An exploration into the relationship between management and market forces: The railroads of Australia and the American West, 1880-1900

Abstract

Purpose

Are business outcomes due primarily to entrepreneurial and managerial ability or are they mainly the result of business content? The purpose of this study is to explore this question by comparing the railroads of Victoria and Queensland (Australia) and the South-West and Northern Plains of America between 1881 and 1900. Given the commonalities of the four railway systems in terms of their economic orientation towards rural custom, and their marked difference in terms of ownership, one would expect similarities in their financial circumstances if outcomes were primarily determined by fluctuations in global commodity markets. Conversely, marked differences would be expected if outcomes primarily resulted from managerial initiative.

Design/methodology/approach

Conceptually, this study is informed by the idea that social and economic outcomes are shaped by long historical movements, with meaningful structural change occurring rarely but to great effect. In exploring this concept through a comparison of the railways of Australia and the American West, the study draws on two forms of archival evidence. One source of evidence relates to railroad management, operations and finances. Figures cited come primarily from Australian railway commissioners’ reports and Poor’s Manual of the Railroads of the USA. The other source of evidence relates to agricultural statistics. These are drawn from official reports.

Findings

This study argues that effective strategic decision-making can only occur if we understand the structural changes that alter our world. In the late nineteenth century, the Australian and American railroads servicing newly settled rural regions were financial failures because management failed to appreciate the structural changes that the revolution in steam-powered transport had initiated; a revolution which resulted in commodity prices – and hence, the railway rates for farm produce – being determined by global demand and supply balances rather than by local factors. As a result, they continued a policy of expansion that was no longer financially justified.

Originality/value

This study seeks to contribute to a fundamental debate in historical studies and management about the drivers of social and economic change. Increasingly, there is acceptance of the view that historical circumstances are inherently unstable and what counts is the particular change cascading through a myriad of “events”. This study points in a contrary direction, suggesting that business outcomes are primarily determined by deep structural shifts that can be understood and steered but seldom opposed.

Citation

Bowden, B. (2017), "An exploration into the relationship between management and market forces: The railroads of Australia and the American West, 1880-1900", Journal of Management History, Vol. 23 No. 3, pp. 297-314. https://doi.org/10.1108/JMH-12-2016-0062