Review on Personal Capitalism

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Assignment 1

Kirsten W Kininmonth “ The Growth, Development and Management of J & P Coates Ltd, c.1890-1960: An analysis of Strategy and Structure” Business History Vol 48 Number 4 (October 2006).

Explain and evaluate Kininmonth argument that Chandler was not accurate in suggesting that J & P Coats Ltd was an example of “personal capitalism”

Word Count: 1168

In order to evaluate Kininmonths argument, that Chandler was not accurate in suggesting that J & P Coats was an example of “personal capitalism”, it must first be established as to what Chandler’s perception of personal capitalism was, and why he recommended that J & P Coats fitted this description. The line of reasoning put forward by Kininmonth, that Chandlers’ depiction of J & P Coats was inaccurate, will be analysed and the validity of the evidence will then be evaluated.

Chandler believed that many large British firms juxtaposed the modern industrial, management based, enterprises that developed in the United States and Germany during the turn of the 20th century, “in a number of capital-intensive industries of the Second Industrial Revolution” (Chandler 1994). He determines that the underlying difference between the large multinational British firms and their American, or German, counterparts was the commitment to personal capitalism, whereby “the perpetuation of family control remained a major desideratum” (Payne 1967). “This commitment to personal rather than professional management characterized British industrial capitalism” (Chandler 1994). It is postulated that at the turn of the century due to the, “continuing commitment to personal management and therefore to personal capitalism” (Chandler 1994), British entrepreneurs failed to make the essential three-pronged investment in manufacturing, marketing management; causing a fundamental inequality with those American and German firms that displayed progression into managerial capitalism, that Chandler thought was essential to gain true global competitive advantage.

Kininmonth initially rebuts the notion, “that personally run British companies were incapable of engaging in key investments in relation to production, marketing and management” (Kininmonth 2006), utilising a financial study by Boyns et al on chemical company Albright & Wilson to illustrate her argument. The rationalisation that family centric business organisations would be capable of global competitiveness, in terms of growth and market dominance, seems credible due to the financial figures that were able to be produced, by firms such as J & P Coats and Albright & Wilson, whilst management structures were dominated by the owning families. This is true despite the inevitable negative impact, manifested in the relatively poor performance in the 1940’s, induced by two World Wars. Although British based firms were able to compete during the second industrial revolution, at a time when globalisation started to see the dominance of economies of scale and scope, Chandler endorses the idea that large British firms had the tendency to be dictated by their commitment to the owning family, stunting their growth in terms of reinvesting profits and employing modern management strategies that could lead to expansion and modernisation. Central to Kininmonths’ rejection of Chandlers’ argument is the notion that the maintained successful approach to management at J & P Coats was due to its utilisation of family, or personal capitalism. The spreading of family members across the spectrum of managerial structures provided the company with an overall cohesion, and direction. It could be synthesised that a competitive advantage was established due to the dissipation of the principal agent problem that can occur in managerial based organisations. “Judging by the continued satisfactory performance of the company and its almost constant expansion, it appears that the values and principles of the founders… must be credited with...
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