New Engineering Companies and the Evolution of The United States Computer Industry Arthur L. Norberg Universityof Minnesota The electronicdigital computerindustry emerged tentatively onto the world stagein 1946,with the foundingof two engineeringcompanies and the incorporationby severallarge firms of the new electroniccomputing ideas into their planning.Only a handfulof largefirms participated in thisnew computer phenomenon--IBM,Raytheon, Bendix, and Burroughs. The smallstartup firms includedEckert-Mauchly Computer Corporation (1946), Engineering Research Associates,Inc. (1946), and CaliforniaResearch Corporation (1950). These latterthree firms were eventuallyabsorbed into largerfirms. Eckert-Mauchly Computer Corporation and Engineering Research Associateswent into Remington-Randin 1951 and 1952, respectively,and California Research Corporationbecame National Cash Register'scomputer division in 1954. Raytheonlater confinedits computerefforts to fire control and missile systems,while Bendix,after developing several computer systems, became part of Control Data Corporationin 1962. Burroughsis now one of two main componentsof UnisysCorporation along with SperryRand, the successorof Remington-Rand,and, of course,IBM is still the principalcompany in the computerindustry. A similarstory could be told abouta numberof startups in the first half of the 1950s, but the story would be the same. The small firms with an engineeringemphasis in leadershipand capabilityprovided an importantstimulus to the early computerindustry in the United States. These businesseswere organizedat a time before a stable computerdesign was available, and they participatedin the developmentof standardschemes for designing,manufacturing, and servicingcomputers. In the receivedhistory of the early computerindustry, writers have assumedthat EckertMauchly ComputerCorporation possessed the capability and an advancedstate of knowledge,which shouldhave given them an edge. This edge was blunted by the inability to convince potential funders/purchasers.Authors have also assumed that IBM resisteddevices that wouldaffect the tabulatormarket, and when they realized it mighttake away their market share, they entered the market late with dedication and overwhelmedthe smallerfirms. EngineeringResearch Associates (ERA) is not evaluatedin this analysis,because it is seenonly as a military contractorrather than a competitorfor commercialbusiness. Many in the industryassume that BUSINESS AND ECONOMIC HISTORY, VolumeTwenty-two, no. 1, Fall 1993. Copyright¸ 1993 by the BusinessHistory Conference. ISSN 0849-6825. 181 182 IBM waited until EMCC demonstratedthe techniquesand then enteredthe market. I believethe evidencedemonstrates a contraryposition, that is, that all thesecompanies struggled with computerideas in the early years,because theyneeded to learna greatdeal about how to implementdesigns and produce a digital computersystem. Each contributeddifferently to the process. What madeIBM andERA differentfrom EMCC was the resourcesthey coulddraw on. Within the company,IBM could supportR&D on computersbecause of their successfultabulator business. ERA had the supportof the U.S. Navy. EMCC had neither of these resources. The areasof the governmentand businessesEMCC relied on for supportwere cautiousabout when success would be achievedand held backsomewhat. In addition,EMCC had a range of problemsunconnected with machinedesign. The story goes that lef• to themselveswith the right financing,EMCC Wouldhave succeeded. If we examine these companiesmore closely using some criteria of Nelson and Winter, we see a differentand more complexhistory. Nelsonand Winter, in their studyAn EvolutionaryTheory of EconomicChange, bring out three areas of firm capabilitythat are particularlyrelevant to the historyof computing. Theseareas are the needfor clear and achievableobjectives, an adequatestate of knowledge,and choicesembedded in the talentsof the personnel. With respectto objectives,they notedthat objectiveslike profit, market share,or growth do not serve to guide actionin the absenceof specificunderstanding as to how they are to be achieved. Unlessthis understandingis obvious, sharedby all thosewho are involvedin decisionmaking, even the deepestcommitments to a commonultimate objectivewill not serve to focus attention and coordinate action. To serve this purpose,objectives must be articulatedin sucha way that they are relevant to the decisionsat hand....choiceof operational objectivesis an importantarena for managerialdecision [3, p. 56]. None of these companiesdefined clear and achievableobjectives in 1946; they cameto them overtime. Overarchingobjectives were apparentto the participantsin computing,but operationalobjectives were not. We need to add to this criterion evaluationof