Monday, July 17, 2006

The Oceans are deep, and HQ is far away

Scientific American has a nice piece on the role played by "rogue" captains of the (British) East India Company in establishing the first truly global market.

enterprising ships’ captains engaged in private trading of their own, abusing company resources for personal gain. Now, researchers at Columbia University have shown that it was this illicit trading, rather than officially sanctioned activity, that was directly responsible for the creation of the first global market and the success of the East India Company.

In a paper in this month’s American Journal of Sociology, they describe how many rogue captains ignored orders to trade in established markets and then return directly to England, choosing instead to explore new locations and trade between local Asian ports for their own personal profit. Although they were breaking the law by appropriating supplies and ship crews for this private trading, in doing so they ultimately benefited the East India Company by building a larger market and gaining a unique knowledge of local market fluctuations.

However, I am not sure about this claim

She and co-author Peter Bearman argue that not only did these entrepreneurial individuals enable the East India Company to completely dominate East Asian trade by 1760

Surely the captains of the Dutch and French companies were equally enterprising? I don't know.
A good example of the advantages of delegation when knowledge is diffuse and communications is slow? A key insight of The Modern Firm by John Roberts is that when these conditions prevail, the way to go is to delegate power, while ensuring that the local guy has the right incentives. When these conditions do not apply, however, centralization could lead to lower costs.

1 comment:

gaddeswarup said...

I remember seeing a documentary on the origins of Singapore and I think that it was along the lines described above.