Hostname: page-component-586b7cd67f-dlnhk Total loading time: 0 Render date: 2024-11-25T03:47:53.242Z Has data issue: false hasContentIssue false
  • English
  • Français

Discrimination or Social Networks? Industrial Investment in Colonial India

Published online by Cambridge University Press:  24 February 2014

Bishnupriya Gupta
Bishnupriya Gupta*
Affiliation:
Associate Professor, Department of Economics, University of Warwick, Coventry, CV4 7AL, United Kingdom. E-mail: [email protected].
Get access Rights & Permissions [Opens in a new window]

Abstract

Industrial investment in colonial India was segregated by the export industries, such as tea and jute that relied on British firms and the import substituting cotton textile industry that was dominated by Indian firms. Empirical evidence in this article does not suggest that barriers to entry faced by Indian entrepreneurs created this separation. Informational asymmetry played an important role. British entrepreneurs knew the export markets and the Indian entrepreneurs were familiar with local markets. Conditional on the initial advantage in entry, social network effects determined subsequent entry of firms by ethnicity and created separate spheres of industrial investment.

Type
Articles
Information
The Journal of Economic History , Volume 74 , Issue 1 , March 2014 , pp. 141 - 168
Copyright
Copyright © The Economic History Association 2014 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

My debt is to V. Bhaskar and Debraj Ray for discussions to formalize the arguments in the article. I thank Wiji Arulampalam, Sascha Becker, Nick Crafts, two anonymous referees, and the editor, Jean-Laurent Rosenthal, for helpful suggestions and the participants at All-UC Economic History Meeting at Caltech, ESTER Research Design Course at Evora, and the Economic History Workshop at Warwick for comments. I am grateful to the Economic and Social Research Council, UK for support under research grant R000239492. The errors are mine alone.

