Core companies

Once these core companies establish a viable national industry, entrepreneurial startups are rarely capable of entering. Instead, competitors to the core companies remain either foreign core companies or domestic core companies in other industries— that is, industries with comparable technical capabilities of the technologies and markets involved with processes of product development, production, and distribution and marketing. 

First movers, of course, cannot create an industry by themselves. They must develop close relationships with supporting enterprises—suppliers both of capital equipment and materials to be processed, research specialists, distributors, advertisers, and providers of financial, technical, and other services. Thus, the needs of the core firms lead to the emergence of a supporting nexus of interconnected and complementary—rather than competitive—enterprises. The nexus may contain small, medium, and even large firms in supporting lines of a wide variety of products and services. And it soon develops into a source for the creation of a wide variety of specialized firms. But only rarely do core companies emerge from the nexus. 

U.S. subsidiaries of foreign industrial chemical core companies (10) ... 

Table 1.1 lists the American and European companies whose evolution is reviewed in Part Two (Chapters 3-6). These core companies created the modern chemical industry at the turn into the twentieth century and continued to dominate it through the period covered by this study. 

Of the multisectored core companies listed in Table 1.1, all except Allied Chemical were American first movers in products based on new chemical technologies. Du Pont, Dow, Monsanto, and American Cyanamid established their initial learning bases between 1896 and 1907. Du Pont was the first mover in nitrocellulose-based explosives, Dow in electrically produced inorganic chemicals, and Monsanto in the synthesis of foods and flavors. The several companies that in 1917 made up Union Carbide had also pioneered in a range of electrically based inorganic products. On the other hand, only one of the enterprises that merged into Allied commercialized a new technology. 

Thus by the end of the twentieth century, the American chemical industry consisted of two multisectored core companies, Du Pont and Dow, as well as a number of specialty chemicals manufacturers still focused on products commercialized in the 1920s or in the 1940s and 1950s. The oil and gas companies produced feedstocks, basic petrochemicals, and commodity chemicals. Except for the German and Swiss companies, which from the start had commercialized pharmaceuticals, the European multisectored chemical companies had also become producers of specialty chemicals. For example, Britain s ICI, after spinning off in 1993 its most profitable division (pharmaceuticals) as a separate enterprise (Zeneca), used the funds generated to acquire Unilever s specialty chemical division. 

This chapter treats what two historians of the chemical industry, Ashish Arora and Alfonso Gambardella, call all-around companies that compete in multiple sectors (SIC codes) of the industry A very small number of the American and European enterprises, six American all-around core companies and a somewhat larger number of European companies, were responsible for commercializing the initial wave of chemical products flowing from the new science-based technologies at the end of the nineteenth and the beginning of the twentieth century. These companies, along with most of the petroleum companies listed in Table 1.1, were also responsible for the polymer/petrochemical revolution in the middle decades of the past century. 

The epilogue to Union Carbide s story can be expressed in a single sentence. In 2001 Dow Chemical acquired Union Carbide for 9.3 billion. The situation was similar to that of Fujitsu s acquisition of Siemens Nixdorf, Europe s leading computer company in 1999, as described in my earlier book Inventing the Electronic Century. Where else could the remaining weaker multisectored core company have gone ... 

While this chapter concentrates primarily on the ten focused chemical companies, it also considers the evolution of a comparable set of specialty enterprises, the specialized engineering firms (SBFs). After World War II, the SBFs designed and built a substantial number of chemical processing plants around the world. These firms had the potential to become focused core companies, but in the United States, at least, only one such firm. Scientific Design, made the attempt, which proved unsuccessful. 

In the 1950s, like Dow and the other major core companies, Cabot looked to opportunities abroad. It built its first carbon black plant in 1950 near Liverpool in England, followed by one in Canada (1953), France (1958), and Italy (1966), as well as investing in partially owned plants in Australia in 1959 and the Netherlands in 1960. 

The evolution of the American pharmaceutical industry obviously differed from that of its sister, the American chemical industry, in that its technology increasingly drew on a different science—biology and related disciplines—its manufacturing on a different process, and its market for an entirely different use—healthcare. Therefore, its core companies required remarkably different technical and functional capabilities. 

The major American core companies were, as industry historian Jonathan Libeneau describes them, large wholesaler/producers who offer a full range of standard preparations, that is, proprietary drugs to pharmacists, dmg-gists, and other retailers. In 1885, Liebenau writes, a buyer could choose between Merck, SmithKline, Parke Davis, Eli Lilly, Sterns, Schieffelen, John Wyeth, Upjohn, Mulford, Sharp Dohme and many others for a complete line of basic medicines in convenient forms. 

The smaller European companies evolved by concentrating on their home markets and European ones, and the Japanese likewise focused on their home market and other East Asian ones. These European and Japanese firms often licensed products from and had alliances with U.S. core companies and startup entrepreneurial firms, just as the American competitors did with European and Japanese pharmaceutical companies. Two of the Japanese companies developed from centuries-old roots. Indeed, Takeda began in 1781, and Shionogi nearly a century later in 1871. The third, Sankyo, was formed in the late nineteenth century as Japan began to industrialize and trade with Western nations. In 1898, Parke Davis penetrated Japan, employing Sankyo as its local marketer. The fourth firm, Yamanouchi, was the youngest, established in 1923. ... 

---