Research

Factory Productivity and the Concession System of Incorporation in Late Imperial Russia, 1894-1908 [Revise and Resubmit, American Economic Review] [Download pdf]

The connection between a firm’s legal form of organization and performance remains poorly understood, especially in poor economies. Causality can work either way: more productive firms may decide to incorporate, and incorporation may allow firms to become more productive. The Russian Empire offers a revealing setting because of two features not commonly found together: Russia’s industrial sector grew rapidly from 1880 to 1914, and Russia’s restrictive incorporation law made the differences between firms of different legal forms of organization especially stark. Incorporation in the Russian Empire required a time-consuming and expensive Imperial concession, yet over four thousand Russian firms incorporated before 1914. The corporate form gave Russian firms advantages in raising capital, including access to foreign and domestic stock and bond markets, full limited liability, and locked-in capital. I argue that more productive firms incorporated to obtain access to long-term capital. Firms that incorporated invested in more powerful machines, grew faster, and became even more productive than they were before incorporating.

This paper studies the decision to incorporate and the returns to incorporation using a newly constructed panel database of manufacturing enterprises from Russian factory censuses of 1894, 1900, and 1908. In the cross-section, corporation-owned factories are larger and more productive. More productive factories are more likely to incorporate within the panel. Regressions with factory-level fixed effects show that after incorporating factories owned by new corporations have greater machine power per worker and even greater revenue per worker. Incorporation aided capital accumulation. I also instrument for a factory’s enterprise form using the relative difference in revenue per worker between corporations and partnerships in a given province industry year cell, excluding the factory in question. The instrument represents corporations’ advantage in a given location and industry: where the quantity was large, more firms incorporated. The IV specification approach shows that, had performance differences been the only factor influencing the decision to incorporate, the returns to incorporation would have been even higher: firms faced significant obstacles to incorporating. Finally, Russian commercial law allowed two types of corporations, one of which did not float shares on equity markets. The factory database shows no difference in performance between the two types of corporations. In other words, firms sought not just access to stock markets but the corporate form’s full set of capital advantages.

Shareholder Rights and Share Capital: The Effect of the 1901 Russian Corporation Reform, 1890-1905 [Economic History Review, August 2017]

In this paper I study the effect of Russia’s 1901 corporation reform on Imperial Russian corporations’ share capital. The 1901 reform increased the rights of small shareholders and removed bankers from corporations’ boards of directors. I argue that corporations affected by the reform altered their share capital to make participation by small shareholders more difficult.

The reform affected one type of corporation (the A-Corporation) more than another type (called the Share Partnership) because one provision of the law created a loophole for Share Partnerships. I thus apply a differences-in-differences approach, studying the differences in corporations of these groups founded before vs. after the reform. The RUSCORP Database (Owen 1990) provides initial charter information from all Russian corporations and from all surviving Russian corporations in 1905. I find that, in response the reform, A-Corporations increased the par value of their shares, reduced their total capitalization, and reduced the number of shares they issued. The reform increased the cost to the firm of having small shareholders; thus, corporations affected by the reform began to resemble the more closely held Share Partnerships.

Vertical and Horizontal Integration in Imperial Russian Cotton Textiles, 1894-1900 [Revise and Resubmit, European Review of Economic History]

When do firms produce their own inputs instead of purchasing them on the market? In one explanation firms engage in vertical integration to save the cost of transacting on the market, especially when markets are thinner and therefore price risk is greater (Coase 1937). On the other hand, firms that wish to vertically or horizontally integrate may be unable to do if they face financial constraints, because integration requires additional capital. I find evidence for both explanations of integration within the Russian cotton textile industry in 1894 and 1900. The 1894 data provide especially rich information on firms’ horizontal and vertical integration: the data list a complete description of each factory’s internal activities and final products. Both vertically and horizontally integrated factories and firms tended to be located outside of European Russia, where markets were thinner. Horizontally integrated firms are more likely to be owned by corporations, which have advantages in raising capital. In addition, vertically integrated firms were older, had more workers and machine power, and produced more revenue given the same workers and machine power.

Data Appendix: Imperial Russian Manufacturing Establishments Database: 1894, 1900, and 1908

My dissertation includes an appendix describing the collection of the factory-level manufacturing data at the heart of the project. The industrial sector in the Russian Empire's poor, mostly agricultural economy was growing rapidly by the beginning of the twentieth century. Scarcity of data has prevented large-scale history studies of manufacturing in poor countries in general and of Russian manufacturing in particular. I describe the formation of a new database of manufacturing establishments in the Russian Empire based on manufacturing censuses conducted in 1894, 1900, and 1908. The database will allow for new studies of the Russian economy and of factory performance in developing economies. This appendix provides a codebook with variable definitions and a description of the sampling scheme for the factory-level data. The database matches factories over time, so I include an analysis comparing matched to unmatched factories. Finally, I describe differences in results that use the enterprise-level data and the aggregate data.

"Capital Structure and Corporate Performance in Late Imperial Russia" (with Steven Nafziger) [Under Revision]

“Financial Dynamics: Corporate Capital Structures and Payout Policies in Imperial Russia, 1900 -1914” (with Steven Nafziger)

“The Birth, Growth, and Death of Russian Corporations: 1900-1914” (with Steven Nafziger) Winner of the Fred Bateman Award for best paper presented at the Economic and Business History Society Conference, May 2018

Other Publications

“Factory Productivity, Firm Organization, and Corporation Reform in Late Imperial Russia.” (Dissertation Summary) Journal of Economic History 76.2 (2016), pp. 619-622. Link

Review of Sergei Antonov, Bankrupts and Usurers of Imperial Russia: Debt Property, and the Law in the Age of Dostoevsky and Tolstoy. History: Reviews of New Books 46.1 (2017): 9. Link

Review of Kim Oosterlinck’s Hope Springs Eternal: Hope Springs Eternal: French Bondholders and the Repudiation of Russian Sovereign Debt. Russian Review 76.2 (2017): 379-80.

Review of Alessandro Stanziani, After Oriental Despotism: Eurasian Growth in a Global Perspective. London: Bloomsbury Academic, 2014. Pp. viii, 183, $34.95, paperback. Journal of Economic History, 76.3 (2016), pp. 961–963. Link

Review of Yanni Kotsonis, States of Obligation: Taxes and Citizenship in the Russian Empire and Early Soviet Republic. Journal of Economic History 76.1 (2016), pp. 281-2. Link

Review of Jennifer Siegel, For Peace and Money: French and British Finance in the Service of Tsars and Commissars. Journal of Economic History 76.1 (2016), pp. 247-9. Link

Review of S.A. Eddie, Freedom's Price: Serfdom, Subjection, & Reform in Prussia, 1648–1848. Journal of Economic History 74.4 (2014), pp 1233-1234. Link