STEVEN W.

USSELMAN
This article surveys firm behavior and competitive structure in American
computing during the past 50 years and places the industry within the context of American political economy It argues thaf leading firms such as lBM,
Apple, and Microsoft have exhibited a capacity to strike compromises between innovation and stability Through selective enforcement of the antitrust laws, government has tolerated and even encouraged such behavior
The computer industry has thus followed patterns established in other endeavors such as electric power and telephony

ction
he remarkable history of the American computer industry
can perhaps best be understood as a sustained drive toward
aturization punctuated by a series of technical compromises.
Even the most casual observer could likely identify the main
course of change. Sustained improvements in manufacturing
technology have enabled producers of solid state components to
cram ever more circuitry into smaller spaces for far less cost.
Riding the natural trajectory of this revolution in miniature,
computer designers and programmers have produced machines of
markedly increased capabilities and steadily diminishing expense
[I]. Less appreciated, it seems, are the pauses along the way. For
amid the ever advancing tide of miniaturization, the computer industry has periodically stabilized around a basic technological configuration involving standard components, logical design, and operating software. Each of these interludes has necessarily involved the
same basic compromise. The potential for more rapid and more
radical change at the technical frontiers of the industry has been
sacrificed in exchange for the perceived benefits of standardization.
These critical compromises have typically been orchestrated
by powerful firms that dominated the market for computing. For
much of the industrys history, giant International Business Ma(IBM) performed this vital function. Capitalit had developed in the electromechanical era
of data processing, IBM quickly garnered over 80% of the market for electronic computers, a position it held for over a quarter
century [2].With the advent of personal or desktop computing,
IBM came to, share the role with Apple Computer, an upstart
that had introduced a measure of predictability into the chaotic
realm of individualistic hackers. More recently, the mantel has
passed to IBMs former suppliers, Intel and Microsoft. All of
these businesses have consistently demonstrated an ability to
assert a degree of order over computing technology without
unduly stifling subsequent development. Their capacity to do so

has made them and the American industry the envy of peoples
and nations around the world
Though this essential capacity for compromise has resided in
private firms operating in a competitive marketplace, the fedeial
government has had a significant hand in its creation and sustenance During the early phases of the industry, military procurement programs helped foster a brand of competition that
rewarded firms such as IBM When the commeicial market
blossomed during the 1950s, the principal locus of government
activity shifted to the Antitrust Division of the Justice Department Through a variety of well-publicized consent decrees,
lawsuits, and settlements, the Justice Department would, during
the next four decades, persistently leave industry leaders intact
while undoubtedly shading their subsequent behavior in more
competitive and innovative directions Meanwhile, as computer
technology increasingly converged with that of communications, the regulatory appdratus of the Federal Communications
Commission and its associated Congressional committees came
into play as well Using these three tools-procurement, antitrust, and regulation-the
federal government established a
framework that tolerated and even encouraged the emergence of
dominant firms, so long as they exhibited a willingness to make
useful tradeoffs between stability and innovation
In highlighting the role of compromise, the following brief
survey makes no claims that the particular series of tradeoffs
struck by dominant firms and their watchdogs have produced the
single best possible outcome Compromises always come at some
cost and never satisfy all interested parties They leave behind
many losers, who are left to ponder whether their alternative path
would not have proved the better course The recurrent antitrust
proceedings that have persistently hovered around the computer
industry give powerful testimony to their frustrations Though
those proceedings have generally exonerated the dominant firms,

