Shaping the Industrial Century: The Remarkable Story of the Evolution of the Modern Chemical and Pharmaceutical Industries (review)

This book is a companion to Alfred Chandler's previous book, Inventing the Electronic Century, and provides a broad history of the chemical and pharmaceutical industries roughly from the end of the nineteenth century to the end of the twentieth century. The history of the chemical and pharmaceutical industries is remarkable because they are old industries, emerging after 1880, and because a small number of companies quickly dominated them and have continued to do so.

Chandler approaches chemical and pharmaceutical companies from the perspective of their 'learning bases' (their knowledge, resources, competencies, and capabilities) and argues that companies follow distinct 'paths of learning.' First movers and their quick followers—'core companies' in these high-tech industries—created their leaning base first and reaped the profits in terms of money and knowledge; they channeled these profits into developing a next generation of products. In this way, first movers created barriers to entry. Over the course of the twentieth century, these companies have let their 'strategic boundaries' be determined by shifting their learning base; the lines of business they were active in followed from the learning base. Core companies that took this route were successful companies. A final ingredient in the formula for success, the 'virtuous strategy,' is to abstain from unrelated diversification.

Besides barriers to entry and strategic boundaries, the third theme of this book is 'limits to growth.' Around 1970, chemical science and engineering no longer provided many opportunities to commercialize new products; at the same time, biology and related disciplines did. Chemical companies needed to respond, and did so by moving into specialties, or limited themselves to introducing improved products on the basis of their existing learning bases. Pharmaceutical companies needed to acquire new capabilities to keep commercializing new products but could profit enormously from these developments in science. According to Chandler, the shift around 1970 shows that the science base of an industry can die out to the point that the chemical industry no longer is a high-tech industry. It is the second reason why the history of chemical and pharmaceutical industries is remarkable.

Chandler provides a coherent history of the chemical and pharmaceutical industries around three themes. He maintains that these industries are science based and that science provides the crucial input to the growth of companies in these industries. His history of the chemical and pharmaceutical industries is focused on stability but at the same time shows change. Although the same limited set of companies has dominated these two industries over the course of the twentieth century, these companies, and particularly the chemical ones, have transformed themselves and their industries radically and repeatedly.

Chandler structures the book around American companies. He starts with chapters on American core companies and then analyses American and European competitors. However, as Chandler acknowledges, German and Swiss companies created the science-based chemical industry at the end of the nineteenth century, but readers have to wait until page 115 until those companies are analyzed in detail.

There is a problem of emphasis here. American industry gets too much weight in the book, particularly in the period before 1940, compared with the weight it leveraged in world markets and in innovation (Chandler's own measures). Nor is it clear why all these American companies should interest us in such detail; Chandler's main thesis is clear but is often only repeated in yet another case study.

A closer look at European industry would also have reinforced the analytical framework Chandler proposes. For instance, he speaks of a 'polymer/petrochemical revolution' driven by American companies. However, Chandler does not take very seriously work in the field of polymers and fibers in Europe before the Second World War. The switch from coal-based to petroleum-based feedstock was a major one, but Chandler does not show that...