------------ EH.NET BOOK REVIEW --------------  
Published by EH.NET (May 2006)  
  
Michael Stephen Smith, _The Emergence of Modern Business Enterprise   
in France, 1800-1930 _. Cambridge, MA: Harvard University Press,   
2005. x + 575 pp. $60 (hardcover), ISBN: 0-674-01939-3.  
  
Reviewed for EH.NET by Pierre-Cyrille Hautcoeur, Ecole des Hautes   
Etudes en Sciences Sociales.  
  
  
Michael S. Smith, associate professor of history at the University of   
North Carolina, proposes a synthesis on the emergence of big business   
in France in the tradition of Alfred Chandler. The book "seeks to   
explain how and why France acquired the roster of large corporate   
enterprises that would come to dominate France's domestic economy and   
project French economic influence throughout Europe and the world   
over the course of the twentieth century" (p. 1). It "argues that the   
same forces that were giving rise to a new kind of very large, very   
complex business organization in the United States, Germany, and   
Great Britain between 1880 and 1930 were also at work in France" (p.   
2), contrary to the idea of a special or a backward path for French   
economic development.  
  
The book is well written and structured, revealing an exceptional   
knowledge of a large historiography and a capacity to organize it in   
a simple and mostly convincing narrative. It is also well presented,   
with minor typographical errors (usually in references to French   
names or publications, e.g. note 6, p. 501). The index includes all   
personal and firms names mentioned in the main text (not including   
the notes), as well as some analytical categories.  
  
The book is divided into three parts and sixteen chapters, plus an   
introduction and a conclusion. Part one deals in less than one   
hundred pages with commerce, banking and transportation, in three   
chronological chapters (1800-1840s; 1850s-1870s; 1870s-1900s), with   
no discussion of the twentieth century.  
  
Part two deals in two hundred pages with "the flowering of industrial   
capitalism." It starts with seven chapters on particular industries   
(textiles, coal, iron and steel, "hardware, machinery and   
construction," consumer goods, chemicals, "glass, paper and print").   
It ends with a transversal chapter on "the new world of industrial   
capitalism" that deals with problems common to many industries and   
not dealt with elsewhere.  
  
Part three analyzes in 160 pages the second industrial revolution and   
the beginnings of managerial capitalism, from 1880 onward. It   
includes four "industry based" chapters on the steel, electrical,   
automobile and "chemicals and materials" industries, and ends with a   
transversal chapter on "the new world of managerial capitalism."  
  
In order to make visible the method followed by the author, I will   
discuss a few chapters in more detail.  
  
After an introduction in which the author presents a well-balanced   
(although not always up-to-date) synthesis on the "foundations for   
modern capitalism" before 1800, the first chapter centers on merchant   
capitalism, which it studies on a local basis and on an individual   
basis more than in terms of formal organization. It then follows the   
traditional historiography, sometimes missing the most recent works   
(even if it would be more consistent with its overall thesis, e.g.,   
J.P. Hirsch, C. Lemercier). The role of the Haute-banque is presented   
in the conventional way.  
  
Chapter two describes the interrelated revolutions in banking and   
transportation, which were grounded in Saint-Simonian ideas and   
networks during the Second Empire. The chapter clearly shows the role   
of the relationship between the government and these networks in   
these changes. It does not discuss the conventional wisdom, nor look   
at the organizational consequences of these relationships (government   
administrations were structured, not only business ones). The   
organization of the railroads is not really discussed, except for its   
"grande politique" dimensions. The internal organization of the banks   
is not discussed either, and the concept of a financial system is not   
introduced.  
  
Chapter eight presents the chemical industry. Like most   
industry-based chapters, it is mostly organized as a succession of   
firms' histories in relation with the invention of new products and   
processes, but says almost nothing of firm or market organization.   
Technological innovation seems the only important way to success, and   
its origins are not much discussed.  
  
The transversal chapter 11 discusses three major themes: how   
industrial enterprises were financed, how they recruited and managed   
their labor force, and how they managed their external environment,   
especially the state. Finance and accounting practices are briefly   
described, but they are not analyzed as strategic choices and/or   
major explanations with responsibility for the varying success of   
firms or industries. The main conclusion is "the normality of the   
French industrial experience -- that is, its similarity to the   
British experience" (p. 303) in finance, accounting and labor   
relations. As concerns the management of the external environment,   
the author concentrates on three subjects: tariff policy, competition   
policy and railroad policy (network subsidies and rate regulation).   
The precise organization of business and the instruments of its   
intervention in policymaking or in policy application (industry-level   
or local-level organizations, such as the chambers of commerce) is   
not examined (except, briefly, for the iron and steel, chemical and   
textiles industries, mostly in terms of restriction to competition).   
In the view of this reviewer, this chapter is too brief and comes too   
late in comparison with its strategic importance in understanding the   
rise of big business as a major economic phenomenon.  
  
The third part focuses on those few industries in which French firms   
underwent a true Chandlerian revolution from the point of view of the   
author. Chapters on iron and steel, the electrical, automobile and   
chemical industries show how concentration, both through vertical and   
horizontal integration, allowed for the creation of important and   
complex organizations (although the internal organization is always   
treated only briefly).  
  
