Technology Transfers and Organization: The English East India Company and the Transfer of Piedmontese Silk Reeling Technology to Bengal, 1750s–1790s

Abstract

This article addresses two questions: Why do firms centralize, and what determines the success and failure of technology transfers? First, it argues that centralization decreases the costs of technology transfers, especially if knowledge is tacit, by reducing transaction costs. Second, it argues that an important factor for the success of a technology transfer is the capacity of a firm to mitigate agency problems. The English East India Company (EEIC) is mostly studied as a trading body. This article analyzes the company’s attempt to become a producer of raw silk in Bengal. In order to improve the quality of Bengal raw silk and thus increase the silk’s trading potential, it decided to apply Piedmontese reeling technologies that relied on a centralized system of production, which significantly decreased the transmission costs of the technology transfer and was thus the key for its success. However, because the EEIC’s management system involved in silk manufacturing was not innovated, the transfer’s effectiveness was diminished.