the role of the customerin setting objectives. An adequate state of knowledge about computing was just developing. Indeed, it took a decadeto arrive at sufficientknowledge to developall the aspectsof constructinga stablecomputer system. Along the way, all the firms interestedin digital computingmachines struggled with pushingback the envelopearound the known into the unknown. And the accumulatedexperience of the personnelin these firms influenced the definitionof problemsinvestigated and the solutionsproposed. The stateof knowledgewas arguablyadequate in 1946, but becameso by 1950, and many groupsplayed a role in the definition. The talentsof the personnelin these groups,while impressive,needed honing. The searchfor a stablecomputer design by all involved inside and outsidethese firms is the key to understandingthis history. In the questfor 183 a stabledesign, emphases were placed on speed, storage, and reliability. Early computerdesigns were slow, had small storage, and were insufficientlyreliable to encouragefaith. Speed could be increasedin two ways: decreasing interactiontime of partsof the computer,such as reducing distances electrical signalsmust travel, and increasingthe amountof dataand instructionsstored insidethe machine. Thus, an array of researchprograms in companiesand universitiespursued techniques to increasestorage and decreasethe time to isolatea singledata element, keeping costs in mind in mostcases. This search culminatedin the developmentof magneticcore memory, which sweptthe industryin the mid-1950s. The reliabilityissue was, of course,twofold also. The need for reliability in componentsled to new developments.Industry developeda rangeof new componentssuitable for usein computers,including massproduction techniques for their manufacture. Designerscrafted more reliablecircuits for the transferof dataand instructionsinternally. In this paper, I concentrateon the two 1946 startupsin the computer business:Eckert-Mauchly Computer Corporation (EMCC) and Engineering ResearchAssociates, Inc. (ERA). EMCC beganwith a generaldesign for a computer based on the work of the principals at the University of Pennsylvania. ERA organized to design and develop data processing machineryto advancethe stateof the art beyondwartime devices. By 1951, each had a computerto market; both machineswere importantdesigns and contributedto the stabledesign that emergedin the middle of the 1950s,both contributedsubstantially to an understandingof speed,storage, and reliability for computers.In the developmentof thesefirms, nothing was routine, in the Nelson and Winter sense. After 1956, a short decade after the introduction of the ENIAC, however, use of digital computerswas spreadingand a digital computer industry was beginning to flourish. The computer stimulatedtechnical developmentsand modes of socialbehavior that made the computingenterprise into a major phenomenon.Out of this came a new world that, over the next four decades,and maybe beyond, containednew opportunitiesand new tensions. The seedsof theseopportunities and tensionswere presentin the efforts of the men and women working in this emergingenterprise in the decadebeginning in 1946. The Companies The storyof the foundingof the new digital computerindustry goes back to early 1945. Even duringthe ENIAC developmentperiod (1943-1945) Eckert and Mauchly were discussingthe design of future internally-controlled computersand of the prospectsfor commercialization.They slippedeasily into plansto build a commercialstored-program electronic computer, and in the springof 1946, establishedan enterpriseto do so. EMCC neverdeviated from the objectiveto build commercialmachines. A principallesson of the war had beenthe value of rapid deciphering of privatemessages of othergovernments. The Navy concludedthat more sophisticatedmachinery would be neededin a more complicatedpeacetime world. Decipheringhad been doneby a sectionthat was composedof a 184 hastilyassembled group ofcryptologists, mathematicians, physicists, engineers, andchess and bridge masters. The Navy's first orderof businesswas to try to keepthis group together. Foiled at keepingthe primegroup together after the war as civilianemployees t6 pursuesuch work underdirect supervision, the Navy assistedin the establishmentof a privatecompany, comprised of many of thosesame men, to performthe sameinvestigations with classified contracts. This companywas ERA locatedin St. Paul, Minnesota. ERA's primeobjective, though different than that of EMCC, wasjust assimply stated as thoseof EMCC: to build dataprocessing equipment for useby the U.S. Navy. In thesetwo cases,overall objectiveswere set through discussions betweenthe companiesand their customers; proximate decisions taken within the companyfocused on engineeringissues. What