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7/29/2019 Collective Invention as the engine of Great Britain's economic growth during the First Industrial Revolution
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Università Ca' Foscari di Venezia
Course: Global History, A.Y. 2011/2012, Term 1
Collective invention as the engine of Great Britain’s economic growth during the
First Industrial Revolution
Santagiustina Carlo R. M. A.
ABSTRACT
This paper deals with the clusters of innovations (CoIs) and micro improvements (MI) that
first took place in Great Britain (GB) between the 18th and the 19th century, as core
prerequisites and determinant factors for the emergence of the 1st Industrial Revolution
(IR). Economic progress during the IR in Great Britain (GB), is the fruit of such a wide andintricate web of causes, that to stand under the flag of only one of them would certainly be a
misleading interpretative path, especially given our purpose of building a logically coherent
and cohesive overview of the links between the major economic transformations that took
place during the IR in GB. The reading key of this paper is based on the notion of collective
invention, as a post-malthusian socio-economical process of network-generated clusters of
innovations that strongly characterizes economic growth during the 1st IR. As we will see, in
the British society, collective invention was based on non-institutionalized and thus non-
formalized diffusion, contagion and adaptation mechanisms for technical and
technological innovations, amongst industrial sectors in a weekly-connected industrial
social community, mostly composed of manual workers, inventors and entrepreneurs thatwere not scientists. We acknowledge that this representation of the IR, based on
innovation/imitation clusters, will probably not be shared by everyone. Moreover, if
analyzing the IR from a micro-economic perspective, many of our arguments and reasoning
would probably lose much of their relevance, which emerges only when adopting an
organicistic (systemistic) approach, this approach to economic development wishes to be the
specificity of this paper, and will thus also be its limit.
Keywords: Technology, progress, clusters, innovation, growth, industrial revolution, welfare,
knowledge diffusion, productivity, mechanization, applied science, networks, invention, investment,
R&D;
INTRODUCTION
At all times in History economic development has drawn its major impetus from non-economic
happenings and transformations within society. However, “change, even when socially beneficial, is
resisted by social groups that stand to lose economic rents or political power. Consequently, the
process change involves significant conflict between different groups” (Acemoglu D. et al., 2005).
Between the Renaissance and the Enlightenment Europe lived a climate of cultural re-evolution.
Through collective questioning and uprising, people progressively replaced most of the ideological
ballast used to protect old privileges and hereditary positions of exploitation, that were previouslypassed off as tradition, culture or religious dogmas. Pre-industrial dominant aristocratic class had
bound the majority of people to poverty and ignorance, and hampered economic growth by
discouraging or restraining middle and lower classes access to erudition, private venture, property
ownership and free enterprise.
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During the seventeenth and eighteenth century, all around Europe, emerging middle class became a
threat to the maintenance of the political and military power of lords. In GB, thanks to the middle
class’s entrepreneurial awareness there was a fertile ground for novelties. Innovations could rapidly
spread within a wide and proactive community of craftsmen, industrialists and merchants in search of
success, who had little to do with our modern and professional scientists (e.g. the first British
professional society of mechanical engineers was formed in only in 1847). As we will see, mechanic
inventions enabled a deep social and technological transformation, supporting progress and growth;
redefining power and richness equilibriums within society.
Emerging power and richness equilibriums relied on new dominant ideologies, first mercantilism and
then capitalism, which through their legal and institutional formalization redefined rights and
obligations upon resources. New rights and obligations influenced the structure of relative prices of
factors of production. Consequently, through laws and institutions a new series of economic incentives
for production factors substitution were generated. For example, as we will explain in detail later on,
in textile manufacture, the new structure of incentives for factors substitution (labor substituted with
capital and energy) had a particular significance for the gradual mechanization of the British
industry. Relative costs for the exploitation of productive resources are thus the key to understand the
implementation of new ways of organizing production, i.e. the technology. Therefore, we will try todetermine why and how new technologies, new products and new ways of preparing individuals for
work, find their “reason d’être” in the newly defined societies values that through their institutional
formalization generate a new structure of prices and incentives, which determines the forthcoming
role occupied by the differently professionalized categories of individuals within society, as well as the
capital and labor intensity in British industries between the eighteenth and nineteenth century.
From the fall of the Roman Empire until the first IR, European Countries were scientifically backlog
in respect to Asian and Arabian empires (Rich E. E., Wilson C. H., 1977 ). Thus, the capacity to
military and economically compete with those foreign powers resided in the ability of making the
greatest gain from the adoption, unconventional application and micro-improvement of foreignknowledge and technology, acquired through trade-driven or war-driven interactions with more
advanced extra-European countries, like the Middle-East and North African Caliphates during the
Islamic Golden Age (750-1258 CE), and the Chinese Empire during the middle ages and renaissance
(i.e. “European used the Chinese inventions of gunpowder, paper and printing, and the magnetic
compass in ways undreamed of by the Chinese themselves”; Bin Wong R., 2004 ). Yet, between the 18th
and the 19th century GB recovered and modernized, economically and technologically, bypassing
eastern powers. The emerging British society was progressively shifting towards its modern economic
and social organization model, the capitalistic one. The latter, as we will make evident, had:
• Increasingly mechanized productive structures: thus less labor intensive and more capitalintensive;
• Increasingly standardized productive processes: thus less apprenticeship dependent;
• Increasingly diffused education and welfare systems: thus less discriminatory and tacit
knowledge dependent;
• Increasingly wide and specialized middle class laborers: capable of generating micro-
improvements in productive processes, accrual innovations and inventions, and perform more
complex procedures at work and more lucid investments and outgoings within the household;
However, the IR in GB was not an autopoietic economic phenomenon, as Ashton T. S. (1997) fittingly
states "changes were not merely 'industrial', but also social and intellectual. The word 'revolution'
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implies a suddenness of change that is not, in fact, characteristic of economic processes. The system of
human relationships that is sometimes called capitalism had its origins long before 1760, and attained
its full development long after 1830: there is danger of overlooking the essential fact of continuity”. We
will therefore investigate about the abovementioned enabling factors of capitalism, the irregular but
increasingly frequent technological progresses and consequent variability of the technological
environment of production.