1058-6180/96/S5.000 1996 IEEE

30 0 IEEEAnnals of the History of Computing, Vol. 18, No. 2,1996

they leave open to question whether industry leaders have truly

attained their positions through artful compromises embraced
broadly by the market. Perhaps on some occasions, at least, their
dominant market positions have enabled them to impose stability
rather than negotiate it.
Yet one advantage of a survey such as this is that it enables
us to step back from the particulars and to see the computer
industry in a broader context. The modern history of innovation and enterprise is littered with examples of promising
technologies that languished because societies could not agree
on the best course of action [3]. Computing was certainly not
immune from this phenomenon. Indeed, the nature of computer technology made the industry particularly susceptible.
Despite the enormous potential inherent in solid state technology, the American computer industry could easily have foundered in a sea of conflicting approaches to design and programming. British computing, starting from a comparable
position, met with just such a plight. Americans found a way
to skirt that danger, much as they had in fields such as railroads, steel, electric power, and telecommunications [4]. Their
efforts at compromise may not have produced an optimal outcome, but they certainly produced a distinctive and enviable one.

The Emergence of IBM

For most of the history of computing, no one was more envied than IBM. Electronic computers first made their appearance at the end of World War 11, with completion of ENIAC. A
tumultuous period followed, as various design groups scrambled
to find a niche within a market heavily enriched by military
expenditures. To have any hope of success, designers needed to
master the rapidly changing technology of electronic components which, with discovery of the transistor in 1947, had just
embarked on the solid state revolution. Everything about this
situation pointed toward chaos, uncertainty, and fragmentation.
Yet remarkably, within a decade of the wars end, IBM had
attained a position of leadership in each of the four major areas
of computer applications and design. Though its influence in
certain areas would subsequently wax and wane, the company
would maintain an astounding 80 to 85 percent of the market for
computing until well into the 1980s.
While it is tempting to interpret this startling performance as a
stunning display of entrepreneurship, the emergence of IBM in
fact provides an outstanding illustration of the evolutionary nature
of economic change common to advanced capitalistic societies.
The economies of such societies do not consist merely of countless isolated units competing freely in a broad marketplace, as
Adam Smith described in his analysis of eighteenth century Britain. Amid the many small producers of the twentieth century, one
finds elaborate organizations with highly developed capabilities.
Specialization and size often limit the flexibility of such institu1. Kenneth Flamm has noted that by 1950 one could clearly identify
four separate approaches to computing: 1) large commercial machines
such as Eckert and Mauchlys Univac; 2) large scientific machines such as
that designed by the mathematician John von Neumann for Princetons
Institute for advanced study; 3) computers for use in real-time control
applications, such as that under development at MIT in Project Whirlwind;
and 4) small machines that might appeal to cost-conscious consumers. See
Flamm, Creating rhe Computer, 1988, p. 105

tions. But these same qualities can also give large firms and public agencies the ability to accomplish certain tasks more readily
than anyone else. The market provides a selection mechanism,
matching tasks that may originate from shifting desires or from
technical novelties with those institutions best capable of performing them [ 5 ] . This is precisely what happened in the early
computer industry. The task of building computers and placing
them in various corners of the market involved a mix of knowledge and capabilities that matched those existing at IBM extraordinarily well.

By their very nature, early computers

presented designers with an
extraordinary latitude that could easily
prove disabling.
The key to this marriage lay in the paramount importance of
striking technical compromises. By their very nature, early computers presented designers with an extraordinary latitude that
could easily prove disabling. Part of the complexity came from
the fact that computers were hybrid assemblages of many components. In this respect, it is true, computers did not differ entirely
from automobiles and many other products. But the number and
degree of potential variations were especially large in the case of
computing. A single installation involved not only choices of
different subassemblies (printers, processors, storage devices), but
also of different basic building blocks (resistors, tubes, semiconductors) that were themselves undergoing rapid development.
Unlike virtually any other machine, moreover, computers had no
single specific use. They could be altered to perform different
tasks. Indeed, their expense made it essential that they possess
such flexibility.3 The tailoring process involved many things-the
logical arrangement of circuits and switches, instructions encoded
in language read by the machines memory, input devices, storage,
and printers. Over time, as innovations in magnetic and electronic
storage reduced the cost of memory, more and more of this programming came to involve language [7]. But for many years
switches and circuitry remained important tools for designers
seeking to build flexibility into their systems. Peripherals have
figured prominently throughout.
No company was better positioned to perform these essential
balancing acts than IBM. Its long experience with building and
leasing electromechanical accounting equipment had not only
2. The task of manufacturing semiconductors proved so novel that it
fell outside the established expertise of any organization. Despite the
efforts of tube makers such as RCA and GE to master semiconductor
production, the industry was dominated by new start-up firms, at least
until IBM itself integrated backward into the component business during
the early sixties. See Lewin, The Semiconductor Industry.
3. Admittedly, those tasks initially did not seem all that diverse. Most
involved complex calculations based on differential equations. Codebreaking represented a different application with important implications, but it was done in secret by the same sorts of peoplemathematicians-using similar thought processes. It took a truly brilliant and prescient individual, such as Alan Turing, to recognize that
those methods of reasoning could be used to resolve all sorts of problems. Even when applied to calculations, however, the computer had to
be tailored or programmed to receive certain information, manipulate it
in particular ways, and print out or store the results in a specific format.

