The Business of Chemistry

Alfred D. Chandler, Jr. Shaping the Industrial Century: The Remarkable Story of the Evolution of the Modern Chemical and Pharmaceutical Industries. Cambridge, MA: Harvard University Press, 2005. ix + 366 pp. $29.95.

Reviewed by John Parascandola

In Shaping the Industrial Century Alfred Chandler, Jr., the eminent Harvard business historian, turns his attention to the development of the modern chemical and pharmaceutical industries. This volume continues the chronicle of modern high-technology industries Chandler began in Inventing the Electronic Century: The Epic Story of the Consumer Electronics and Computer Industries (Free Press, 2001). He defines a high-technology industry as “one in which new learning in science and engineering leads to opportunities to commercialize . . . new products based on that new learning” (p. 3). Chandler draws upon his previous book at various points to compare and contrast the consumer electronics and computer industries with the chemical and pharmaceutical industries.

Shaping the Industrial Century covers the history of the chemical and pharmaceutical industries in the United States and Western Europe from the 1880s to the present. Chandler begins by defining his underlying concepts and reviewing his basic themes and historical approach. His most basic concept is that in market economies, the competitive strengths of industrial firms rest on learned organizational capabilities. These capabilities are based on three types of knowledge: technical, functional, and managerial. “Once the new enterprise’s competitive power has been demonstrated, its sets of integrated organizational capabilities become learning bases for improving existing products and processes and for developing new ones” (p. 8).

One of Chandler’s main themes is that the early companies in a field, once they have consolidated their positions, can create barriers to entry that make it very difficult for others to enter the arena. He notes, for example, that the barriers to entry in the chemical and pharmaceutical industry were so high that only 2 of the 50 largest chemical companies and none of the 30 largest pharmaceutical companies have entered these industries after the 1920s.

Chandler devotes the bulk of his book to the development of the two industries in Europe and the United States, providing a useful overview and analysis and discussing individual companies to illustrate broader trends. He shows how the success of companies in these fields depends in no small part on scientific and technological advances, but he covers the history of scientific developments in only a general fashion. One of his major conclusions is that by the 1970s chemical science and engineering were no longer generating significant new learning. Today’s chemical companies succeed by focusing on product and process development. The pharmaceutical industry, on the other hand, continues to benefit from new scientific learning in biology and related disciplines (e.g., molecular genetics) and finds commercial opportunities in new products based on this learning. Of course, chemists could argue that the new molecular biological sciences have a strong biochemical component and so would question Chandler’s conclusion that chemical science is no longer producing significant new learning.

As one would expect from a business historian, Chandler concentrates Book Reviews on the economic and managerial aspects of the history of the two industries. He believes that his book can provide insights to managers in today’s industry by revealing long-term patterns of success and failure. One of his conclusions is that companies prosper in high-technology industries by following “virtuous strategies” that commercialize new products from their integrated learning bases, but struggle when they diversify into unrelated areas. This thoroughly researched and well-written book should be of interest to anyone in the chemical and pharmaceutical industries, as well as to business historians and historians of science.