In the first part, we will explain how during the IR, useful knowledge and technical experience wasdeveloped in urban and industrial milieus and then transmitted by means of ideas transmission,
between workers and members of the industrial business community. Furthermore, we will explain
how during the 18th and 19th century the scientific method and new market institutions contributed to
British creativeness and inventiveness.
In the second part, we analyze the role of incentives for factor substitution and entrepreneurship in the
innovation and industrialization process; giving particular attention to the role of high wages and
cheap coal in the mechanization of the British economy. Furthermore, we explain why Acemoglu D. et
al. (2005 ) as others, affirm that during the IR “the differential growth of Western Europe is accounted
for largely by the growth of Atlantic trade”, trying to discern why Atlantic Trade and Colonialism arethe cause, and not only the consequence, of the British industrialization process.
In the third part, we describe the mechanisms of diffusion, improvement and imitation of innovations
during the IR. Subsequently, we explain why in connected constellations of small businesses and
industries, CoIs and collective inventions are self-enforcing and self-expanding. Subsequently, we
identify some important CoIs and collective inventions of the British IR, and recognize interrelations
and reciprocities between them.
In the fourth and final part we clarify how CoIs, collective inventions and the mechanization of
production processes determined the growth of productivity per worker, markets, foreign trade and
least but not last welfare within GB.
DEVELOPMENT
As observed by Von Tunzelmann G. N. (1997), the peculiarity of an industrial revolution is that
“technological change permeates all functions undertaken by firms and by the economies that contain
them. The very complexity that emerges defies any straightforward application of covering laws or
general principles of economic development … In the British case, the contribution of explicit scientific
findings to technology was minimal: what instead the scientific revolution provided was theexperimental method, i.e. a procedure for logical investigation, together with some of the instruments
that allowed such analysis. The major scientific advances that carried direct implications for
technology, like the discoveries of the laws of thermodynamics, were more likely to be the result of
technology than the cause”. Accordingly, during the British IR, the link between useful knowledge
(science) and technology was bidirectional and the process of innovation was more erratic, looping and
complex than as described in the classical models of innovation (e.g. Linear Model of Innovation).
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To understand the industrial transformation that occurred during the eighteenth and nineteenth
century in GB, it is necessary to identify underlying mechanisms of selection and contagion in all the
different phases towards the diffusion of a new technology. At the epoch of the first IR, selection and
contagion of ideas between industries and between inventors led to massive improvements of
productive processes in main industries of GB’s economy: Textile, Coal Mining, Steel and Iron,
Railway, Steam Power; disseminating new mechanized equipment for transport and production. In the
Figure 2, we have identified and summarized the compound path from the invention to the adoption
and diffusion of a technology. We can consider the following scheme a revision of the Linear Model of
Innovation with some important differences to fit the peculiar situation of Britain during the first IR.
Figure 2: The road to the improvement of a productive process during the British IR
Useful knowledge
(basic reserch)
Invention
(applied research)
Innovation
(technology development)Production and Diffusion
Fit to business
environment and
development prospects
-Incentives for early
adoption of innovations
- Ease in upgrading
industrial plants
-Capital and labor disposal
-Natural resources
constraints
-Risk propensity
Diffusion of technology
-Business networks
-Industrial clusters of
innovation: COIs
-Cross industry synergies
and spin-offs
Intellectual fertility and
creativeness
- Entrepreneurial culture
-Public promotion and
funding of inventions
-Stability of the political
environment
-Literacy and numeracy
- Attitudes and morals
that legitimize and
support enrichment,
progress and economic
growth.
-Faith in industrial
progress
-Technical know-how
and useful knowledge
diffusion
- Problem solvingaptitude
1. Sources of
Invention
2. Opportunities
for innovation
3. Circulation and
improvement of
technology
Micro-improvements and
heuristic advances
-Incremental micro-improvements
-Exploration and testing of
promising refinements
Imitation and reuse
-Unconventional use of
pre-existing technology
- Imitation and adaptation
of solutions
Source: Godin B. (2006)
International trade
opportunities
-Foreign markets
openness
-Transportation costs
4. Response and
support of the
environment to
industrialization
Market expansion
- Economies of specialization/scope
-Industrial
concentration/clustering
Urbanization
- Agrarian Revolution
-Land and sea transport
improvement
-Demographic growth
Wealth growth
-Rising wages of
unskilled workers
- Rising consumption of industrial goods
Figure 1: Linear Model of Innovation
Source: of my production
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1) Sources of invention
Social environment can stimulate or inhibit men’s creativity in innumerable ways, thus we will
resume in this first part the main happenings and features within British industrial society that could
have widely stimulated or inhibited creativity. As previously anticipated, the cultural advancement of
the Renaissance and the Enlightenment created new attitudes (e.g. systematic doubt, humanism,
positivism and anti-clericalism) and methodologies (e.g. the scientific method).
Figure 3: The scientific method applied to industrial innovation
Source: of my production
During the IR, countless individuals developed a passion for the systematic classification of natural
elements and phenomena. This cultural attitude facilitated the educational transition from ‘cabinets of
curiosities’ to organized collections of useful knowledge. Men’s ability to extract useful knowledge from
experience depends on available intellectual tools and methodology, both improved in Britain during
the IR. Moreover, organized and structured proceedings used for scientific research could be profitably
applied to technical innovation, i.e. for the design and construction of industrial machines.
