Market Structure, Industrial Research, and Consumers of Innovation: Forging Backward Linkages to Research in the Turn-of-the-Century U.S. Steel Industry

Abstract

Although the U.S. steel industry's concentrated market structure and well-established production technology curbed active research by most steel firms, between 1880 and 1910 vertical research arrangements between steel producers and steel consumers, notably the Pennsylvania Railroad, became a key factor in promoting both increased innovation in basic steel products and increased innovative effort by steel producers, albeit slowly and gradually. Thus, research into steel was initiated not by steel producers but by steel consumers, who established in-house industrial research laboratories and interfirm cooperative research arrangements as a means to solve their technical problems with steel products. They also began to work toward creating an institution—the American Society for Testing Materials—that would allow for effective interaction with other consuming firms and, eventually, with producing firms to exchange information and build consensus.