Policy, innovation: Historical
Policy, Organization, and Innovation in
American Pulp and Paper since 1914: Historical perspectives on
The pulp and paper industry is currently undergoing fundamental
changes in its organization and technology. A new wave of
consolidation has swept through the industry. In its wake, firms
must seek to integrate diverse sources of supply and plants of
various capacities and characteristics capable of producing a wide
array of products for various market segments. This reshaping must
occur within a complex regulatory environment involving multiple
jurisdictions and agencies pursuing aims that often conflict.
Consequently, it must involve both independent creative
entrepreneurial behavior on the part of managers at individual
firms and creative cooperation through institutions that reach
across the industry.
Our research seeks to provide perspective on this situation by
examining similar episodes of transition from earlier in the
history of the industry. Since the late nineteenth century, the
pulp and paper industry has undergone recurrent bouts of
organizational change (Stevenson, 1940; Ohanian, 1993). Typically,
these episodes have come in response to external shocks in the form
of shifts in demand, often triggered by political action such as
war or new economic policies (Ellis, 1948 and 1960). On occasion,
they have resulted from disruptions in the sources of supply.
Regardless of the impetus for change, these shocks have compelled
industry leaders to rethink the boundaries among firms and between
the industry and various regulatory agencies such as the Federal
Trade Commission and the Environmental Protection Agency.
Adjustments in organization and industry relations have
typically focused upon matters of costs and pricing (Stevenson,
1940; Ellis, 1948 and 1960; Whitney, 1958; Lamoreaux, 1985). One
would hardly expect otherwise in an industry where much activity
involves high-volume, capital-intensive manufacturing of a largely
undifferentiated product using stable processes that are improved
incrementally. In such circumstances, marginal costs acquire
heightened importance. It is not surprising, then, that most
American anti-trust activity during the first half of the twentieth
century focused upon pricing arrangements among firms. Nor is it
difficult to comprehend why tariffs have often figured prominently
in episodes of reorganization (Ellis, 1948). Even a small
adjustment in duties can exert a profound impact upon the
competitiveness of paper mills in a given nation. The same is true
for environmental regulations (Norberg-Bohm and Rossi, 1998). With
margins so tight and productive efficiencies so critical, plants
cannot easily absorb the costs of environmental compliance and
Much of the best recent research into the history of the pulp
and paper industry has sought to comprehend this interplay among
policy, industry structure, and incremental process improvement.
Avi J. Cohen, for instance, has documented incremental improvements
occurring in the American industry between the two world wars
(Cohen, 1984 and 1987). He attributes rapid increases in productive
efficiency during the 1920s to a booming market for newsprint that
supported rapid investment in electrification and facilitated ready
cooperation through the newly created Technical Association of the
Pulp and Paper Industry. Gary Bryan Magee takes the story further
back in time, from 1860 to 1914, and offers a useful comparative
dimension between Britain and the United States (Magee, 1997a and
1997b). Magee is especially concerned with how American firms
developed productive efficiencies more fully than their British
counterparts. He attributes the divergence to several elements,
including market demand, resource endowments that encouraged
alternative labor systems, differences in the abilities of the
industries to learn collectively, and tariff policies. Two other
recent studies move forward in time and look at incremental
improvements introduced in response to environmental regulation
since the nineteen seventies (Collins, 1994 and Norberg-Bohm and
While these works and several older studies (Boyce, 1933;
Stevenson, 1940; Ellis, 1948; OEEC, 1951; UNESCO, 1954: Ellis,
1960) lay a valuable foundation, they leave open several lines of
inquiry of particular relevance to the contemporary pulp and paper
industry. Some obvious holes remain in temporal coverage. No study
has examined developments since World War I with anything
approaching the thoroughness of Magee. Cohen fills in some of the
gaps for the period up to 1940, but in his desire to comprehend
process innovation, he leaves unexamined several important
developments in the area of product innovation during the teens and
twenties, including new filtering papers, absorbent products for
hygiene and medicine, and building products (Grummer, 1991 and
Smith, 1991). These efforts to diversify across product lines,
largely obscured by the FTC's overriding concern during the
interwar years with price-fixing in newsprint, bear a close
resemblance to more recent developments in the industry.
By treating the industry in a largely undifferentiated manner,
Cohen also failed to comprehend important regional differences. The
pulp and paper industry underwent significant geographic shifts
between the wars (Ohanian, 1993). Movements into new areas involved
vital learning processes in horticulture and chemical processing,
as firms struggled to adapt established production technology to
new raw materials (Burke, 1993). Even the seemingly
undifferentiated newsprint sector thus experienced technical change
of considerable complexity and variety. Such variation posed
complicated challenges for firms and trade associations alike.
Regional variations likely acquired heightened significance
during the post-war period (Birch, n.d.). The pace of geographic
relocation accelerated, while emergent environmental concerns at
the state and local level introduced a new element into the complex
regional dynamic. Labor conditions, which also varied widely by
state and region, complicated the situation still further. The
recent pioneering studies of William Boyd have only begun to
suggest just how profoundly local conditions such as these
influenced the course of change in pulp and paper during the
post-war decades (Boyd, 2001).
Nor did regional differences diminish in importance with the
emergence of national environmental and occupational safety
legislation during the late sixties and early seventies. For rather
than homogenizing conditions at the local and regional level, these
national measures superimposed another layer of jurisdiction upon
the old (Harrigan, 1995). Those national measures, moreover,
necessarily had significant implications for the competitiveness of
firms in what had always been a global industry. Pulp and paper
companies now faced an extraordinarily daunting situation in which
they needed to operate in numerous local arenas while competing in
global markets shaped in considerable measure by national policies
(Eaton and Kriesky, 1998). All the while, they needed to adust to
changing technologies affecting both process and product (Stier and
Bengston, 1992; Oforiamoah, 1993). The circumstances called for
some of the most creative boundary-drawing in the history of the
industry (David, et. al., 1992; Mater, 1997).
We seek through our research to examine this evolving interplay
among technical innovation, industry organization, and government
policy at the local, regional, and national levels since 1914. In
part, this will entail a macro-level assessment of policy and
practice across the American industry, with some comparison to
developments in Scandinavia and other areas of Europe. Our larger
aim, however, is to probe key moments of transition in greater
detail by documenting events at the level of the firm and the
plant. By tracing the responses of particular managers to specific
circumstances, we can better appreciate how local and regional
conditions interacted with national and international ones. A case
study approach also promises to reveal precisely how firms
interacted with one another across the industry. We seek to
comprehend how business strategies at various moments in time
involved elements of both cooperation and competition.
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