Additionally, in GB the scientific method was much diffused in nonscientific contexts, this amplifiedexponentially the inventiveness of the British society. As a result, only a small number of ideas that
determined concrete improvements of production processes came from science and scientists. But if not
from scientists and academics, where did industrial ideas and inventions come from?
Most of the ideas that jointly determined the IR came from self-taught or home-taught people with
little scientific background. Many inventors were manually valuable craftsmen; mainly tinkers,
carpenters and mechanics with outstanding creativity and problem-solving talent (e.g. James
Hargreaves inventor of the spinning jenny). But in the long list of inventors that contributed to the IR
we also have clerics (e.g. Edmund Cartwright inventor of the power loom), artists (e.g. Samuel Morse
inventor of the telegraph), barbers (e.g. Richard Arkwright inventor of the water frame) and otherunschooled professionals. This occurred because, at least until 1850, most of the invention and
innovation activity (in modern terms R&D) was not so theoretical knowledge intensive as it is now.
During the IR, invention and innovation activity required good logic, basic understanding of
mechanical and physical principles, tools and gears, and extremely long time to shape and assembly
mechanical components in an effective and original way. Ready reckoners, who became more diffuse
and cheap thanks to the progressive diffusion and improvement of printing machines from the
sixteenth century on, helped those amateur inventors in using most recent applicable knowledge about
mechanics, physics and mathematics. Invention was an exploratory process with an uncertain or
unknown outcome; therefore British inventors were certainly risk seekers, namely entrepreneurs.
Many of them were after-work inventors; they used their leisure time to seek for new solution orimprovements for manufacturing activities, indeed they did it for passion, probably with the hope of
becoming rich, which seldomly happened to inventors during the IR; although, many of them became
famous and are still remembered for their inventions.
Observationof
productionprocesses
Identificationof a problem
orinefficiency
Investigationfor solutions
inventionand technicalformulationof a solution
Modellingand testing
Adjustmentand
refinement
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Another important element of the British IR to considerate, is that “political institutions placing limits
and constraints on State power are essential for the incentives to undertake investments and for
sustained economic growth; In early modern Europe (especially GB), such political institutions were
favored by commercial interests outside the royal circle, but were not welcome by the monarchy and
its allies; Institutions favored by economically and politically powerful groups are more likely to
prevail” (Acemoglu D. and all., 2005). Therefore, the Glorious Revolution was a clash over the rights
and prerogatives of Lords. Business and trade interests sided with those demanding restrictions on
the power of the King and its court. After the Glorious Revolution, the British governance apparatuseshad to enforce a new “social contract” between Lords (gentry) and Commons (plebeians) as determined
in by the Bill of Rights on 16 December 1689. The protection and enforcement of property rights and
contracts (e.g. The “Statute of Monopolies” of 1624, protected also inventor’s intellectual property
right), through impartial courts (e.g. According to the Act of Settlement of 1701, judges' commands
were considered valid only if resulting from good and fair behavior: “quamdiu se bene gesserint”) are
certainly central organizational factors for reducing transaction costs and promoting trade, progress
and economic growth.
Despite the fruitful cultural and institutional climate, that helped Britain becoming one of the most
inventive countries of Europe, life during the IR wasn’t a bed of roses, “the early 1800’s were a periodof substantial upheaval for the British economy. The country was fighting a long and expensive series
of wars with France that drained resources and disrupted trade. In addition, there were several years
of devastating crop failures in the early 1800’s.” (Stokey N. L., 2001). We should thus ask ourselves
how GB managed to have an Industrial Revolution in such a difficult time. It may seem strange but
the abovementioned adverse events, gave to Britain the opportunity to accelerate the industrialization
process in the following way:
• Crop failures and war mobilization obliged Britain to import more food and raw materials from
foreign countries and colonies. To buy them, Britain increased its production and exports of
manufactured goods, mainly textiles that were lightweight and could be transported abroadwith little transport costs per unit. The loss of food self-sufficiency, turned out to be an
incentive for industrializing. To improve its cost efficiency and volumes of production Britain
further mechanized, in the textile industry steam engines progressively replaced water wheels,
and exports became more competitive and vital than ever.
• Naval warfare in the late eighteenth and early nineteenth century, gave to Britain additional
motives to further improve navigation and ship building technologies, to protect sea trade,
coastal industrial areas and ports. Shipbuilding improvements determined many collateral
benefits for the British trade. For example, copper sheathing allowed the navy to stay at sea for
much longer without the need for cleaning and repairs to the underwater hull; this innovationrevealed to be profitable even when implemented to merchant vessels, because the initial
outlay was more than compensated in the long run by lower costs for maintenance and
insurance.
As end result, it’s an ill wind that blows no good: The British industrial golden age is also the outcome
of a series of timely coincidences.
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2) Opportunities for innovation
According to the Lockean philosophy, innovation is the intellectual component of modern production,
the human capital intensive phase of industrial manufacture. As prerequisite and primary part of the
production process, technology follows innovation trajectories that are determined or at least biased by
the surrounding economic environment. In GB, main factors that influenced the process of
technological development and innovation in industry during the 18th and 19th century are:
• Natural resources endowments and prices: In the 17th century, forests in GB were rapidly
shrinking due to an intensive exploitation of timber that was used both for heating and
construction. Demographic growth and urbanization required the erection of new buildings and
housing, the Great fire of London (1666) further worsen the situation, wood was in short
supply. Luckily, GB had enormous and easily reachable reserves of coal that could be mined,
and used to substitute charcoal for heating. Subsequently, in the 18 th century coal extraction
started rising. In the 19th century, innovations in mining, refining and smelting made coal a
much cheaper energy source than charcoal. Moreover, Britain imported growing volumes of
food and raw materials both from its colonies and from trade partners (e.g. cotton used in the
textile industry was massively imported to Britain first from America and then from India).
