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Founded in 1892, General Electric set out to dominate the American electrical industry. This article is an explanation of how the company accomplished this goal in the highly profitable electric lamp ("light bulb") market. GE's techniques included technology leadership through in-house development and the purchase of patent rights, discriminatory agreements with suppliers based on market power, and cartel arrangements of various sorts, both foreign and domestic. The article shows how one company was able to use financial and market power, combined with early control of a rapidly developing technology, to gain and then hold a major American market for half a century.
The General Electric Company (GE), an early innovator in electric lighting and power, dominated the highly profitable American electric lamp market for fifty years. It also protected its home market from the commercial advances of foreign firms and realized royalties on technology and expertise shipped abroad. The explanation of how its achieved these remunerative arrangements is both fascinating and instructive.
In this article I will consider GE's transformation of an early advantage in the electric lamp market into a solid and enduring domination. A full-time producer of electrical goods, it enjoyed a number of advantages over smaller competitors, including substantial financial resources, strong scientific and technological capabilities, economies of scale and scope, and market power as both seller and purchaser. Its management developed technological, legal, and marketing strategies that significantly increased GE's lamp market share, then retained that share in the face of continuing competitive threats--an approach that the company used successfully with other important product lines as well.(1) Within the confines of the increasingly restrictive American antitrust laws, GE developed mechanisms of market control as its most valuable patent rights expired, permitting the company to maintain a high level of profits for half a century.
As we shall see, the "visible hand" involved in GE's management of the electric lamp industry might better be characterized as an "iron fist," sometimes gloved in velvet, sometimes not.(2) GE management not only rationalized operations to improve efficiency, lower costs, and maintain product leadership, but it also nullified competitors, both large and small, and neutralized government intervention. The picture that emerges from this examination of GE's methods calls into question the image of an industrial leader...