IEEE Annals of the History

of

Computing, Vol. 18, No. 2, 1996 3 I

Fostering a Capacity for Compromise: Business, Government, and Stages of Innovation

made the firm familiar with the most sophisticated calculating
techniques of the day; it had also fostered a set of abilities that
ideally suited the challenges of computing. IBM salesmen worked
continually to build their installed base of leased machines,
which each month earned them and IBM rental income. Salesmen
could of course increase their base by attracting new customers.
but they could also do so by persuading existing customers to use
novel arrangements of IBM equipment to perform new tasks. The
production facility in Endicott, New York operated as a mechanical job shop, responding to requests from the field for solutions to
particular problems. It constantly took gears, ratchets, and relays,
obtained from outside suppliers, and produced novel machines.
and it devised numerous ways of joining counters, printers, and
other machines in complex installations. Naturally, the mechanics
at Endicott routinely looked for opportunities to reduce the variations and build in volume. Sales statistics and education programs
helped the cpmpany strike a balance between novelty, which generated revenue, and standardization, which produced economy.
The production facility also worked in close collaboration with engineers who installed and maintained the equipment in the field [8].
In sum, IBM was an organization whose business had naturally
fostered these qualities: salesmanship that required close attention
both to technology and to the particular requirements of each
customer, regular exchange of information between the field and
the plant, flexibility in production, and a willingness to compromise. These qualities put IBM in an excellent position to adapt to
the electronic computer and the solid-state revolution. Some observers, reflecting on this situation, have argued that IBM behaved
in a highly unusual (and remarkably enlightened) fashion in
making this transition because the electronic computer ultimately
made the companys installed base of electromechanical accounting equipment obsolete. I believe this argument represents a profound misreading of the situation-one which fails to comprehend
the nature o? technical knowledge in the data processing business,
overlooks the importance of existing organizational capabilities,
and neglects market conditions. A brief synopsis of IBMs history
during the forties and fifties will bear this
IBM made the transition from electromechanical accounting
equipment to electronic computers by pursuing two paths. One
was to go after the emerging market for large, scientific machines,
which was funded largely through defense contracts. The other
was to begin to convert some of its established electromechanical
equipment to electronics and to build some degree of electronic
programmability into it. Through much of the 1950s, these efforts
remained conspicuously separate. The former was centered in
Poughkeepsie in a new facility built during the war, the latter
remained anchored in the original plant at Endicott. But despite
this separation, which many at Poughkeepsie actively tried to
4. .In stressing this essential continuity and the passive selection mechanisms of evolutionary change, I do not wish to diminish entirely the role of
IBMs managers or its workforce. Management could easily have resisted
change or missed opportunities, and success depended on countless heroic
efforts by employees throughout the firm. But when viewed from the
broad comparative perspective of business history, what appears most
striking aboyt IBM is how its managers and employees did almost reflexively tasks that virtually all other firms found new and difficult. Its ability
to respond in such a fashion, is of course testimony to the talents of its people. For the organizational traits IBM exhibited-flexibility and compromise-are ones that require initiative and communications up and down the
corporate hierarchy.