1700-9 1860-9
Net Food Imports per person 0.43 3.77
Net Raw Material Imports per person -0.25 3.14
Total Food, Energy and Raw Material
consumption per person (in £)12.7 15.5
)
Source: data from Clark G. (2001)
• Labour wages: “Britain was a high-wage economy in four senses. Firstly, at the exchange rate,
British wages were higher than those of its competitors. Secondly, high silver wages translated
into higher living standards than elsewhere. Thirdly, British wages were high relative tocapital prices. Fourthly, wages in northern and western Britain were exceptionally high
relative to energy prices” (Allen R. C., 2011).
0
50
100
150
200
250
1 6 0 0
1 6 1 0
1 6 2 0
1 6 3 0
1 6 4 0
1 6 5 0
1 6 6 0
1 6 7 0
1 6 8 0
1 6 9 0
1 7 0 0
1 7 1 0
1 7 2 0
1 7 3 0
1 7 4 0
1 7 5 0
1 7 6 0
1 7 7 0
1 7 8 0
1 7 9 0
1 8 0 0
1 8 1 0
1 8 2 0
1 8 3 0
1 8 4 0
1 8 5 0
1 8 6 0
(base year 1860 =100)
Farm
goods
Coal
Light
Housing
Iron
Figure 4.1: Raw materials and food net imports and consumption (in £)
Figure 4.2: Raw materials, energy and food prices
Source: data from Clark G. (2001)
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• The momentum of the technological heuristics: intended as the set of paradigms used in a
determined field to solve the most significant problems recently encountered. “Machinery is
regarded here as a paradigm in the sense that, when a problem ("puzzle") arose in
manufacturing, the solution first turned to was likely to be one of developing a machine to
overcome the difficulty. … Indeed, in sectors other than manufacturing, other paradigms
continued to predominate. In British agriculture, biological and chemical solutions were more
likely to succeed, and machinery was uncommon in the British countryside until a century
later” (Von Tunzelmann G. N., 1997), the 20th century.
Therefore, Britain’s unique structure of relative prices was mainly due to two reasons: “The first was
Britain’s commercial success in the global economy, which was in part the result of state trade policy
and colonialism. The second was geographical—Britain had vast and readily worked coal deposits”
(Allen R. C., 2011); the two, jointly determined strong incentives for the development of labor-saving,
energy intensive technology. At the epoch, the innovation paradigm was inventing new machines and
mechanisms powered by water or coal to save labor and reduce the time of manufacture processes.
Potential benefits of innovations could be tested through small scale engineering models. This
modeling technique was massively adopted in the nineteenth century to reduce the costs for the
development of new machines and mechanical components; first small scale prototypes were developed
and refined, when suitable and fully operational, prototypes were rebuilt in real scale and
implemented to production plants.
Costs for the development of new equipment were initially incurred by inventors and/or entrepreneurs
in the hope of future gain. Paying these initial costs gave rise to the problem of the private financing of
innovation: As scientific method made innovation more effective, economic data and mathematical
laws made projections of innovation investment returns more precise and foreseeable by investors,
which gradually became more confident in financing R&D. Isaac Newton’s present value tables could
be used to calculate the real value of forthcoming estimated profits, deriving from investments in
innovation. Moreover, discounted cash flow analysis, which was first adopted in the Tyne coal industry
around 1801, proofs the progress of both accounting and financial systems in GB during the IR. All
calculations for investment decisions “shared a common core, which was the assessment of the annual
profits over the lifetime of the lease together with the residual values of plant and materials at the end
of the term, all of which, were discounted at interest rates to reflect the viewer’s assessment of risk”
(Brackenborough S. and all., 2001). Accordingly, expected returns of an investment in innovation were
calculated using data on the sector/industry concerned by the innovation to forecasts differential
returns deriving from the implementation of a new technique, process or machine. Industrial secrecy
and patents were respectively used to try to safeguard and capture forthcoming benefits. For the first
time in History, private investment in innovation provided a market link between, profit rate, interest
rate, product prices and technology. However, this market mechanism wasn’t always effective, and the
reason was simple: If patents didn’t describe detailed techniques, processes and machines, but only
general principles or ideas that could be used to infer several detailed technical solutions to a concrete
problem; then, once an invention was patented other inventors couldn’t use the same principles to
developed similar but not identical technical solution, without being legally liable for copying, for this
reason Newcomen was forced to go into partnership with Savery, whose patent covered “all engines
that raised water by fire”. Consequently, relevant ideas and innovations that could be technically
implemented in innumerable ways were sometimes restricted by previous patents. But, even if patents
could slow down diffusion, they nevertheless favored technological variation, by stimulating the
development and emergence of alternative and differentiated techniques and technologies for the sameuse, bypassing in such a way pre-existing patents.
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TECHNIQUES FA
C
T
O
R
S
PR
O
C
E
S
SPRODUCTS
SCIENCE AND TECHNOLOGY
I
N
S
T
I
T
U
T
I
O
N
S
FI
N
A
N
C
E
TASTES
The rapid growth of the British manufacturing industry was made possible by maritime trade,
colonialism and (indirectly) slavery. According to Bowles P. (1986), “there were three changes that
occurred at the turn of the seventeenth century which led to a rise in the strength of Britain as a
trading nation at the expense of those states that had made the initial advances. First, the invention
of the mariner's compass enabled trade to be carried on over longer distances. Second, the discovery of
America, and the opening of a passage to the East Indies by the Cape of Good Hope were of major
significance. These discoveries presented a set of new and magnificent objects of commerce, and the
prospect of trading with nations in various climates, producing a proportional variety of commodities,provided a great stimulus to trade. Britain was ideally placed, geographically, to exploit these new
opportunities”. On the same subject, Acemoglu D. and all. (2005) recognize meaningful causal
relations between trade expansion institutional change and economic growth in GB: “from 1600,
onward, in countries with non-absolutist initial institutions and easy access to the Atlantic, the rise in
trade enriched and strengthened commercial interests outside the royal circle and enabled them to
demand and obtain the institutional changes necessary for economic growth”. British trade certainly
played a crucial role in the IR, it fostered the reallocation of power and wealth in GB, land owners
suffered the competition of foreign imports of food and raw materials, while industrialists and
merchants could take advantage from low cost foreign raw materials and wider markets to export high
value-added British manufactured goods.
