BLOG #3: Update On Andrew Smith’s activities for the Timber Project

In the last few months, Andrew Smith (University of Liverpool Management School) has been contributing to the timber project in several ways.

First, he has been supervising the collection trade statistics so that we can reconstruct the international flows of timber in the nineteenth century. Collecting the data has been involved looking at the table of figures that were printed each year in the British parliamentary papers and then entering the relevant numbers into an Excel file. This essential data entry work has been performed by an able Research Assistant working under Andrew’s supervision. (The able RA in question is Joe Kelly, a PhD student over in Liverpool’s history department). Andrew has been responsible for analysing the resulting data and turning it into a form useful to other members of the project. He has also engaged in archival research about the international timber trade, using materials in the University of Liverpool Library’s Special Collections & Archives as well as the Archive in the Liverpool Museum.

Andrew wrote a lengthy report on the history of British timber tariff policy for the group. Andrew has also researched and prepared a long note on the history of the Canada Dock, a specialised facility for handling timber in Liverpool’s waterfront that opened in 1859.   The information in these documents will be incorporated into the various co-authored papers that emerge from our group project. Moreover, the material in the reports has fed into a paper Andrew is co-authoring with Kirsten Greer and Kirby Calvert.

This paper seeks to answer the question of whether it is possible for a government to use protective tariffs and other interventionist trade policies to permanently increase the competitiveness of the nation’s firms . Free-market purists argue that protectionist policies are almost always wrong, since they nurture incompetent companies that almost always fail once the artificial support of government intervention is removed. Other academics and policymakers, however, argue that under very particular circumstances, it is possible to use industrial policy to nurture companies that are genuinely competitive. These companies will survive and thrive once the supportive industrial policy, the training wheels as it were, is removed. These academics, who include figures such as Dani Rodrik, tend to use data taken from the post-1945 history of East Asia to support their theory. However, the advocates of active IP certainly consider the economic histories of other countries. Indeed, the edited collection University of Toronto Press published last year, Smart Globalization, uses Canadian case studies to try to address this debate.

Our paper, which is called “The Role of IP-Induced Resource Accumulation by the Liverpool Timber Cluster,” uses the Liverpool timber merchants on the 19^th century to engage with the issue of whether IP can permanently strengthen the capacity of firms to compete in the global economy. In the paper, we operationalize a theoretical framework that was recently developed by Sergio Lazzarini, a professor of strategy at Insper Institute of Education and Research in São Paulo, Brazil. (see his “Strategizing by the government: Can industrial policy create firm‐level competitive advantage?.” Strategic Management Journal 36, no. 1 (2015): 97-112

Here is an abstract of our paper

“The Role of IP-Induced Resource Accumulation by the Liverpool Timber Cluster”

Andrew Smith, Kirsten Greer, Kirby Calvert

Abstract:

In 1810, the British government introduced an Industrial Policy (IP) designed to create alternative to Britain’s traditional supplies of wood in the Baltic region. This IP consisted of a differential duties to induce timber importing firms to switch from Baltic to Canadian suppliers. As a result of this policy, the firms acquired capabilities related to the import of wood over long distances. Between 1810 and 1842, Britain’s timber merchants developed thriving businesses based on trans-Atlantic supply chains. The tariff structure in place in these years created an artificial cost structure that benefited timber merchants with ties to Canada, many of whom were in Liverpool, over timber merchants with ties to the Baltic, a group disproportionately located in Hull, Newcastle, and the other North Sea ports that faced towards the Baltic. Between 1842 and 1860, this tariff structure was gradually eliminated. At the same time, the development of Britain’s railway network intensified competition among British ports to serve timber consumers in the interior of the country. Liverpool’s timber merchants thus faced a number of strategic threats in the 1850s and 1860s. The firms in Liverpool’s timber cluster responded to these challenges with strategies that involved a mixture of intra-cluster cooperation and intra-cluster, inter-firm competition. They learned to use the resources they had accumulated during the 1810-1842 period of mercantilist tariffs in novel ways to cope with the new strategic environment. The historical case study presented in this paper is intended as a contribution to the project of integrating research in IP and Strategic Management (SM), a research agenda that has been outlined by Lazzarini (2015). The paper uses this historical case study to provide prescriptions for policymakers in different groups of nations. The paper uses the experience of the Liverpool timber cluster in the nineteenth century to argue that interventionist IP is most likely to result in the accumulation of Support-Adjusted Sustainable Competitive Advantage (SASCA) by firms in polities have long been characterized by stable and inclusive political systems, low levels of corruption, and high levels of transparency and state capacity. In such countries, interventionist IP may be able to produce SASCA, provided there is vigorous competition between firms in the sector targeted by the IP. The IP should also ensure that the firms in the targeted sector should be integrated into global production networks. However, the IP is most likely to be effective if targeted sector has high degree of geographical specificity of the type seen in clusters.

Andrew will be presenting this paper at the University of York Management School on Tuesday, 24 February. He also plans to get feedback on this paper at the summer conference circuit, with presentations at the Association of Business Historians annual conference (Exeter, 3-4 July ) and a pre-conference paper development workshop at the joint meeting of the Business History Conference and the European Business History Association (Miami, 24 June). Andrew will then, he hopes, present the paper to Society for Strategic Management conference in Denver, Colorado, October 3 – 6, 2015.

To conclude, Andrew Smith and his collaborators are using these funds provided by SSHRC to produce high-quality, archive-based historical research that is relevant to policy issues that are being faced by governments around the world. We also believe that our research will be of interest to decision makers in the private sector, as well as to academics in a range of disciplines.

Figures 1 & 2: Canada and Huskisson Docks, Liverpool.  Until 1860, the vast majority of the 20-odd timber firms in the city were located near the Huskisson and Brunswick Docks. In that year, they relocated en masse to the newly opened Canada Dock, which was designed to handle timber imports (hence the name).