32 0 IEEEAnnals of the History of Computing, Vol. 18, No. 2, 1996

foster at the time and which many observers have subsequently

exaggerated, the two facilities shared important traits Each took
basic components and arranged them in complex machines that
were leased to customers and maintained by IBM in the field
Working in collaboration with their customers and then assemblers, the field force tailored the machines to peiform a variety of
specialized tasks Computers, in other words, called forth many of
the same qualities as the older technology
The more significant diffeiences between the activities at
Poughkeepsie and Endicott during the early fifties had to do with
the market Most of Poughkeepsies customers were sophisticated
scientific and engineering organizations which leased their machines with defense funds These consumers difered considerably
from those in IBMs traditional business accounting market, and
one might reasonably ask why IBM pursued them Several factors
help explain this move

First, many of the early scientific computers had been built

from modified IBM punched-card equipment
Second, the company had a long tiadition of doing business
with government, and its chief executive officer was a close
friend of the Roosevelts (Both factors came into play during the war when IBM sponsored the Mark I project headed
by Howard Aiken of Harvard University.)
Third, IBM was a market-oriented company, and scientific
computing represented an obvious opportunity, one which
did not threaten its established base at all [9]

That market was especially attractive because of the approach the government took to computing Froin the beginning, the government did not attempt to taiget fiims with the
most impressive research organizations In other words, it did
not pursue a supply-side approach, in which it assumed that
money spent on research would ultimately yield computers
Instead, the vast majority of its support came in the form of
purchase orders for computing power The government, acting
as an informed first user, set goals and put out bids to have
them met Moreover, it did so not through a single, coordinated plan, but by placing money in the hands of many different organizations that each put out their own contracts for bid
Each of the armed services acted as a consumei, as did the
laboratories of the Atomic Energy Commission, as did the
large manufacturers of aircraft operating under government
contract In effect, the government set up a market for powerful computers-a market of informed useis who each expected to
exert sufficient input into the design of their machine to ensure
that it performed the particular operations they desired [lo]
This was a market that suited IBM perfectly The companys
entire culture was dedicated to the task of meeting specific data
processing problems in the field The only significant difference
between large electromechanical data processing installations and
these machines was that the computers would use vacuum tubes
instead of electromechanical relays and would involve a staggering amount of wiring But these differences appear trivial when
placed in the total context of the task Computers called for extensive sales, maintenance, programming, and field engineering
Within the plant, the company would look, as always, for ways to
build standardization into the machines while retaining sufficient
flexibility to meet the demands of each user At this point, before
the advent of lower-cost memory enabled users to reprogram the

