, 1800–1885 (New York, 1983).

43 Dicke, Thomas, “Franchising in the American Economy, 1840–1980” (Ph.D. diss., Ohio State University, 1988); this study is a forthcoming publication with the University of North Carolina Press. On the development of franchising see also Luxenberg, Stan, Roadside Empires: How the Chains Franchised America (New York, 1985), a journalistic account; and Marx, Thomas G., “The Development of the Franchise Distribution System in the U.S. Automobile Industry,” Business History Review 59 (Autumn 1985): 465–74, a scholarly work.

44 Tedlow, Richard S., New and Improved: The Story of Mass Marketing in America (New York, 1990), chap. 4.

45 Mayer, Kurt, “Small Business as a Social Institution,” Social Research 14 (March 1947): 349. The question of the socio-economic backgrounds of small business people and their social mobility has long attracted the attention of scholars; see: Anderson, D. and Davidson, P., Occupational Mobility in an American Community (Stanford, Calif., 1937); and Lewis, G. F., “A Comparison of Some Aspects of the Backgrounds and Careers of Small Businessmen and American Business Leaders,” American Journal of Sociology 65 (Jan. 1960): 348–55.

46 Palamountain, Joseph Jr., The Politics of Distribution (Cambridge, Mass., 1955), 256, 262.

47 Phillips, Joseph, Little Business in the American Economy (Urbana, Ill., 1958), 57, 111.

48 Bunzel, The American Small Businessman; and Zeigler, The Politics of Small Business.

49 Hamilton, Richard, Restraining Myths: Critical Studies of U.S. Social Structure and Politics (New York, 1975), 254.

50 Vatter, Small Enterprise and Oligopoly, 5.

51 Averitt, Robert, The Dual Economy (New York, 1971); Bowring, Joseph, Competition in the Dual Economy (Princeton, N.J., 1986); especially chaps. 2 and 3; and Galbraith, John Kenneth, The Rise of the New Industrial State (Boston, Mass., 1966).

52 Atack, Jeremy, Estimations of Economies of Scale in Nineteenth-Century United States Manufacturing (New York, 1985); Firm Size and Industrial Structure in the United States During the Nineteenth Century,” Journal of Economic History 46 (June 1986): 463–75; and Industrial Structure and the Emergence of the Modern Industrial Corporation,” Explorations in Economic History 22 (Jan. 1985): 2952. But, see also James, John A., “Structural Change in American Manufacturing, 1850–1890,” Journal of Economic History 43 (June 1983): 433–60; and O'Brien, Anthony Patrick, “Factory Size, Economies of Scale, and the Great Merger Wave of 1898–1902,” Journal of Economic History 48 (Sept. 1988): 639–49.

53 Piore, Michael J. and Sabel, Charles F., The Second Industrial Divide: Possibilities for Prosperity (New York, 1984), 17. See also Sabel, and Zeitlin, Jonathan, “Historical Alternative to Mass Production: Politics, Markets, and Technology in Nineteenth Century Industrialization,” Past and Present 108 (Aug. 1985): 133–76. This article, which deals mainly with Europe, argues that small industrial firms were able to compete with their larger counterparts until political decisions made in the twentieth century gave an edge to big businesses. For an examination of the continuing importance of small firms as subcontractors see Berger, Suzanne and Piore, , Dualism and Discontinuity in Industrial Societies (New York, 1980).

54 Scranton, Figured Tapestry, 3, 6.

55 See, for instance, Brock and Evans, The Economics of Small Business, 178–82; and Judd, Richard J., Greenwood, William T., and Becker, Fred W., Small Business in a Regulated Economy: Issues and Policy Implications (New York, 1988), a collection of essays written mainly by economists and business school faculty.

56 See, for example Soloman, Steven, Small Business USA: The Role of Small Companies in Sparking America's Economic Transformation (New York, 1986).

