The article by Alfred Chandler opens the topic, which has resonance and gives purpose for long discussion next to it. The question why some country’s economy growth is fast and others not, and how modern management techniques are related to it. It is arguable and interesting at the same time. Therefore, after first step was done and the opinion on the subject was formed, it can be supposed that next author’s task of making critical reviews, additions and contradictions were easier. Let us compare one of such following works by Albert Fishlow, whose opinion on monopoly and big size corporations is not so positive, with original paper by Chandler.
These two articles, make others look like adepts of different economic schools, they have different values and preferences on a very basic level. One of them finds centralization and monopolization causing effect of scale economy core for growth and development, when another sees in this situation violation of market economy main principles and underestimation of competition importance for growth in a market economy.
The core ideas from Chandler (as they pointed by Fishlow (p. 726) for next discussion) are next:
Industrial development is correlated with and caused by modern types of enterprises building;
Reasons for success of new enterprises at the end of XIX - beginning of XX centuries were product diversification, centralized marketing and distribution, strategic management development.
At first, Fishlow highly appreciates the Chandler’s work, but as soon as core values of the authors are different, he argues that by highly development of one idea Chandler misses some alternative points of view. In particular, Chandler in his article does not speak about specialization and comparative advantage, when spending so many pages speaking about the advantages, what scale economy gives. In addition, by Fishlow point of view, Chandler underestimates competition as a motor for economic growth, even more – puts it in opposition to economic growth (Ibid., p. 726). As well, Chandler does not point attention to side effects of management and ownership division. At the same time, he overestimates the effects of scale and underestimates problems driven by the complexity of big firms as well as the pluses of specialization of little firms.
When we come to the empirical basis of argumentation and its support, we see statistic data and examples from history of business in Chandler’s work (he uses for support statistic by Fortune – data about 200 largest firms in each country of research from 1917-1973 years) and only a couple of quotes and examples from the modern economy in Fishlow work. Analysis of statistical data and many cases, of course, look more convincing. However, one more sin, in which Fishlow blame Chandler is telling good stories instead of searching for scientific truth (Ibid., 727). Chandler has prejudice, initial point to defend and use statistic not to test hypothesis, but just prove his idea. Therefore, he took the only statistic information, which supports this idea; he analyzed examples of USA, Great Britain and Germany, which are countries with a long capitalistic history.
Fishlow gives as a counter-example developing countries and the effect, which the same monopolization has there. He points, that Chandler misses the role of government in modern enterprises in developing countries (Ibid., 728). So using of building managerial capitalism recipe for higher economic growth in developing countries is applicable only with some adjustments. The problem is that roots of managers in such close to state big enterprises are not from market competition, but corruption and personal relations with political elites (Ibid., 728). As a result, monopolies and oligopolies in developing countries have their lobbies – that leads to economic growth not all society, but few leaders, elite. That illustration is very natural and as convincing as a lot of statistics by Chandler, but does not give space for manipulation as figures do.
Actually making comparison of that works by such criteria - helpfulness in understanding historical questions - is irrelevant. Looks like Fishlow has not even had it as a point – to describe the historical emergence of teams – when he is much more concentrated on questions of economic growth and role in that growth of big enterprises with managers and owner division. Therefore, we can see that discussion around Chandler’s article goes with time far from initial historical questions and new lines of arguing starts as new economic conditions and challenges.
Both articles were actual at their time and field of research; both are thoughtful and well developed. What is important, the discussion keeps going and new points more or less related to initial Chandler’s paper emerges, inspired by his thoughts. This means that the area of knowledge is developing.
Chandler, Alfred D., Jr. "The Emergence of Managerial Capitalism."Periodicals Archive Online, 1984.
Fishlow, Albert. “Developing Countries and the Modern Firm”. Review Colloquium, 726-729.