Technological change and the transition from rail to road c1920 - c1939: an opportunity lost? , Southampton, UK University of Southampton
(University of Southampton Discussion Papers in Management, M-07-17).
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The ability of an economy to adapt to changes in the economic environment has long been regarded as an important constituent of economic growth (e.g. North 1991). The adaption of existing firm and market structures requiring the configuration of path dependant organisational structures, operating routines and the wider regulatory institutions that bound market structure.
Rail hauled freight was regulated during the 19th century as if the railway companies' had a monopoly of carriage in this market. By 1918, government was considering how best to deal with a mature industry, where the benefits of competition needed to be weighed against the efficiency associated with a natural monopoloy. Government control of the railways in the war had demonstrated the benefits of co-operation, perhaps even nationalisation. The creation of the Ministry of Transport in 1919 and the subsequent Railways Act of 1921 were an attempt by government to ensure the continued financial health of a private sector rail network, which at the same time could deliver a cheap, efficient service to the business community, thereby ensuring Britain's continued prosperity. The difficulty faced in the post-war market was very different to that of 1914. Massive investment in road hauled, internal combustion engine technology by government during the war provided cheap assets to those wishing to establish their own businesses. The legislative process surrounding the 1921 Act specifically distinguished between rail and road transport, and attempts by the railway companies, the London North Western Railway in particular, to obtain road powers failed, largely it seems through vagaries of the administrative process. Although the railways were eventually granted road powers in 1928, the difficulties associated with changing the regulatory framework are indicative of a key management problem faced by management: how to change the regulatory infrastructure to better suit operational and commercial reality? It was the emergence of road haulage on a large scale that was to provide the main difficulty faced by the railway companies' in the period 1923 to 1939, and beyond into nationalisation. Indeed it may be argued that the difficulty of chosing the most appropriate mode of transport is still at the heart of transport policy today.
This paper will argue that it was the failure of government to act on the analysis of its own servants that created many of the problems faced by railway managers in the inter-war period. The potential difficulties were recognised by civil servants and some railway managers in 1919, but the political process was not able to deliver an effective response. There was a missed opportunity to enable the railway companies to focus on providing the best transport, rather than rail or road hauled, service. Regulation created a market of road hauliers and rail hauliers, and did not encourage the integration of both. The acquisition of road carriers by railway companies' extended collection and delivery services, rather than providing a new business model for the carriage of freight.
The paper begins with a discussion of the legislative changes surrounding the introduction of the Ministry of Transport and the 1921 Act, before moving on to examine the particular administrative process surrounding the failed attempt to acquire road operating powers for London North Western Railway. The more general issue of transport co-ordination and integration is examined through the flawed attempts by government to intervene in regulating the appropriate mode of transport, through both the continued regulation of the railways as a monopoly and the restrictions on road hauliers of their right to operate on certain routes. The paper will conclude that it was the path dependency of administrative structures and regulatory routines that failed to deliver an effective environment within which an integrated freight haulage network could have developed.
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