57 Gumpert, David E., ed., Growing Concerns: Building and Managing Smaller Businesses (New York, 1984), 3, 11.

58 On how scholars have pictured entrepreneurs and entrepreneurship, see Hebert, Robert F. and Link, Albert N., The Entrepreneur: Mainstream Views & Radical Critiques (Westport, Conn., 1988). On entrepreneurship and small business, see Adnor, James, “The Spirit of Entrepreneurship,” Journal of Small Business Management 26 (Jan. 1988): 14. Historians have also looked at these topics; see, for example, Livesay, Harold, “Entrepreneurial Persistence Through the Bureaucratic Age,” Business History Review 51 (Winter 1977): 415–43.

59 See, for example, Kirchhoff, Bruce et al. , eds., Frontiers of Entrepreneurship Research (Wellesley, Mass., 1988).

60 Birch, David, Job Creation in America: How Our Smallest Companies Put the Most People to Work (New York, 1987). Two business school faculty members clearly recognizing that not all, or even most, small businesses are entrepreneurial in nature (that is, interested in growth) are Donald Sexton and Nancy Bowman-Upton. Writing in 1987, they observed that “High growth entrepreneurial firms and small businesses are not the same,” and they concluded that “Government programs designed to assist small businesses are not addressing the issues and needs of growth oriented firms.” See Sexton and Bowman-Upton, “A Growth Model of New Venture Development,” unpublished paper as submitted to IEEE Transactions, 1987, p. 1.

61 Birch, Job Creation in America, 9.

62 Wall Street Journal, 21 Nov. 1988; see also Ibid., 8 Nov. 1988.

63 Storey and Johnson, Job Generation and Labour Market Change, 66, 119.

64 Ibid., 3. For a critique of Storey and Johnson, see Fitzroy, “Firm Size, Efficiency and Employment.”

65 Zoltan J. Acs, “Flexible Specialization Technologies, Innovation, and Small Business,” in Judd, Greenwood, and Becker, Small Business in a Regulated Economy, 41–50; and Carlsson, “The Evolution of Manufacturing Technology.” Storper, Michael and Christopherson, Susan, “Flexible Specialization and Regional Industrial Agglomerations: The Case of the U.S. Motion Picture Company,” Annals of the Association of American Geographers 77 (March 1987): 104–17, shows that the many independent firms now making up the motion picture industry have adopted the strategy of locating near each other as a substitute for vertical integration, in this way minimizing their external transaction costs. This trend toward regional agglomeration appears to be spreading. For instance, Japanese automobile companies manufacturing cars in the United States have imported Japanese production methods, including a heavy reliance on subcontractors usually located near their plants. In a case that one of my students, Masami Mitsui, studied, the assembly line of Honda's main factory in Marysville, Ohio, was even connected directly by computer link-up to the assembly line of one of its prime subcontractors located a mile away, thereby guaranteeing a very fast response to Honda's needs. As American companies adopt some of Japan's production methods, especially just-in-time inventory management, such arrangements may become increasingly common.

66 For an introduction to the development of America's service industries, see Riddle, Dorothy I., Service-Led Growth: The Role of the Service Sector in World Development (New York, 1986).

67 Kerr, “Small Business,” 1.

68 Hounshell, David and Smith, John Kenly Jr., Science and Corporate Strategy: Du Pont R&D, 1902–1980 (New York, 1988); and Reich, Leonard S., The Making of American Industrial Research: Science and Business at GE and Bell, 1876–1926 (New York, 1985).

69 Acs and Audretsch, David B., “Innovation, Market Structure, and Firm Size,” Review of Economics and Statistics 69 (Nov. 1987): 567; see also Acs, and Audretsch, , “Innovation in Large and Small Firms: An Empirical Analysis,” American Economic Review 78 (Sept. 1988): 678–90.

