Industrial Leadership: a Hsitorical Analysis of Merchant Shipping
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I I I INDUSTRIAL LEADERSHIP: 1-· A mSTORICAL ANALYSIS OF MERCHANT SIDPPING GREG CLYDESDALE INDUSTRIAL LEADERSmp: A mSTORICAL ANALYSIS OF MERCHANT SHIPPING A Thesis Submitted in Fulfillment of the Requirements of the Degree of Doctor of Philosophy at Lincoln University by Greg Clydesdale February 2002 11 Abstract of a Thesis submitted in fulfillment of the requirements of the Degree of Doctor of Philosophy INDUSTRIAL LEADERSHIP: A mSTORICAL ANALYSIS OF MERCHANT SHIPPING Greg Clydesdale This thesis set out to explore the forces that determine the rise and fall of industrial leadership. It attempted to do this by applying an industry life cycle model to the ~hipping industry. The industrial life cycle was posited on the basis of existing literature, particularly the growth of knowledge, evolutionary and institutional literature, which lend themselves to patterns of industrial growth and entrapment. On this basis, this thesis set out to examine whether industrial leadership can be explained by a four-staged process of imitation, catch up, advance and entrapment. However, this thesis has exposed something more complicated. Processes of imitation, catch up advance and entrapment were shown to be at work in the shipping industly, but they were tempered by the effects of military and political forces that may not be exogenous, and the trend from regionalism to globalisation. The original model did not encompass early indigenous developments that are not based on imitation that do not immediately lead to a position of advanced leadership. In this light, a better description of the first stage would be capability building. Key Words: Evolutionary Economics, Economic History, Shipping, Maritime Industries, Instihltional Economics. 111 ACKNOWLEDGEMENTS Whatever, the wealmesses of this thesis, they would have been far greater without the kind support, assistance and patience of a number of people. Thanks are owed to a number of people who made themselves available or supplied me with information without which this thesis could never be written. Standing out are the inter-loans staff at Lincoln University library who always seemed to get what I wanted no matter how Herculean the task. I would like to thank Ross Cullen for the support he gave my PhD at various stages. I would like to thank Lincoln University for financing an overseas tlip that gave me access to a number of librmies, museums and individuals of invaluable use. These included the National Malitime Museum and Library at Greenwich, and the Rijksmuseum in Amsterdam. At these iustitutions, Brian Lavery and Ab Hoving gave me insight into problems that had been plaguing me regarding European shipping technology. I would like to thank the efficient staff at Independence Seaport Museum in Philadelphia, in particular, Michael Angelo. Other institutions whose services made this thesis and my tmderstanding licher include the Blitish Museum, Amsterdam's Historisch Museum, the Sheepvaart Museum (Amsterdam), the Portsmouth Historic Dockyard, and the Museo Navale and the Padiglione Del Mare E Della Navigazione in Genoa. There are two people I would like to thank for their kind patience as, at times, my task simply seemed too much. First is Amal Sanyal, who I would like to thank for the wise words of advise that have made this thesis stronger. To Peter Earl, pure and simply, this thesis would not have happened if not for you. Your openness to new ideas and ability to think outside the box is something the world of economics needs more of. Finally, I would like to thank my friends and family who stood by me religiously throughout this process. lV CONTENTS PAGE Abstract ii Acknowledgements iii Contents iv List of Tables v List of Figures vi Chapter 1. Introduction Chapter 2. The Literature of Dynamic Competition and Entrapment 5 2.1 Literature on Intemational Merchant Shipping 5 2.2 Competitive Advantage and Life Cycles 6 2.3 Evolution and Economics 8 2.4 Industry Formation and Entrepreneurship 11 2.5 Securing Competitive Advantage 13 2.6 Advance and Improvement 15 2.7 Organisations Institutions and Production Technology 18 2.8 Change and Rigidity 20 2.9 The Chains of Entrapment 21 2.9.1 Psychological Barriers to Adjustment 21 2.9.2 Technological Paradigms, Path Dependency and Lock-in 24 2.9.3 Institutional Entrapment 25 2.9.4 Costs of Change 28 2.10 Summaty 30 Chapter 3. A Model of an Intemational Industry Life Cycle 32 3.1 Description ofthe Model 32 Chapter 4. Methodology and Cliticism 38 Chapter 5. The Nature ofIntemational Merchant Shipping 47 Chapter 6. Chinese Shipping from the tenth to sixteenth century 55 6.1 Evolution of the Chinese Economic System 55 6.2 The lise of Chinese Shipping 59 v 6.3 Sources of Competitive Advantage 61 6.3.1 Specialisation, Experience and Learning Curves 61 6.3.2 Knowledge Resources 62 6.3.3 Organisation and Indusuy Structure 63 6.3.4 Supporting Indusu'ies 67 6.3.5 Compatibility with