ABSTRACT
This chapter explores the emergence and evolution of business networks among an industrial cluster of firms in the manufacturing centre of Coventry. From the late nineteenth century, Coventry's industrial structure was rapidly transformed, as traditional industries such as ribbon weaving, sewing machines, and watchmaking were eclipsed by 'the new engineering products of cycles, motor vehicles and machine tools'. The Coventry district evolved into a cluster of interconnected industries, locked together by common products and technologies, and by markets.' We show that clustering was related to the emergence of the key industry of bicycles, which drew on engineering skills, technologies and entrepreneurial talent that had evolved in older forms of industrial activity. Of importance was the development of business networks which we define using Veblen's concept of institutionalised social habits. Such networks are difficult to detect from empirical investigation, because they are often informal in character and transcend simple economic transactions between firms. Nevertheless, to understand the evolution of networks requires an examination of how social habits were mediated both within and amongst firms at the local and regional level. The evolution of seed-corn firms such as the Coventry Machinist informally created a school of entrepreneurship. This led to the establishment of a cluster of bicycle and component supply companies which pursued a strategy of profusion and nurtured the flow of tacit knowledge amongst firms. The early development of bicycles in the city stimulated activity in related sectors of industry, machine tools and motor vehicles, creating a system of interrelated firms which played an important role in the expansion of a regional pattern of industry. Of particular interest is the firm of Alfred Herbert, the largest machine tool maker in Europe by the 1920s.
Association with the bicycle industry shaped its early product development, and Herbert's became a leader in the machine tool trade. Through its personal style of governance, the firm established business relations based on reputation and trust, and acted as a hub for a regional business network.
