[Access article in PDF]
Against Whig History
It is never safe to forget the truth which really underlies historical research: the truth that all history perpetually requires to be corrected by more history.
By the end of the twentieth century, it had become clear that the grand synthesis laid out by Alfred D. Chandler, Jr., in The Visible Hand, Scale and Scope, and other writings was badly in need of revision.2 [End Page 376] It was in need of revision because the type of enterprise that Chandler took to be the acme of capitalist economic organization—the large, vertically integrated, horizontally diversified, managerially directed corporation—was clearly in retreat. This development cast into doubt not only the substantive content of Chandler's interpretation but also its methodological underpinnings.
In "Beyond Markets and Hierarchies," we undertook to supply an alternative synthesis that could account for the changes of the late twentieth century as well as for the rise a hundred years earlier of what, for the sake of brevity, we will call the Chandlerian enterprise.3 But our primary goal was to offer an interpretation that would not suffer from its predecessor's main methodological flaw—that is, it would not take the present to be the endpoint toward which history had been unfolding. Instead, we outlined an approach designed to avoid the analytical trap that Herbert Butterfield long ago derided as the "Whig interpretation" of history.
Around the same time as our essay appeared in print, Richard N. Langlois published his own synthesis of American business history, "The Vanishing Hand."4 Like ours, Langlois's article is an attempt to account for the rise and decline of the Chandlerian firm, and the two interpretations have much in common. According to Langlois, the main difference between his account and ours is that we rely too heavily on the comparative statics of Oliver Williamson's transaction-cost economics, whereas Langlois offers an evolutionary analysis of how firms resolve what he terms "dynamic transaction costs."5 Langlois, however, misses the evolutionary perspective at is at the heart of our approach. Instead, in our view, the most important difference is that his account, like Chandler's, is Whiggish. Where Chandler extrapolated from Edith Penrose's Theory of the Growth of the Firm a logic for the large managerial organizations that dominated the economy when he was writing, Langlois extracts from Adam Smith's Wealth of Nations a similarly sweeping explanation for a resurgence of market transactions in the late twentieth century. "In the end," Langlois tells us (and the emphasis is his), "there are markets."6 As he summarized his own argument in "The Vanishing Hand": [End Page 377]
Driven by increases in population and income and by the reduction of technological and legal barriers to trade, the Smithian process of the division of labor always tends to lead to finer specialization of function and increased coordination through markets. . . . But the components of that process—technology, organization and institutions—change at different rates. The managerial revolution Chandler chronicles was the result of such an imbalance, in this case between the coordination needs of high-throughput technologies and the abilities of contemporary markets and contemporary institutions to meet those needs. . . . But with further growth in the extent of the market and the evolution of institutions to support exchange, the central management of vertically integrated production stages is increasingly succumbing to the forces of specialization.7
In what follows, we explain why we think Langlois's interpretation is misguided. First, however, we restate briefly the theory that underpins our work in order to indicate how it differs from a static, transaction-cost approach and also to highlight its benefits for avoiding the trap of Whig history. We then turn to Langlois's analysis and the problems we see with his Smithian view of organizational change. Finally, we discuss how it is possible to maintain simultaneously both a backward- and a forward-looking perspective on history—that is, to...