References

REFERENCES

Anstey, V. Economic Development of India. London: Longmans, Green & Co, 1957.Google Scholar
Bagchi, A. K. Private Investment in India. Cambridge: Cambridge University Press, 1972.Google Scholar
Bagchi, A. K. “European and Indian Entrepreneurship in India, 1900-30.” In Enterpreneurship and Industry in India, 1800-1947 edited by Ray, R. K.. Delhi: Oxford University Press, 1994.Google Scholar
Bagchi, A. K. The Evolution of the State Bank of India, Volume II. New Delhi: Sage Publications, 1997.Google Scholar
Banerjee, A.V. “A Simple Model of Herd Behavior.” Quarterly Journal of Economics 107, no. 3 (1992): 797–817.CrossRefGoogle Scholar
Banerjee, A.V., and Munshi, K.. “How Efficiently is Capital Allocated? Evidence from the Knitted Garment Industry in Tirupur.” Review of Economic Studies 71, no. 1, (2004): 19–42.CrossRefGoogle Scholar
Bikchandani, S., Hirschleifer, D., and Welch, I.. “Learning from the Behavior of Others: Conformity, Fads, and Informational Cascades.” Journal of Economic Perspectives 12, no. 3 (1998): 151-70.CrossRefGoogle Scholar
Bordo, M., Eichengreen, B., and Irwin, D.. “Is Globalization Today Really Different from Globalization a Hundred Years Ago.” In Brookings Trade Policy Forum, edited by Collins, S. and Laurence, R., 1–72. Washington, DC: Brookings Institution, 1999.Google Scholar
Bovenberg, A. L., and Gordon, R. H.. “Why is Capital So Immobile Internationally? Possible Explanations and Implications for Capital Income Taxation.” American Economic Review 86, no. 5 (1996): 1057–75.Google Scholar
Buchanan, D. The Development of Capitalist Enterprise in India. London: Frank Cass, 1966.Google Scholar
Chapman, S. Merchant Enterprise in Britain: From Industrial Revolution to World War I. Cambridge: Cambridge University Press, 1992.CrossRefGoogle Scholar
Davis, L. E., and Huttenback, R. A.. “The Political Economy of British Imperialism: Measures of Benefit and Support.” The Journal of Economic History 42, no. 1 (1982): 119-30.CrossRefGoogle Scholar
Davis, L. E., and Huttenback, R. A.. “The Export of British Finance.” The Journal of Imperial and Commonwealth History 13, no. 3 (1985): 28–76.CrossRefGoogle Scholar
Desai, A. “Origins of Parsi Enterprise.” In Enterpreneurship and Industry in India, 1800-1947, edited by Ray, R., 99–108. Delhi: Oxford University Press, 1994.Google Scholar
Edelstein, M. “Realized Rates of Return on U.K. Home and Overseas Portfolio Investment in the Age of High Imperialism.” Explorations in Economic History 13, no. 3 (1976): 283–329.CrossRefGoogle Scholar
Epstein, G. S. “Informational Cascades and the Decision to Migrate.” In Frontiers of Economics and Globalization, Volume 8, Migration and Culture, edited by Epstein, G. S. and Gang, I. N., 25–44. Bingley, UK: Emerald Group Publishing Limited, 2010.Google Scholar
Fafchamps, M. Market Institutions in Sub-Saharan Africa: Theory and Evidence. Cambridge, MA: MIT Press, 2004.Google Scholar
Fafchamps, M., and Minten, B.. “Relationships and Traders in Madagascar.” Journal of Development Studies 35, no. 6 (1999): 1–35.CrossRefGoogle Scholar
Goswami, O. Industry, Trade, and Peasant Society: The Jute Economy of Eastern India, 1900-1947. Delhi: Oxford University Press, 1991.Google Scholar
Guha, A. “More About Parsi Seths: Their Roots, Entrepreneurship, and Comprador Role: 1650-1918.” In Business Communities in India: A Historical Perspective, edited by Tripathi, D., 109–121. New Delhi: Manohar, 1984.Google Scholar
Gupta, B. “Wages, Unions, and Labor Productivity: Evidence from Indian Cotton Mills.” Economic History Review 64, no. 1 (2011): 76–98.CrossRefGoogle Scholar
Lucas, R. E. “Why Doesn't Capital Flow from Rich to Poor Countries?” American Economic Review 80, no. 22 (1990): 91–96.Google Scholar
Macpherson, W. “Investment in Indian Railways, 1845-1875.” Economic History Review 8, no. 2, (1955): 177-86.Google Scholar
Mehta, M. Indian Merchants and Entrepreneurs in Historical Perspective. New Delhi: Academic Foundation, 1991.Google Scholar
Morris, M. D. “Towards a Reinterpretation of Nineteenth-Century Indian Economic History.” The Journal of Economic History 23, no. 4 (1963): 606-18.CrossRefGoogle Scholar
Morris, M. D.. “Values as an Obstacle to Economic Growth in South Asia: An Historical Survey.” The Journal of Economic History 27, no. 4 (1967): 588–607.CrossRefGoogle Scholar
Morris, M. D.. “The South Asian Entrepreneurship and the Rashomon Effect.” Explorations in Economic History 16, no. 3 (1979): 341-61.CrossRefGoogle Scholar
Morris, M. D.. “The Growth of Large-Scale Industry to 1947.” In The Cambridge Economic History of India, Volume II, edited by Kumar, D. and Desai, M., 553–676. Delhi: Cambridge University Press, 1982.Google Scholar
Morris, M. D.. “Indian Industry and Business in the Age of Laissez Faire.” In Enterpreneurship and Industry in India, 1800-1947, edited by Ray, R. K., 187–227. Delhi: Oxford University Press, 1994.Google Scholar
Munshi, K. “Strength in Numbers: Networks as a Solution to Occupational Traps.” Review of Economic Studies 78, no. 3 (2011): 1069–1101.CrossRefGoogle Scholar
Pearse, A. The Cotton Industry India. Manchester: International Federation of Cotton Spinners’ and Manufacturers’ Association, 1930.Google Scholar
Portes, R., Rey, H., and Oh, Y.. “Information and Capital Flows: The Determinants of Transactions in Financial Assets.” European Economic Review 45, no. 4-6 (2001): 783-96.CrossRefGoogle Scholar
Ray, R. “Asian Capital in the Age of European Domination: The Rise of the Bazaar, 1800-1914.” Modern Asian Studies 29, no. 3 (1985): 449–554.CrossRefGoogle Scholar
Ray, R. K. “Introduction.” In Enterpreneurship and Industry in India, 1800-1947, edited by Ray, R. K., 1–69. Delhi: Oxford University Press, 1994.Google Scholar
Rungta, R. S. The Rise of Business Corporations in India, 1850-1900. Cambridge: Cambridge University Press, 1970.Google Scholar
Rutnagur, S. M. Bombay Industries: The Cotton Mills. Bombay: Indian Textile Journal, 1927.Google Scholar
Sen, A. K. “The Pattern of British Enterprise in India, 1854-1914: A Causal Analysis.” In Enterpreneurship and Industry in India, 1800-1947, edited by Ray, R. K., 109–26. Delhi: Oxford University Press, 1994.Google Scholar
Thorner, D. “Great Britain and the Development of India's Railways.” The Journal of Economic History 11, no. 4 (1951): 389–402.CrossRefGoogle Scholar
Timberg, T. A. The Marwaris: From Traders to Industrialists. New Delhi: Vikas, 1978 Google Scholar
Tripathi, D. “Indian Entrepreneurship in Historical Perspective: A Re-Interpretation.” Economic and Political Weekly 6, no. 22 (1971): M59–66.Google Scholar
Tripathi, D. State and Business in India: A Historical Perspective. Delhi: Manohar, 1987.Google Scholar
Tripathi, D. Historical Roots of Entrepreneurship in India and Japan: A Comparative Perspective. New Delhi: Manohar, 1997.Google Scholar
Tripathi, D. The Oxford History of Indian Business. New Delhi: Oxford University Press, 2004.Google Scholar
Tripathi, D., and Mehta, M.. Business Houses in Western India. London: Jaya Books, 1990.Google Scholar
Vicziany, M., The Cotton Trade and Commercial Development of Bombay, 1855-1875, Ph.D. thesis, London University, 1975.Google Scholar
Weber, M. The Religions of India: The Sociology of Hinduism and Buddhism. Translated and edited by Gerth, H.H and Martindale, D.. New York: Free Press; London: Collier Macmillan, 1958.Google Scholar
White, D. L. Competition and Collaboration: Parsi Merchants and the English East India Company in Eighteenth-Century India. New Delhi: Munshiram Manoharlal Publishers, 1995.Google Scholar

Data Sources

Bombay Cotton Mills Association Annual Reports, 1889, 1910, 1920, 1929, 1934.Google Scholar
Investors India Year Books, 1911-1913, 1920, 1925, 1929, 1934.Google Scholar
Jute Mills Review, 1935.Google Scholar
Statistical Abstract of British India, 1922.Google Scholar
Tea Producing Companies, The Mincing Lane Tea and Rubber Share Brokers’ Association and the Indian Tea Share Exchange. London, 1911-1914, 1920, 1929, 1934.Google Scholar