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Mobilizing Venture Capital during the Second Industrial Revolution: Cleveland, Ohio,1870-1920 Lamoreaux, Levenstein, and Sokoloff Capitalism and Society,

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Presentation on theme: "Mobilizing Venture Capital during the Second Industrial Revolution: Cleveland, Ohio,1870-1920 Lamoreaux, Levenstein, and Sokoloff Capitalism and Society,"— Presentation transcript:

1 Mobilizing Venture Capital during the Second Industrial Revolution: Cleveland, Ohio, Lamoreaux, Levenstein, and Sokoloff Capitalism and Society, 2006

2 Main story How Cleveland’s inventors and innovative firms obtained financing? successful local enterprises= wealth-creation possibilities + hubs of overlapping networks

3 The Rise of Cleveland manufacturing output: 22th in 1870, 4th in 1920 Significant patents: 5th in 1900 average size of firms: 66th in 1870, 52th in 1920

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7 Informal Finance not Automatic personal connections + the worth of ventures Jacob Cox’s Cleveland Twist Drill Company 1, initial capital investment of $2000 (at 7 percent interest) 2, lent him $9,000

8 The Brush Electric Company Brush’s technical triumph + Telegraph Supply Company’s backing= success +prosperity 1 magnet for ambitious young men 2 network with creative people 3 investors eager to finance

9 Hub of Network of Inventors 1, Bentley and Knight +electrically powered Streetcars 2, Work in Cleveland 3, very visible position+ financial backers= Bentley-Knight Electric Railway Company

10 Limited Formal Financial Institutions secondary role of formal finance Crucial: validation of technology by experts in the hub + businessmen hoping to replicate

11 The White Sewing Machine Hub Almost all the same!

12 Summary conventional story: employment positions in the R&D facilities of large-scale enterprises the dominant pattern in the Midwest: inventors became principals in companies detail the channels through which local pools of capital flowed into high-tech enterprises

13 The exact channel good reason to believe that the investments would pay off signal that their ideas were promising the networks that formed around innovative firms

14 Beyond Cleveland: Detroit 1, Initial Olds Motor Works 2, demand for parts: Cadillac, Ford, and Buick 3, spun off large numbers of new enterprises

15 Beyond Cleveland: Silicon Valley 1, the Fairchild Semiconductor Company 2, founding engineers started other businesses : Advanced Micro Devices, Intel, and LSI Logic conclusions : heart of overlapping networks of innovators and financiers


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