Industrialization and Technological Advancements: The late 19th century witnessed a surge in industrialization, driven by technological innovations such as the steam engine, electricity, and new manufacturing techniques. These advancements allowed for increased production and efficiency, making it possible for businesses to expand beyond individual ownership and operate as larger, more complex organizations.
Limited Liability: The concept of limited liability, which shields individual investors from personal liability for the debts and obligations of a corporation, became more widely adopted in the late 19th century. This legal structure provided investors with greater protection, encouraging them to invest in and form new corporations.
Capital Requirements: The growth of corporations was facilitated by the increasing availability of capital. During this period, the United States experienced a significant influx of foreign investments and also saw the rise of large investment banks, such as J.P. Morgan & Co., which provided financial backing for new businesses and ventures.
Economies of Scale: As corporations grew in size, they were able to achieve economies of scale, allowing them to produce goods and services more efficiently and at a lower cost than smaller, individual enterprises. This competitive advantage further contributed to the success and growth of corporations.
Vertical Integration and Conglomeration: Corporations engaged in vertical integration, controlling various stages of the production process, from raw material acquisition to final distribution, and horizontal integration, merging with other companies in the same industry. These strategies allowed corporations to maximize efficiency, reduce costs, and increase market power.
Government Support: Government policies and regulations, including favorable antitrust laws and tariff policies, also played a role in the growth of corporations. The Sherman Antitrust Act of 1890, while aimed at preventing monopolies, allowed for certain forms of consolidation and mergers, facilitating the formation of large corporations.
Overall, the combination of technological advancements, legal structures like limited liability, access to capital, economies of scale, and favorable government policies created a conducive environment for the dramatic growth of corporations after 1870. Corporations became the dominant form of business organization in many industries, shaping the economic landscape of the United States and the world.