Mobilizing Venture Capital during the Second Industrial Revolution: Cleveland, Ohio, 1870-1920

Naomi R. Lamoreaux, University of California, Los Angeles; NBER
Margaret Levenstein, University of Michigan
Kenneth L. Sokoloff, University of California, Los Angeles; NBER

Abstract

During the Second Industrial Revolution of the late nineteenth and early twentieth centuries, Midwestern cities were important centers of innovation. Cleveland, the focus of this study, led in the development of a number of key industries, including electric light and power, steel, petroleum, chemicals, and automobiles, and was a hotbed of high-tech startups, much like Silicon Valley today. In an era when production and invention were increasingly capital-intensive, technologically creative individuals and firms required greater access to funds than ever before. This paper explores how Cleveland's leading inventors and technologically innovative firms obtained financing. We find that formal financial institutions, such as banks and securities markets, were of only limited significance. Instead our research highlights the vital role played by a small number of successful local enterprises that both exemplified the wealth-creation possibilities of the new technologies and served as hubs of overlapping networks of inventors and financiers. We conclude by suggesting that such nodal firms have spawned important clusters of innovative enterprises in other places and times as well.

Recommended Citation

Lamoreaux, Naomi R.; Levenstein, Margaret; and Sokoloff, Kenneth L. (2006) "Mobilizing Venture Capital during the Second Industrial Revolution: Cleveland, Ohio, 1870-1920," Capitalism and Society: Vol. 1 : Iss. 3, Article 5.
DOI: 10.2202/1932-0213.1016
Available at: http://www.bepress.com/cas/vol1/iss3/art5

Discussion and Commentary

Steven Klepper, Carnegie Mellon University, A Shop Floor View of Growth in Turn-of-the-Century Cleveland (December 2006)