machines easily, such custom tailoring often involved the wiring

itself, just as customizing the older equipment involved unique
arrangements of gears and ratchets. One of the greatest challenges
in such work, IBM had long since learned, was to keep track of
design changes as the machine moved into production and out
into the field. This task required massive record-keeping and close
cooperation among engineers responsible for design, assembly,
and service. In tackling those jobs, IBM drew freely on personnel
who had performed similar tasks at Endicott.
Purchasers recognized these qualities in IBM and favored the
company because of them. This was certainly true in the case of
the SAGE contract, a massive anti-aircraft project funded by the
Air Force that called for 23 pairs of computers operating in realtime. The Air Force relied on Jay Forrester of MIT to design these
novel machines, but when it came time to build them it chose
IBM over several other firms favoi-ed by the academic designel-.
The Air Force cited IBMs experience with assembly and service
as the critical factors influencing its choice.
The SAGE contract proved extraordinarily important to IBM,
because it introduced the company to a variety of militarysponsored technical efforts aimed at reducing the costs of assembling or packaging electronic circuits [I I ] . Especially prior to the
advent of the integrated circuit, packaging was perhaps the most
important element of computer production. It was where logical
design, components, and custom-tailoring intersected. SAGE and
subsequent government contracts for state-of-the-art machines,
such as STRETCH (IBM 7030), helped IBM build on its established expertise as an assembler and stay abreast of the latest developments in solid state techniques [12].
Throughout this critical early period of government support,
IBM benefitted from a quality that might at first seem a detriment in an environment of rapidly changing technology. That
quality was humility. In short order, computing had opened
two technological frontiers-logical
design and solid state
components. It was very easy for people working at those
frontiers to feel a certain hubris. Many of the practitioners
were physicists and mathematicians. The work they did was
new, it was scientific, and it yielded fame and Nobel prizes.
IBM filled a far less glamorous middle ground. It purchased
components, as it always had, and it let its customers have
input into the logical designs. This attitude permitted IBM to
move to the center of knowledge in the industry.
Humility also aided IBM during this period by helping prevent
it from ignoring potential customers. Many organizations working
on computers focused almost exclusively on the high end. Perhaps
the most apt comparison is Engineering Research Associates
(ERA), a company that concentrated on building computers for
the most sophisticated users [13].5 As IBM entered the scientific
market, it never lost sight of the commercial market and the potential connections between the two. Most significantly, the company did not isolate work on the large computers in a separate
scientific or defense wing. As it worked on the IBM 701, it si5. Because of the nature of its market, Kenneth Flamm has noted in
his excellent history of the computer industry, engineering considerations
dominated ERAS business orientation...In sharp contrast with firms
seeking a commercial market, ERA experienced little feedback from users
and little direct contact with what remained a relatively unknown market.
The emphasis on technical sophistication over marketing, it may be argued, persisted in the computer companies that the engineers brought up in
ERA went on to found.

multaneously developed the IBM 702 for business purposes. The

two programs shared many of the same personnel and the same
technology. Here again, one can see that an established characteristic of the firm-its
tradition of entering many markets and
seeking to transfer lessons learned in one to the othersultimately contributed to success in the computing business.

Throughout this critical early period of

government support, IBM benefitted
from a quality that might at first seem a
detriment in an environment of rapidly
changing technology. That quality was
humility.
In actuality, however, IBMs efforts to transfer the fruits of
its work on scientific machines directly to the commercial market seldom worked as well as planned. The real growth in business computing came instead from the second path, the operations at Endicott, where engineers developed programmable
electronic calculators. Their first big success was the IBM 650,
which ultimately sold in the thousands, and later they generated
the IBM 1400 series, a spectacular success of the early sixties
that made computing far more common in business than it had
ever been before. The Endicott facility also produced a series of
input-output devices that helped develop the market for both
large and small computers. Though these products made use of
electronics, they also drew extensively on the mechanical skills
available at Endicott. Printers and disk storage devices, in particular, were distinguished as much for their rapid, precise mechanical motions as for their logical design [14].
The introduction of these products perhaps lends some support
to the contention that IBM showed extraordinary daring in making its established line obsolete. But again, I would urge that the
developments at Endicott be seen in the context of IBMs previous history and the emergent market for data processing. By the
time of its move into electronics, IBM had a long history of making its own machines obsolete. Its sales force had long since
learned that change, if it produced some new capabilities, was the
surest path to larger contracts. Greater calculating power would
almost certainly lead customers to spend more on novel methods
of printing or to do additional tasks.
In assessing this situation, moreover, we should remember that
the market for data processing was growing rapidly. World War I1
had triggered an explosion in demand. Punched-card techniques
attracted particular interest, in part because all draftees and other
government personnel had their names and vital information entered on cards. IBM saw its revenues more than triple during the
war, and Remington Rand did nearly as well [15]. This boom
carried over into the peace, as civilian institutions that had grown
familiar with data processing equipment found new applications
and the requirements of the Cold War sustained government demand. With the market booming, machines taken out of service at
one installation could readily be placed in another. Many were
shipped overseas, where depression and war had created an enormous pent-up demand that domestic manufacturers could not
meet. No firm was better positioned to perceive these marketing
opportunities than IBM, the largest accounting machine company,
and one with established outlets around the world [16].