One peculiarity of the British IR is that many business actors of the emerging industries were both
inventors and entrepreneurs within their corporate (see figure 5), this peculiar guiding position of
inventors allowed firms to be projected towards a production process based competition, cost-efficiency
was of primary importance. Product differentiation and marketing levers were secondary in respect to
the production technology levers of competitiveness. The ideal entrepreneur-inventor of the British IR
was someone who was able to constantly run its activity at the technology frontier, by perpetually
introducing micro-improvements on his machinery and equipment, by promptly imitating the finest
innovations of leading competitors and rapidly reorganizing the production processes when major
technology advances where made.
Figure 5: Summary and taxonomy of the forces and agents at work in Innovation processes
Source: Personal revision of fig.1 in Von Tunzelmann G. N. (1997)
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3) Adoption, diffusion and improvement of technology
In the early 19th century, the British industrial structure consisted of geographically agglomerated
groups of small locally owned firms, making uncoordinated -but symbiotic- production and local
investment decisions. Internal to cluster business to business trade was based on trust and long term
relationships. Minimum efficient production scale (MES) were still relatively small, this prevented the
rise of large vertically and horizontally integrated firms in most of the geographical districts in
Britain. One of the distinguishing features of the British business structure was local labor market,which was often internal to the district and highly flexible. Individuals easily moved from firm to firm,
and growing businesses attracted and absorbed redundant workers from businesses in crisis or
bankrupt; workers were accordingly more committed to their district rather than to their firm, so that
labor inter-district migration was limited. Districts were subsequently relatively stable communities,
in which owners as well as workers lived together, this enabled the evolution of strong local cultural
identity and shared industrial expertise.
Before describing in detail the features of technological progress, clusters of innovations (COIs) and
accrual micro-improvements during the British IR, we need to define the very concept of technology; to
do so two aspects of technology ought to be differentiated:
• The scope of technology: technologies are systematized collections of procedures and knowledge,
necessary to overtake or solve technical problems and reach desired outcomes in an
economically suitable way. Accordingly, technology is realized through a process of
implementing structured procedures and useful knowledge within an operative organization
via human’s intervention; it develops in an ordered and coherent collection of “software”
(systems of techniques) and “hardware” (tools and equipment) needed to perform them, in order
to produce a predetermined and desired result once employed. Technology can be itself an end,
for instance to develop a new capability within an organization. Besides, if progress becomes a
value within a society (as it was in Britain during the IR), upgrading technologies, or using
them in an original manner is a way to shape new competitive dimensions, and generate new
competitive advantages in markets.
• The role of technology: technologies are dynamic forces having human mediated impacts on
structural properties of organizations; such as the competitive approach and strategy, the
decision-making processes, the capital and labor intensity of processes, the capacity and
saturation of assets, the division of labor, tasks, resources and responsibilities; those impacts
are moderated by human actors and codetermined by preliminary organizational structure and
environment.
“The range of hardware [equipment, machines, and instruments that humans use in productive
activities, whether industrial or informational devices] in sectors and industries has led to multiple,
context-specific definitions of technology, which have inhibited comparisons across studies and
settings, technology concept was thus extended to "social technologies" [software], thereby including
the generic tasks, techniques, and knowledge utilized when humans engage in any productive
activities" (Orlikowski W. J., 1992 ); in Britain the “hardware” renovation, mostly due to the
mechanization of production processes, was combined to the improvement of the “software”, or
organization and techniques, in key industries and sectors (coal, textile, steel and iron,
transportation); those transformations drastically altered the structure of the British economy,
engendering a new approach to doing business:
1. Competition and cooperation within districts was based on the ability to employ, retain,
transfer and flexibly reposition human-capital and specialized equipment within and between
firms;
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2. Synergies between sectors and industries acquired great significance; gains in efficiency in one
sector (for example: transportation services) could improve the overall cost-efficiency, and thus
competitiveness, of the British economy;
3. New mechanic technologies shaped a new set of competitive dimensions; the aptitude to rapidly
evaluate and choose between alternative technologies and investments to be done (that
determined the intensity of inputs use in production processes) became the key to success.
If mechanization has first occurred in Britain, it must be that during the IR new mechanic
technologies were both capital-intensive and capital-biased (a technology is said absolutely biased
toward a factor if it increases its marginal product) to fit the particular price structure of productive
factors in Britain (see part 2); i.e. those technologies augmented the marginal productivity of capital
goods (MP(C)), more than they augmented the marginal productivity of non-qualified labor (MP(L)).
Moreover, since the new technologies were more capital intensive than the old ones, the difference
between the growth rates of the marginal productivity of capital and labor had to be enough to
compensate capital productivity fall due to the use of more capital intensive technologies, which
augmented the overall capital/labor ratio of the British industry (with the neoclassical assumption of decreasing marginal productivity of factors: if C augments, given a constant value of L, MP(C) should
decrease).
