Scale and Scope The Dynamics of Industrial Capitalism
In the last half of the nineteenth century a new form of capitalism appeared in the United States and Europe. Before the coming of modern transportation and communication-that is, before the railroad and the telegraph, the steamship and the cable-the processes of production, distribution, transportation, and communication in capitalistic economies had been carried on by enterprises personally managed by their owners. The number of salaried managers in these enterprises was tiny. And those few managers worked closely with the owners.
The building and operating of the rail and telegraph systems called for the creation of a new type of business enterprise. The massive investment required to construct those systems and the complexities of their operations brought the separation of ownership from management. The enlarged enterprises came to be operated by teams of salaried managers who had little or no equity in the firm. The owners, numerous and scattered, were investors with neither the experience, the information, nor the time to make the myriad decisions needed to maintain a constant flow of goods, passengers, and messages. Thousands of shareholders could not possibly operate a railroad or a telegraph system.