Accounting for Growth: Information Systems and the Creation of the Large Corporation

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Overview

Accounting for Growth is a study of information systems in American business during the quarter-century before World War I, a period that saw the birth of the large modern corporation as the dominant form of American enterprise. The book takes as its starting point the way in which the Dow Chemical Company constructed and reconstructed its internal information systems during years of rapid growth and technological change in the chemical industry. The book also discusses how changes in information systems affected Dow's organization and management, as well as the extent of its technological innovation.

During this period, Dow transformed itself from a small, single-product firm, which sold all its output through a national cartel, into a technologically dynamic, vertically integrated firm selling pharmaceutical, agricultural, and industrial chemicals throughout the world. These organizational and strategic changes required changes in the firm's information systems, which measured and recorded what occurred within the firm, particularly in the areas of monitoring and planning. Most of these changes were incremental and were initiated by Dow's managers, who relied heavily on the expertise of large stockholders associated with other firms.

The book examines the impact of the accounting profession and its new standards in cost accounting on the development of information systems at Dow. It compares Dow's accounting practices to those of other manufacturing firms as well as to the emerging ideas of accountants and engineers about how information systems should be designed. Despite urging from professional accountants, Dow declined to include allocated overhead in its calculation of product costs, relying instead on measures of average variable cost except when it was making prospective investment decisions. Such innovations changed both the information available to managers and the incentives that followed.

These information changes encouraged Dow's master strategy of product diversification (moving into new markets and out of some large but less profitable ones) and vertical integration, rather than cooperation with cartels, which controlled distribution as well as output decisions.

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Editorial Reviews

From the Publisher
"Levenstein gives us a richly articulated view of the complex interactions between a firm's strategy and its information system that will be welcomed by economic and business historians and should be required reading for economists of the firm." —Joanne Yates, Journal of Economic History
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Product Details

  • ISBN-13: 9780804730037
  • Publisher: Stanford University Press
  • Publication date: 7/28/1998
  • Edition description: New Edition
  • Pages: 296
  • Product dimensions: 6.00 (w) x 9.00 (h) x 1.00 (d)

Meet the Author

Margaret C. Levenstein is Assistant Professor of Economics at the University of Michigan.

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Table of Contents

List of Figures
1 Introduction: Information and Innovation 1
2 The History of Early Manufacturing Accounting 20
3 Strategy and Structure: A History of Dow 40
4 Reports and More Reports: A Reconstruction of the Information System 87
5 Accounting for Capital: Depreciation, Inventory Valuation, and Cost Calculation 140
6 Strategy, Structure, and Information: The Evolution of Accounting at Dow 164
7 Information, Organization, and Competition: The Creation of Monopoly Capitalism 190
App. A Biographical Information for Key Individuals in the Early History of the Dow Chemical Company 199
App. B Products of the Midland and Dow Chemical Companies, 1891-1914 204
App. C Item Identifications: Elements of the Dow Information System 208
App. D Types of Information Included in Midland and Dow Chemical Company Reports 211
Notes 215
Bibliography 265
Index 273
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