The fundamental machine building technologies (assemblage techniques, components and tools) used
by inventors to mechanize and improve productive processes during the IR were first invented, studied
and miniaturized in the clock and watch making industries; probably without the progress of this
millenarian technical expertise, industrialization wouldn't have ever occurred. Since during the IR
most of the technical and technological improvements in production processes came from analogical
thinking, namely finding solutions to new problems adapting old solutions, methods, components and
techniques, used by other inventors facing similar problems, clock making mechanic technology offeredmany hints to improve productive processes of other industries through the automation of productive
processes. Trough imitation, exchange or acquirement, transfers of technology between firms and
industries was an extremely powerful instrument for productivity growth; accordingly, the rapid
circulation of new technologies could engender several cycles of “innovations from innovations”,
namely clusters of innovations that spread new ideas across the whole British industrial society. This
phenomenon was amplified by the gradual codification and transcription of technical knowledge in
businesses.
The main linkage between most diverse mechanical devices invented during the first IR was the
minimalism of the technology required for their assemblage and the flexibility of their mechanicalcomponents: levers, pulleys, gears, (gears) trains, pistons, turbines, rails, cam and followers, wheals
and axles could be adjusted and assembled to fit most dissimilar uses; likewise, mechanic devices
functioning principles could be easily imitated and exported from one sector to another. Furthermore,
watch-making technology, that became widespread in Europe from the fifteenth century on, was also
very important “because it allowed Europeans to conceive time in a new manner that facilitated new
kinds of economic practices. These activities further demonstrated and developed the fine motor skills
and precision instrument making that Europeans put to great effect in a broader array of technical
tasks. The inability of others to develop clock and watch making skills was symptomatic of their
limited abilities to undertake technological changes needed for economic development” ( Bin Wong R.,
2004 ).
Four major British businesses experienced significant benefices from the accrual technological
improvements during the IR:
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• Textile manufacture;
• Coal Mining;
• Steam and Iron production;
• Railroad and steam engine industry;
Textile manufacture was certainly the most important British industry during the IR, both for value of
the outcome and for exporting volumes of the business; Clark G. (2001) goes so far as to suggest that
“productivity growth rates of the Industrial Revolution owed mostly to productivity gains in textilemanufacture”. Until the mid-nineteenth century “very little mechanization had taken place [in the
textile industry], and an industrial plant of any type had a very low power requirement, usually no
more than 5-7 horsepower. The main sources of power were water wheels, windmills, horses and man
(or woman) power, with the water wheel being by far the most important. The undershot wheel was
simple, robust, and cheap to construct. … But by the late 1700’s overcrowding was a severe problem,
at least on favorable streams in desirable areas, and the potential for further increases in power was
limited. … This situation began to change in 1771, when Arkwright built the first cotton mill with
mechanized spinning. Many of the cotton mills built in the 1770’s, 80’s and 90’s followed Arkwright’s
design closely, and they typically used either 10 or 20 horsepower. … Although earlier devices were
employed in coal mining, the use of the steam engine in textile manufacturing came with James Watt.… By 1850 the steam engine had displaced the waterwheel as the most important source of power. …
A total of 500,000 horsepower in steam engines were installed in Britain. The textile industry alone
employed 133,000 horsepower, of which 81% came from steam.” (Stokey N. L., 2001).
“The introduction of coke smelting of iron ore by Abraham Darby in 1709 freed the [British] iron
industry from its dependence on charcoal derived from increasingly scarce and expensive timber”
(Cameron R., 1985). From the mid-eighteenth to the mid-nineteenth century, the growing demand of
foreign markets (continental Europe, North America and eastern Asia) for British manufactured goods
stimulated a continuous expansion of the capacities and volumes of production in the British industry.
To supply to this growing demand for manufactured goods, the British industry incessantly needed toincrease the scale of its production and resource provision facilities. New high capacity mechanized
production equipment, and transportation services for raw materials (coal, iron, wool and cotton) were
needed. Moreover, the demand for coal and iron increased so rapidly from the 17 th century on, that, to
satisfy emerging needs, new technologies and techniques for mine pumping, heating and smelting had
to be conceived and new designs for furnaces, flues, and chimneys were required, (for details see: Allen
R. C., 1983). New skills were also necessary to stoke and control coal fires. Accordingly, during the IR
iron industry became increasingly dependent on coal mining and new synergies between the two
emerged: coal was needed for smelting iron ores, and iron was needed to build steam engines to pump
out water from coal mines and build railways to carry the coal to towns and industries. Efficiency
gains due to a technological or technical advancement in one sector engendered direct benefices alsofor the other. In 1800, Britain mined 90% of the coal in Europe and produced more than 50% of the
world’s iron manufacture.
Since the early nineteenth century, a new specialized machine-building sector progressively developed
within the Lancashire textile industry. “These machinery firms, some of which were exporting at least
50 percent of their production as early as 1845–70, had an important role in exporting textile
technology. These capital goods firms were able to provide a complete package of services to
prospective foreign entrants to the textile industry, which included technical information, machinery,
construction expertise, and managers and skilled operatives” (Clark G., Feenstra R. C., 2003).
