Chapter 4: Entrepreneurship and the Industrial Revolution: A Re-appraisal
4.1 INTRODUCTION The previous chapter explained entrepreneurship as a creative response to the problems generated by information costs. This chapter applies the insights of the theory of entrepreneurship to an important epoch in the making of modern civilization – the Industrial Revolution of the late eighteenth and early nineteenth century. Many people think of entrepreneurs as charismatic individualists – adventurous risk-takers, imbued with the spirit of competition. This stereotype of the entrepreneur is only a half-truth, however. It is often at variance with the reality of entrepreneurship, particularly where large ﬁrms are concerned. The theory of information costs suggests that entrepreneurs have as much to gain from co-operation as they have from competition. Entrepreneurs need to synthesize information from a wide range of sources in order to minimize the risk of making mistaken decisions. Because an entrepreneur cannot be everywhere at once, this information must be obtained from secondary sources, and in particular through social contacts with other people. The experience of the Industrial Revolution in the UK conﬁrms this view. Although competition in many industries was intense, ‘networking’ between entrepreneurs was important as well. Networking underpinned the formation of partnerships, the ﬂotation of joint stock companies, and the co-ordination of investments – particularly in infrastructure and heavy industries. In this respect, the theory of information costs is a much better guide to historical interpretation than the conventional stereotype of the entrepreneur. 4.2 FUNDAMENTAL QUESTIONS RAISED BY THE INDUSTRIAL REVOLUTION The literature on the Industrial Revolution is enormous (for reviews see Mokyr,...
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