Industry and Firm Dynamics in Early Twentieth-Century America.

Abstract

This dissertation explores industry and firm dynamics in early twentieth-century America. Using newly digitized micro data and employing standard analytical techniques, I investigate the determinants of establishment entry, exit, continuation and growth, and their impact on employment. Relatively little research in economic history has investigated plant-level data to study business dynamics in the early twentieth century, particularly the Great Depression. This dissertation narrows the gap by showing how firms and establishments grew and created jobs during this period. All three chapters investigate new or improved establishment-level data. The second chapter tests whether the Great Depression was cleansing in the motor vehicle industry. Analyzing the establishment-data from the Census of Manufactures, I find that the Depression was not cleansing in the passenger car market, the most important segment. Establishment size rather than productivity before the Great Depression predicts the survival of establishments. I draw further implications by breaking the sample into single-plant and multi-plant firms. The third chapter examines employment dynamics from the job perspective. Extending the scope to a large and diverse set of manufacturing industries, I confirm the finding of the second chapter that the Great Depression was not cleansing. This chapter also examines the quality of jobs destroyed. I find that the employment change rates were high at low-paying establishments both in downturn and recovery. The Great Depression was not cleansing also in the job aspect. In the fourth chapter, I use the frames of earlier chapters to analyze industry evolution over the long term. Taking the rise of the North Carolina cotton textile industry as the context, I examine how firm structure affects mill survival and productivity. I find that marketing and distribution was a powerful factor of mill productivity. The multi-mill structure of several leading business groups was likely to be an outcome of investment constraints that existed among mills with many small owners. However, new mills of these groups benefited from the parent firm’s marketing and distribution assets. Old firms could maintain their market leadership thanks to better management, and it brings out the indigenous nature of Southern textile industry’s growth.