In the late nineteenth century there were three leading districts in which the textile business was
carried:
1. The South district of Canterbury, Sandwich, Southampton and Maidstone;
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2. The West district from Cirencester in the north to Sherborne in the south, and from Witney in
the east to Bristol in the west;
3. The North district of Greater Manchester Counties and Lancashire;
Textile districts were vast constellations of small firms; and because of the intense competition firms
had very small profit margins. Within those business clusters, major industrial innovations, like the
steam engine -that was first used in textile districts to recycle water used by mills by pumping it backto the top of a stream- required long time and capital to be refined and become technologies profitable
to be implement in production processes, especially in small production plants of vertically and
horizontally fragmented industries such as textile. Furthermore, even the most cost-efficient
innovations were rarely rewarding for their inventors because often patents proved to be difficult to
enforce: “Boulton and Watt formed their partnership in 1775, to exploit Watt’s patent on the separate
condenser, and over the next 25 years (the patent was extended) they built on the order of 450-500
engines. Competing firms built steam engines with other designs, as well as ‘pirate’ engines that
infringed on Watt’s patent, Boulton and Watt had only a little over a quarter of the market during the
life of Watt’s patent” (Stokey N. L., 2001). Due to the small volumes of production per firm,
investments in new equipment could need several decades to be amortized. Subsequently, small textilefirms often didn’t have the money to buy patented mechanical equipment from technologically leading
competitors or other external suppliers. Furthermore, with one generation backwardness, newcomers
could use state to the art technologies without adapting repeatedly to the continuous micro-
improvements of production processes and machinery. However, firms that did not exploit more cost
efficient and labor-saving technological solutions were regularly knocked out of market by the ones
who were able to rapidly imitate best practices.
To survive this competitive clash, many textile district’s firms started adopting a new attitude: they
rapidly and continuously micro-upgraded their plants; and no more simply imitated others most cost
efficient innovations and micro-improvements but they tried straightway to improve them internally;generating in such a way new cost-efficiency gaps between firms. Gains in competitiveness could be
used to put out of market competitors -by lowering prices- or to ensure higher profit margins. By
recurring to differential imitations jointly to endless micro-improvements, textile firms that operated
in districts became increasingly good and rapid in innovating by imitating, and then refining each-
others advances. Accordingly, differential and accrual imitations and micro improvements were
happening on a daily basis, as a result especially in the textile industry many inventors died in
poverty because plagiarized (e.g. John Wyatt and Lewis Paul inventors of the spinning machine).
Collective invention turned out to be the golden solution to the abovementioned problem of market
failure due to the rapid and irrepressible phenomenon of imitation of the innovations within business
clusters in key sectors of the British economy:
I) When new capacity was built, the investing firm could vary the design to improve the best
practice.
II) If the variation cut costs the next investing firm could extend the change and try to further
improve the best practice, and so on.
Since the cost of each experiment depended of the probability that the new design would reveal to be
inferior to best practice, by making small variations, the costs per firm were kept low. Moreover, the
higher was the number of firms participating to this technology exchange process the higher revealed
to be the pace and efficiency of the innovation process (the collective invention taken into
consideration).
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Accordingly, more and more firms started grouping in specialized clusters and sharing the design
information of production processes either from necessity or agreement (for an iron industry cluster
case see: Allen R. C., 1983; for a mining district case see: Nuvolari A., 2004 ). Finally, what appeared to
be the imitation problem became the strength of a new form of inter-firm R&D organization that
rapidly diffused in Britain during the 19th century, which produced a technology adapted to the
conditions and factor prices of its environment. Collective invention/R&D was probably the major
cultural advance of GB in the 19th century.
4) Response and support of the environment to industrialization
The Agricultural Revolution that took place in GB between 13th and the 19th century was certainly a
fundamental supporting factor for the British IR: Selective breeding, rotation of cultures and the
introduction of new crops and fertilizers greatly improved the natural productivity (mass of food per
square acre) of British lands. These advancements in agriculture allowed, from the 14th century on,
“the population of a full world - that is, 30 to 40 inhabitants per square kilometer” (Leon P., 1978).
Furthermore, in the 17th, 18th and 19th century GB was experiencing a rapid demographic growth,
which, “by driving up land rentals and creating urbanization, spurred a number of changes in the
economy, such as the enclosure of common lands, improvements in transportation, the expansion of coal mining, and perhaps also the fall in interest rates in the eighteenth century” (Clark G., 2001).
Labor was released from agriculture, or, as Wrigley E. A. (2006) more precisely says: “numbers on the
land remained broadly static, so that, with an increasing population, there was a disproportionately
rapid rise in non-agricultural employment. … The [British] economy as a whole was sufficiently
resilient to absorb into secondary and tertiary employment those no longer working on the land”.
As we can see from Fig. 6, in GB during the IR the wage ratios (craftsmen wage/laborer wage) were
always higher in the countryside (farm) than in city areas (urban); moreover the difference between
the two constantly grew for almost three centuries. The data demonstrates two things:
1) The skill/education premium was higher in the countryside than in cities; and this gap was
accentuated by industrialization and urbanization; this because skilled workers (craftsmen)
progressively became more and more scarce, relatively to unskilled (laborers), in the countryside in
respect to cities, where training and education facilities became increasingly abundant and easily
accessible; accordingly, in industrial areas qualified workers were more easily substitutable.
2) The laborer wage -that is inversely proportional to the wage ratios on the graph- was higher in
cities (urban) than in the countryside (farm). During whole IR this gap constantly and
continuously grew. Therefore the incentive for unqualified workers to move from the countryside to
cities lasted the entire period taken into account and was accentuated by industrialization.
Manufacturing cities and villages with access to the sea, near navigable rivers/canals and coal/mineral
deposits grew very rapidly during the IR; firms in such places had a competitive advantage from the
point of view of the transportation costs of inputs (from suppliers to the firms manufacturing facility)
1,00
1,20
1,40
1,60
1,80
2,00
2,20
2,40
1 6 0 0
1 6 1 0
1 6 2 0
1 6 3 0
1 6 4 0
1 6 5 0
1 6 6 0
1 6 7 0
1 6 8 0
1 6 9 0
1 7 0 0
1 7 1 0
1 7 2 0
1 7 3 0
1 7 4 0
1 7 5 0
1 7 6 0
1 7 7 0
1 7 8 0
1 7 9 0
1 8 0 0
1 8 1 0
1 8 2 0
1 8 3 0
1 8 4 0
1 8 5 0
1 8 6 0
Craftsman Wage/ Urb.Laborer Wage
Craftsman Wage/ Farm.Laborer Wage
Source: data from Clark G. (2001)
Figure 6: Urban and rural wages in Britain during the first IR
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and outputs (from the firms manufacturing facility to clients/markets). Since transportation costs
deeply affected the profitability of businesses and the ease to access markets (both domestic and
foreign) geographical business concentration, in specialized sectorial clusters, was the natural
positioning solution to minimize the transportation costs for Business to Business trades.
