collective invention as the engine of great britain's economic growth during the first...

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.

[email protected]

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.

mailto:[email protected]

mailto:[email protected]



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'



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).



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



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



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.



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




• 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.



TECHNIQUES FA

C

T

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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)



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;



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:



• 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;



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).



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


Figure 6: Urban and rural wages in Britain during the first IR



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.


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



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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