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Lamoreaux, Levenstein, and Sokoloff Capitalism and Society, 2006

Mobilizing Venture Capital during the Second Industrial Revolution : Cleveland , Ohio,1870-1920. Lamoreaux, Levenstein, and Sokoloff Capitalism and Society, 2006. Main story. How Cleveland’s inventors and innovative firms obtained financing?

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Lamoreaux, Levenstein, and Sokoloff Capitalism and Society, 2006

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  1. Mobilizing Venture Capital during the Second Industrial Revolution: Cleveland, Ohio,1870-1920 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, 4thin 1920 • Significant patents: 5th in 1900 • average size of firms: 66th in 1870, 52th in 1920

  4. 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

  5. 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

  6. 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

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

  8. The White Sewing Machine Hub Almost all the same!

  9. 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

  10. 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

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

  12. 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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