In the 18th and 19th century most of the British freight of goods and raw materials was still done by
water transportation, using ships propelled by sails and/or steam-engines. In the inland, transport
boats and rafts travelled along canals and rivers, these boats were steam-powered or horse-draw:“A towpath alongside the canal [was made] for the horse to walk along. This horse-drawn system
proved to be highly economical and became standard across the British canal network” (from
Wikipedia: “History of the British canal system”). Only in the late 19th century railways started
substituting inland canal systems, until then railways were used to connect locations where canal
digging or stream canalization was impracticable or too costly. Throughout the 19th century four major
innovations further lowered the costs of transportation:
• Screw propeller: this new method of propulsion allowed steam ships to travel at a much
greater speed without using sails thereby making ocean travel faster;
• Iron hulls: iron-hulled boats were 40% lighter and gave 15% more cargo capacity for a givenamount of steam power;
• Compound engines: were much more fuel efficient and had a more uniform turning momentum;
they were implemented in sea and earth transportation;
• Surface condensers: allowed steamboats to avoid the use seawater to make steam, which
produced corrosion and fouling of the engine.
As Clark G. and Feenstra R. C. (2003) observed “these innovations greatly reduced the coal
consumption of engines per horsepower per hour. In the 1830s it took 4 kg of coal to produce 1 hp-
hour, but by 1881 the quantity was down to 0.8 kg”. As a result, given the almost stable real costs of
coal, between 1830 and 1880 (see Fig. 4.2) ocean freight and land transportation costs fell by 80% (0.8
kg is 1/5 of 4 kg), which is equivalent to an average annual fall of transport costs of 1,2%. By lowering
the costs of transportation, imported food and raw materials became cheaper; besides, British firms
could more easily export their manufactured products to overseas markets. As a result foreign demand
for British manufactured goods rapidly grew during the IR, giving way to a long-lasting period of
industrial and economic growth (for details see: Komlos J., 2003 ). As Britain industrialized, the share
of work earnings on GDP -that mainly depended on the difference between the growth rates in the
productivity of labour respect to the productivity of land and capital investments- constantly increased
(see Fig.7); accordingly, workers employed in manufacturing activities were better remunerated, and
became increasingly rich and wealthy, their living conditions improved rapidly and they received a
significant part of the overall economic benefits due to industrialization and urbanization, at least
until the late 19th century.
Source: data from Clark G. (2001)
Figure 7: Welfare and distribution of income in Britain during the first IR
20%
30%
40%
50%
60%
70%
Work Earnings/ GDP
Property Earnings/ GDP
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As the British GDP per person increased, also the share of workers income
dedicated to the consumption of durables and luxuries/cultural goods and
services augmented, making people living standards and quality of life
higher; in Fig. 8, the increasing over time values of the Human
Development Index (estimated by Crafts N. F. R. in 1997 ) support our
thesis of constant progresses in living conditions in GB during the IR. The
values of life expectancy, school enrolment, literacy and income gradually
improved from the mid-18th to the mid-19th century. To conclude, it mustbe said that, in addition to the benefices due to the growth in real wages of
workers, the provision and improvement of public services (education,
transportation, healthcare, social security etc.) codetermined this long-
lasting growth cycle that GB lived during its first industrial revolution.
CONCLUSIONS
In this paper we have studied the innovation system and environment, in which the British
industrial revolution took place. Of the four main sources of invention that Allen R. C.
(1983) identified:
(i) Non-profit/Public institutions;
(ii) Private R&D laboratories;
(iii) Individual inventors;
(iv) Collective invention;
We can affirm that collective invention (iv) was certainly the one that tied together the
efforts of the British society during the whole IR, by fostering the circulation useful
knowledge. As Landes D. S. (1969) illustrates, “in this process small anonymous gains were probably more important in the long run than the major inventions that have been
remembered in history books”. The major strength of collective invention process was thus
its cumulative and accrual nature: chained waves of minor innovations were followed by the
scientization of new technical solutions (prescriptive knowledge) developed within
increasingly specialized business clusters. Since the feedback mechanism between
propositional and prescriptive knowledge was bidirectional, the system was autopoietic and
thus potentially perpetual. Furthermore, innovations from specialized business clusters
certainly sowed the seeds of new ideas in other “inventive institutions” (i, ii, iii) in which
prescriptive knowledge was classified, formalized, generalized and mathematically codified
to become more serviceable; subsequently, this new propositional knowledge could be once
again selected, exploited and improved in business clusters according to sector-specific
requirements and prospects, and so on. In view of this, if the IR was the “clustering of macro-
inventions leading to an acceleration in micro-inventions” that Mokyr J. (1993) mentions in
his writings, much is probably due to the complementarity between collective invention and
other inventive institutions that operated in GB during the 18th and 19th century. We have
tried to give an outline of those interconnections, but there is certainly much more to
understand, and therefore we hope that future research will clarify the causal links and
interdependences between all British inventive institutions (i, ii, iii, iv) during the IR;
according to the author, this topic should be studied through cases, since only through
empirical approach we can identify common features of the inventive processes that
occurred during the IR.
Figure 8: A
comprehensive Measure
of well-being in GB
during the IR
Year HDI
1760 0.272
1780 0.277
1800 0.3021820 0.337
1830 0.361
1850 0.407
Source: data from Table
2 in Crafts N. F. R.
(1997)
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