The Global Chemical Industry in the Age of the Petrochemical Revolution

Published by EH.NET (August 2007)

Louis Galambos, Takashi Hikino and Vera Zamagni, editors, The Global Chemical Industry in the Age of the Petrochemical Revolution. Cambridge: Cambridge University Press, 2006. x + 529 pp. $80 (hardback), ISBN: 0-521-87105-0.

Reviewed for EH.NET by Alessandro Nuvolari, Faculty of Technology Management, Eindhoven University of Technology.

This book edited by Louis Galambos (professor of history at John Hopkins University, Baltimore), Takashi Hikino (associate professor of industrial organization at Kyoto University) and Vera Zamagni (professor of economic history at the University of Bologna) contains fourteen papers (plus a “quantitative” appendix) on the evolution of the global chemical industry from the end of World War II until the most recent period. The editors have entrusted the drafting of the various chapters to an authoritative panel of scholars who have already provided substantive contributions to the history of the chemical industry. Given these premises, the ambition of the book, which is stated explicitly in the introduction, is to become a sound and comprehensive reference text.

The book is divided in two parts. The first part deals with what the editors term as “crosscutting issues” (which are essentially peculiar features of the evolution of this industry, analyzed from a “global” point of view). In this way, the book covers the themes of firms’ networks, firms’ strategies, corporate financing, and environmental regulation. More traditionally, the second part of the book contains a series of country studies (covering in total eleven nations or groups of nations).

Chapter 1 by Fabrizio Cesaroni, Alfonso Gambardella and Myriam Mariani focuses on the changing role of networks in the evolution of the industry. While before the 1950s, national and international collusive networks between firms played an important role in shaping the structure of the industry, the authors document the formation and growing importance of other forms of networks after World War II, in particular those between firms and universities (for accessing newly produced scientific knowledge) and between users and producers (in particular with users of plastics and other new materials). The chapter also documents the emergence of small specialized engineering firms (SEFs) that increasingly took care of the design of petrochemical plants leading to the formation of an international market for technology. The argument of the authors is that the competitive success of chemical companies is tightly related with their abilities in entering and exploiting these different networks.

In Chapter 2, Harm Schotter attempts to map the strategies of the leading chemical companies over the period 1970 to 2000. The sources used in this exercise are annual reports and other related companies publications. Schotter is looking for evidence on two dimensions of competitive strategies: whether a company is focused more on the national or on the global market and whether the product mix supplied by the company is more oriented towards commodities or specialties. The period studied by Schotter is one of intensive restructuring and turbulence and this is reflected in rather drastic changes in the strategic orientation of companies. Interestingly enough, there seems to be no immediate relationship between strategic positioning along the dimensions examined by Schotter and competitive success.

In Chapter 3, Marco Da Rin tackles the issue of finance in the chemical industry. Da Rin argues convincingly that given the importance of investment in research and development, financing is a critical component for achieving and maintaining a competitive edge in this sector. Accordingly, Da Rin investigates the relationships between different national financial systems and the creation of firm capabilities in the industry. Da Rin concludes that, while the U.S. financial system was capable of assisting companies in their restructuring efforts after the 1970s, the European and Japanese systems were instead partially responsible for delaying the efforts of firms in adapting to the new and more intense competitive environment.

Chapter 4 by Wyn Grant is devoted to environmental regulation. The chapter charts the development of environmental regulation affecting the chemical industry in the U.S. and Europe and the reactions of major chemical companies for adapting to it. Grant’s conclusion is that, although environmental policy and regulation undoubtedly represented a destabilizing force which could severely constrain the growth of the industry, chemical companies were able through a number of initiatives to create a new interface with government and other interest groups which has permitted them to adapt rather successfully to the new situation.

The chapters of the first part of the book are all nicely crafted and they provide very useful surveys. What I think is missing is a chapter devoted to technological change, which appears the leitmotiv to which all the book refers. I think that, given the importance of this factor, it would have been necessary to have a chapter fully devoted to a survey of the technological trends of the sector.

The second part of the book is devoted to national case studies. Chapter 5 by Ulrich Wengenroth deals with Germany. Chapter 6 by John Keenly Smith covers the United States. Chapter 7 by Margrit Muller is devoted to Switzerland. Chapter 8 by Gunnar Nerheim is a survey of Nordic countries (Sweden, Norway and Finland). In Chapter 9 Florence Charue-Duboc summarizes the French case. Chapter 10 by Wyn Grant is a survey of the United Kingdom. Chapter 11 by Takashi Hikino is devoted to Japan. In Chapter 12 Vera Zamagni deals with Italy. Finally, in Chapter 13 by Nuria Puig analyzes Spain.

All the chapters of the second part of the book are written from a business history approach and they provide rich and articulated descriptions, focussing in particular on national polices and company strategies. What perhaps is missing here is the adoption of a more explicit common interpretative framework in which each national study could have been scaffolded. In my view, the traditional structure-conduct-performance approach would have been particularly useful for this purpose. In this way, it would have been easier to draw comparisons and generalizations. In fact, Chapter 14 by Vera Zamagni and Louis Galambos is precisely devoted to a summary of main findings of the case studies but this is a very cursory one (only 3 pages). The book concludes with a quantitative appendix by Renato Giannetti and Valentina Romei which provides a quantitative assessment of the economic trends of the industry between the 1950s and the 1990s.

Notwithstanding some minor reservations (in particular the lack of chapter devoted to technical change), in my view the book represents a very useful point of reference for anyone (not only economic historians, but also economists and management scholars) with an interest in this industry.

Alessandro Nuvolari is Assistant Professor in the Economics of Science and Technology at Eindhoven University of Technology, the Netherlands. His research focuses on the role of innovation and technical change in the British industrial revolution. His publications include “Collective Invention during the British Industrial Revolution: The Case of the Cornish Pumping Engine,” Cambridge Journal of Economics, 2004 and “The Pitfalls of Prosopography: Inventors in the Dictionary of National Biography” Technology and Culture, 2006 (joint with Christine MacLeod). He is currently working on a book on the development and diffusion of the steam engine.