Economic History and Business History: Mutual Contributions and Future Prospects

In the very first edition of Business History T.S Ashton described economic history as 'the parent study', arguing that business history's principal role was to highlight micro-economic perspectives. Much has happened in the intervening 52 years to undermine this view. Indeed, business history would now claim to be a discipline in its own right, with flourishing academic journals, several textbooks, and a plethora of literature of both a generalist and case-study form. At the same time, it is vital not to overlook the enormous complementarities that link economic and business history, specifically for example in terms of better understanding such concepts as entrepreneurship, industrial structure, industrial relations, the impact of government policies, and the roles played by financial institutions in a modern economy. Business historians now think as much about the economic, social, political and cultural environments in which business operates as they do about business operations in their micro-economic context. Meanwhile economics and social science theory more generally has evolved new conceptual frameworks and methodological tools that allow the development of new perspectives in business and economic history. One might therefore argue that the two disciplines are now bound together much more extensively than they would appear to have been in the 1950s.This paper therefore argues that too much divergence between economic history and business history is both undesirable and unnecessary. Such an outcome might arise for example if business history were to become too strongly subsumed within the business school research agenda, embracing sociological and cultural methodologies to the exclusion of a productive relationship with economics. A further risk would be that micro-economic theory that has become useful for firm level analysis in fields such as corporate strategy is also lost to the history agenda. At its embryonic stage business history complemented economic history as a tool of further analyzing the residuals in total factor productivity models. Today it offers more than that, including dynamic theories of resource creation, sustained competitive advantage and corporate control. Economic history meanwhile provides suitable methodologies for business historians to model the performance of entrepreneurs or the consequence of managerial decisions.To exemplify the advantages of these overlapping approaches, the paper revisits a key theme in the economic history literature from a business history perspective: the loss of British competitiveness at the corporate level and consequent economic decline from the middle of the nineteenth century onwards, referred to in shorthand as the entrepreneurial failure hypothesis. An archetypal case study, Lancashire cotton textiles, is used for the purposes of reviewing this hypothesis. It is appropriate to do this, not least because business and economic historians have neglected what had been a productive research programme two decades ago. Most of the residual work has been done by economic historians, without reference to business history approaches, leaving an important gap for business historians to fill in a way which is helpful to the economic history agenda.The paper begins by tracing the origins of business history as a branch of economic history reviewing recent developments in business history as it has developed into a discipline in its own right. It then examines aspects of management theory that have inputted into this process, differentiating between those that are helpful to achieving a coherent programme of economic/business history research and those that are inimical. The former include the resource based view of the firm, and the related notion of dynamic capabilities, which when linked to processes of governance and corporate accountability, offer the potential to link economic theory and economic history with business history by providing a micro theory of the operation of the firm. The paper then updates the entrepreneurial failure literature in economic and business history and re-examines the evidence on Lancashire cotton case study using this integrating theoretical framework. In doing so it shows that there is much to be gaining from potential complementarities in a future economic and business history research programme addressing this, and wider debates. In outlining these potential complementarities for future research the paper will also set out an agenda for how economic and business history can work together in providing better insights into the operation of economic forces.