70 Mowery, David C., “Industrial Research and Firm Size, Survival, and Growth in American Manufacturing, 1921–1946: An Assessment,” Journal of Economic History 48 (Dec. 1983): 953–80. Mowery does conclude, however, that engaging in industrial research did increase a firm's chance for survival and growth. Mowery counts as “small” any company not among the largest two hundred manufacturing businesses in the United States.

71 Soltow, , “Small City Industrialists in the Age of Organization: A Case Study of the Manufacturers' Association of Montgomery County, Pennsylvania, 1908–1958,” Business History Review 33 (Summer 1958): 178–89, is one of the few studies on this topic.

72 Grape, Eugene F., “Retailer-Owned Wholesaling in the Hardware Trade” (Ph.D. diss., Ohio State University, 1966); and Kantowicz, Edward, John Cotter: 70 Years of Hardware (Chicago, Ill., 1986).

73 For a solid introduction to these matters, see Hawley, Ellis W., The New Deal and the Problem of Monopoly (Princeton, N.J., 1966).

74 See, for example, “What Do Women Want? A Business They Can Call Their Own,” Business Week, 22 Dec. 1986; and “Why Women Aren't Getting to the Top,” Fortune, 16 April 1984.

75 Although winning some places in the management of small businesses in the 1970s, blacks were, nonetheless, underrepresented as workers in small businesses as compared to big businesses. Women, in contrast, constituted a larger proportion of the work force in small as opposed to large firms. See Storey and Johnson, Job Generation and Labour Market Change, 160.

76 Cummings, Scott, ed., Self-Help in Urban America: Patterns of Minority Economic Development (Port Washington, N.Y., 1980); Light, Ivan H., Ethnic Enterprise in America: Business and Welfare Among Chinese, Japanese, and Blacks (Berkeley, Calif., 1972); Light, and Bonacich, Edna, Immigrant Entrepreneurs: Koreans in Los Angeles, 1965–1982 (Berkeley, Calif., 1988). There is, as well, a growing literature on the history of blacks in American business. For introductions to this topic, see Bailey, Ronald W., ed., Black Business Enterprise: Historical and Contemporary Perspectives (New York, 1971); Harmon, John Henry, “The Negro as a Local Businessman,” Journal of Negro History 14 (April 1929): 116–55; Harris, Abram L., The Negro as Capitalist: A Study of Banking and Business Among American Negroes (New York, 1956); Henderson, Alexa Benson, “Herman E. Perry and Black Enterprise in Atlanta, 1908-1925,” Business History Review 61 (Summer 1987): 216–42; Joyce, Donald, Gatekeepers of Culture: Black-Owned Book Publishing in the United States, 1817–1981 (Westport, Conn., 1983); Schweninger, Loren, “Prosperous Blacks in the South, 1790–1880,” American Historical Review 95 (Feb. 1990): 3156; Walker, Juliet E. K., “Racism, Slavery, and Free Enterprise: Black Entrepreneurship in the United States before the Civil War,” Business History Review 60 (Autumn 1986): 343–82; Weare, Walter, Black Business in the New South: A Social History of the North Carolina Mutual Life Insurance Company (Urbana, Ill., 1973); and Weems, Robert Jr., “The History of the Chicago Metropolitan Mutual Assurance Company: An Examination of Business as a Black Community Institution” (Ph.D. diss., University of Wisconsin, Madison, 1987).

77 Chandler, , Scale and Scope: The Dynamics of Industrial Capitalism (Cambridge, Mass., 1990).

78 Several scholars have compared individual aspects of small business development across national boundaries, but no comprehensive historical account exists. See, for example, Oakley, Ray, Rothwell, Roy, and Cooper, Sarah, Management of Innovation in High Technology Small Firms (New York, 1988); Storey, , ed., The Small Firm: An International Survey (London, 1983); and Storey and Johnson, Job Generation and Labour Market Change.

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Small Business in America: A Historiographic Survey

  • Mansel G. Blackford (a1)

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