The capabilities of industrial capitalism

Alfred D. Chandler, Jr. is a worthy successor to Joseph Schumpeter as analyst of the large corporation and its role in economic growth. His new book, Scale and Scope, a comparative history of corporate capitalism in the U. S., Britain, and Germany, is animated by a vision of the large corporation as the leading force in economic growth, outdistancing older owner‐managed forms of organization with a superior ability to invest entrepreneurially in large‐scale production, mass distribution, and professional management. Chandler's account implicitly relies on a dynamic “capabilities” theory of competition that reveals the fundamental irrelevance of neoclassical theory and policy, including antitrust policy. In some ways, however, Chandler's vision is too narrow, underplaying the role of markets in economic growth. One needs to know how economic systems build capabilities, not merely how the corporate institution does so. Moreover, there is reason to think that the last few decades have seen an organizational revolution with a dynamic rather different from the one that animates Chandler's account. As a result, Chandler's work is important for understanding the present‐day issues of industrial competitiveness, but is only one piece of the puzzle.