Religious and Military Institutions and Consequences for Govemment Policy 70 i·< 6.4 Conclusion 75 Chapter 7. Gujarat Shipping and the Indian Ocean 79 7.1 A BliefNote on the Development of Indian Ocean Trade 79 7.1 Gujarat Shipping in the fifteenth and sixteenth centlllies 80 7.2 Sources of Competitive Advantage 87 7.2.1 Specialisation, Skills and Experience 87 7.2.2 The Mughal Empire 88 7.2.3 Complimentary with Religious and Mi1itary Instimtions and Values 90 7.2.4 Organisation 92 7.2.5 Infrastructure and SuppOliing Industries 96 7.3 The Decline of Javanese Shipping 100 7.4 China and Gujarat Compared 101 Chapter 8. The Rise of European Shipping 103 8.1 Evolution ofthe European Commercial Environment 103 8.2 European Technological Advance 107 8.3 Evolution of Shipping Technology 107 8.4 Rise of Spanish and Portuguese Shipping 112 8.5 Sources of Iberian Competitive Advantage 118 8.5.1 Skills, Expelience and Reputation 118 8.5.2 Compatibility with Religious and Military Institutions 119 8.5.3 SUPPOliive Govemment Policies and Organisation 120 8.5.4 SuppOliing Industries 127 8.5.5 Knowledge Resources 129 8.6 The Portuguese and Spanish anive in Asia 132 Chapter 9. The Rise of NOli hem European Shipping 138 9.1 The English Imitation Process 138 VI ~:,>~< 9.2 The Rise of the Dutch 142 9.3 Dutch Advance 144 9A Gujarat, China and the NOlthern Europeans 151 9.5 Crisis in Spain and the Dutch Golden Age 157 9.5.1 Organisation and Institutional Advances 157 1::-- 9.5.2 Government Policy 162 :...... ' 9.5.3 SUPPOlting industJies 163 9.5A Human Resources 167 9.5.5 Complementatity with Religious Values 168 9.5.6 Military Strength 169 9.6 Attempts at RefOlm 172 9.7 Conclusion 177 ;--.-- Chapter 10. Britannia Rules the Waves 181 10.1 English Imitation of the Dutch 181 10.2 English Advance and Dutch Entrapment 186 10.2.1 Economies of Scale, Expelience, Specialisation and Skills 186 10.2.2 Government Policy and Complementarity with Military Instituti ons 188 10.2.3 Organisation 190 10.2.4 Technology and SUPPOlting IndustJies 192 10.3 Conclusion on Dutch Decline 198 10.4 Gujarat's Decline in the Early Eighteenth CentllIY 200 10.4.1 Decline of the Mughal Economy 200 IOA.2 Saturation and Shifting Pattems of Demand 203 10A.3 Organisation 205 10.5 A Need to RefOlm 206 10.6 EntJ'apment in the Textile Industry 210 10.7 Conclusion 212 Chapter II. The Industrial Revolution 214 11.1 Coal, Iron and Steam Technologies 214 11.2 Shipping and the New Technologies 216 11.2.1 Organisation 221 11.2.2 Government Policy and Empire 224 11.2.3 SUPPOIting IndustJ'ies and Technologies 225 11.3 The Coal and Steam based Economic System 228 Vll 11.4 Early US Shipping 229 Chapter 12 Changes in the East 234 12.1 The Decline of Chinese Shipping 234 12.2 China's Failure to Imitate 242 12.3 Imitation - Steamship Companies 247 12.4 Conclusion on Chinese Decline 250 12.5 Imitation in Japan 253 12.6 Imitation in Japanese Shipping 261 12.7 Conclusion - China and Japan Compared 270 Chapter 13 Towards the Twentieth CentlllY 272 13.1 Evolution ofthe Amelican Economic System 272 13.2 The Rebirth of American Shipping 275 13.3 Twentieth Century Catch Up 283 Chapter 14 Britannia Shares the Waves 290 14.1 Blitish Entrapment 290 14.1.1 Shipping Technology 290 14.1.2 Path Dependency - The General Pmpose Tramp 293 14.1.3 Organisation 294 14.1.4 Supporting Industries 297 14.2 Attempts at RefOlm • 305 14.3 Discussion 307 14.4 A Brief Note on Shipping in the Second Half of the Twentieth Century 308 . ,--~ Chapter 15 Conclusion 311 15.1 Imitation and Catch Up 311 15.2 Advance 313 15.3 Entrapment 314 15.4 An International Industry Life Cycle? 317 15.5 Can the Past Predict the Future 319 15.6 Implications for Govel1lment Policy 322 Bibliography 324 Vll1 LIST OF TABLES TABLE PAGE 2.1 Baniers to Change 29 3.1 Chronological Map of Thesis 37 6.1 Competitive Strengths and Related Hemistics of Chinese Shipping 77 7.1 Competitive Sh"engths and Related HeUlistics of Gujarat Shipping 99 8.1 Competitive Strengths and Related Heuristics of Ibelian Shipping 103 9.1 Declining Spanish and Portuguese Shipping 170 9.2 Entrapment of Iberian Shipping 172 9.3 Competitive Strengths and Related Heuristics of Dutch Shipping 179 10.1 Tonnage of shipping cleared from Blitish ports for foreign trades 186 Ib.2 Entrapment of Dutch Shipping 199 10J Entrapment of Guj arat Shipping 213 Il.l Declining Freight Rates: Steam and Sail 221 1l.2 Competitive Strengths and Related Hell1istics of Blitish Shipping 229 12.1 Entrapment of Chinese Shipping 252 12.2 Growth in the Japanese Mercantile Mmine 269 13.1 World Major Ship-owners in 1926 287 13.2 Tonnage by Nationality 1939-1948 288 14.1 Structure of Blitish Industry in 1960 295 14.2 Changes of world leadership in indushial production, 1870-1938 298 14.3 Entrapment of Blitish Shi.pping 308 14.4 Plinciple Merchant Fleets 1953 -1973 309 15.1 Competitive Advantage from Industry and Environment 314 15.2 Stages of the Life Cycle 318 1X LIST OF FIGURES FIGURE PAGE 2.1 The effect of innovation on the relative cost structure of finns.