One important question is whether the factors behind the smaller size   
of French firms had an impact on their efficiency and their ability   
to develop all the economies of scale and scope favored by   
Chandlerian business historians. These factors certainly included   
market sharing (in iron and steel), interlocking directorates and   
participation, and family firms' preoccupation with secrecy and   
family control, all elements mentioned by the author but without   
providing a satisfactory answer to the above question.  
  
Like chapter 11, chapter 16 has a crucial role and could well have   
been extended beyond its twenty pages. It discusses the creation of   
complex organizational structures, the growing role of professional   
managers and the new challenges in corporate policies that made them   
necessary. After a rapid presentation of the railroad's pioneering   
role in organization, it presents the changes in management in   
industrial firms. It describes examples of divisional organization as   
early as the late nineteenth century, and emphasizes rightly the   
importance of holding structures from the 1920s onwards. It mostly   
insists on the rise of engineers as the main managers of French   
industrial firms, but discusses little their education, their   
efficiency, or the importance for their management style or their   
links with public administration. Overall, it suggests that new   
techniques of management or organization (including assembly lines)   
were already well developed in France prior to World War II.  
  
The conclusion describes briefly the evolution of French big business   
in the second half of the twentieth century.  
  
As a whole, the book gives a quite complete picture of French big   
(mostly manufacturing) firms in the nineteenth and early twentieth   
centuries. It reflects the many and important developments in the   
recent historiography of French business, and also its shortcomings,   
which explain most of the quibbles mentioned above.  
  
Nevertheless, the reader (especially if he is an economic and not a   
business historian) could have expected something more. Although in   
the prologue, the author presents a short survey of   
(English-speaking) macroeconomic interpretations of French   
development, he is not really in a position to discuss the views   
expressed at the macroeconomic level. Some assertions such as   
"firm-level research demonstrated that French industry was more   
expansive and technologically advanced ... than once thought" (p. 4),   
or "by the end of the nineteenth century, the activities [of the big   
firms] had become the focal point of economic life in France" (p.   
324), suffer from a methodological bias, since the overall importance   
of big business in the economy is neither discussed nor compared to   
that in other countries. The book focuses on firms, not economic   
development, with an ambiguity since the only reason to discuss   
French firms separately is their link with French economic   
development. Bringing in more data comparing big firms with   
macroeconomic data (which exist at the industry level at least for   
the period after 1890) could have helped solve that problem. A short   
discussion of industries where big firms did not develop -- and why   
-- would also have been useful.  
  
A second, related quibble: the international position of French firms   
is mentioned but little discussed, even though some of them had major   
international operations. If "it is with an eye to France's eventual   
success in the late twentieth century that this book tells the story   
of the modernization of French business" (p. 5), one cannot but point   
out to the author that today's big firms make most of their business   
abroad (not only by exports, but also by producing abroad), so much   
so that their impact on the French economy is sometimes questioned.  
  
A third point, related to the two previous ones: the book is not very   
quantitative. It deals with a great number of firms, but provides   
little quantified comparisons among them (which could give way to   
typologies, for example) or between them and the rest of the economy   
or their foreign equivalents. The few tables (eight for the entire   
book, no figures) list the biggest firms in a given industry at a   
particular date; only the last two give some international   
comparison, and they provide few elements of comparison (total assets   
in general).  
  
Fourth point: the relationship between French firms and the state is   
discussed in the very first chapters for the early nineteenth   
century, and somewhat in chapter 11, but almost never thereafter,   
although discussions of nationalization are widespread in the   
interwar period. The relationships between government and big   
business people or organizational practices are worth more   
discussion. The role of governments regulations (major in the 1930s),   
but also of semi-public bodies such as the chambers of commerce   
(important during the all period), is under-appreciated. (Actually   
neither the Code de commerce, nor the chambers of commerce, the   
commercial courts, nor the commerce minister appear in the index,   
even if some of them occasionally appear in the text.)  
  
In conclusion, the book is a very useful synthesis for American   
students or scholars (French readers will find it strange that the   
discussion centers only on English-language historiographical   
debates, even if they are mostly based on French scholarship), more   
than an original contribution to our knowledge.  
  
  
Pierre-Cyrille Hautcoeur is Professor of Economic History, Ecole des   
Hautes Etudes en Sciences Sociales and Research Fellow, Paris Jourdan   
Sciences Economiques (PSE) (joint research unit,   
CNRS-EHESS-ENPC-ENS). He specializes in monetary and financial   
history. His recent publications include "Efficiency, Competition and   
the Development of Life Insurance in France (1870-1939); or: Why Some   
People Don't Trust Pension Funds," _Explorations in Economic History_   
41 (2004): 205-32; "Was the Great War a Watershed? The Economics of   
World War One in France," in S. Broadberry and M. Harrisson, editors,   
_The Economics of World War One_ (2005); and "Why Didn't France   
Follow the British Stabilization after World War One?" (with M.   
Bordo), NBER Working Paper 9860, forthcoming in the _European Review   
of Economic History_.  
  
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