Key influences: The complexity of the machinery industries made the managers most influential; bankers and owners did rarely have much say in the strategy of the companies, except in financial difficulties.
Lessons from the American experience: The overriding importance of the “three-pronged investment” (production, distribution and organizational capabilities) stressed again.
Managerial capitalism (topic of Chandler’s The Visible Hand) refers to “a new type of capitalism–one in which the decisions about current operations, employment, output, and the allocation of resources for future operations were maid by salaried managers who were not owners of the enterprise”.
Scale, Scope and Organizational Capabilities (General theory of why and how industrial enterprises began and evolved).
The industrial enterprises grew by adding new units – different in terms of geography, economic functions or products.
These units were added because they provided In production, increased output in the old, labor-intensive industries came mainly by an increase in size (adding more machines and people).
In the new, capital-intensive industries increase in output came as a dramatic reduction in capital/labor ratios, due to new machines and processes.
Thus, economies of scale were much more important in capital-intensive industries, whereas in the labor-intensive one the large firm did not have significant advantages over the small ones.
One reason for this was the increasing “product-specificity”; as products became more complex, it was not cost-efficient to have a wholesaler handle the difficult transaction processes.
Another reason was competition; in the fierce battle for market share in an oligopolistic marketplace an intermediary who made his profit from handling products of more than one manufacturer became redundant.