IEEE Annals of the Histo y of Computing, Vol. 18, No. 2, 1996 33

Fostering a Capacity for Compromise: Business, Government, and Stages of Innovation

rand Compromise of System/360

Because IBM ended up with development efforts aimed at all
segments of the market, it was then in a position to see and feel
pressures from what would soon emerge as the central recurrent
dynamic force in the computer industry: the convergence of machines designed for one market with those designed for another as
the availability of new memory increased programming capacity
and as changes in components improved processing power. From
the mid-fifties on, this issue continually created problems within
IBM, as its machines competed with one another in the marketplace and its development efforts overlapped. The problems
within development were compounded by the continually advancing technology of solid state, which constantly blurred divisions between component manufacture and logical design. Mervin
Kelly, the former research director of Bell Labs, whom Tom Watson, Jr. had hired as a consultant, warned Watson that IBM would
lose the capacity to design computers if it failed to integrate
backward into the components business. Kelly predicted that established component producers who also had experience designing, building and marketing electronic products, such as RCA and
GE, would eventually dominate the industry. Though few did so
as early as Kelly, in time many observers in the business press
expressed similar judgments. Managers at GE and RCA laid plans
for the move [17].6
During the late fifties IBM addressed these pressing matters. It
struggled to sort out its development efforts and to master solid
state manufacturing. Steps taken during this period would eventually culminate in Systemi360, a single line of computers that
would replace all other IBM machines, run the same programs,
and contain solid state circuits of the same standard design manufactured from scratch entirely within IBM. No other product announcement would have a more profound affect on the computer
industry-at least until the coming of the personal computer.
Space does not permit a full accounting of the torturous
course that culminated in production of Systed360, but one
feature of the process deserves emphasis. Even as IBM integrated backward into component production, its traditions of
assembly, packaging, flexible production, and feedback from
the sales force and field engineers remained essential factors in
its success. The key remained not simply to master components,
but to strike balances between components, logical design, and
markets. Within the area of components, moreover, one needed
to strike balances between performance and manufacturability.
Once again, IBMs tradition of product engineering and its lack
of technical hubris proved extraordinarily useful.
Drawing on its established capabilities in circuit assembly and
packaging, IBM inoved in two steps. First it developed a new
solid-state package using transistors obtained under license from
Texas Instruments. (IBMs established position in the,marketplace
no doubt provided another advantage by making it an attractive
plum for Texas Instruments). The new package, known as Standard Modular System or SMS, introduced IBM to the world of
chemical or wet process manufacturing. This technology
formed the basis of the IBM 1400 series computers and other
large scale machines. The line operated at Endicott, where its
6 The analysis in this section closely follows that of Usselman, IBM
and Its Imitators,which in turn i s derived from my monograph, Creating
System/36O(in progress)

34 e I E E E A n n a l s ofthe History of Computing, Vol. 18, NO. 2, 1996

designers again took advantage of the available mechanical skills

to build the necessary conveyers and other materials-handling
equipment.
Then, for its Systed360 series announced in 1964, IBM took
the expertise acquired from TI and developed its own internal
component production facility. Though constructed near the
Poughkeepsie plant, a management team from the SMS production area ultimately took charge of running this operation, with
ample assistance from personnel borrowed from TI. Significantly,
IBM in building this facility struck a fundamental compromise,
choosing not to develop the new integrated circuits, and instead
concentrating on building a production line of great flexibility that
could readily respond to shifts in demand and keep track of design
changes. True to its heritage, even as it moved into extraordinarily
capital intensive process manufacturing, IBM did not want to
sacrifice the flexibility it had come to rely on as an assembler of
customized machines. (It gained additional flexibility by continuing to rely on the SMS format for many of the peripherals.)
Though Systed360 is often lauded as bringing a high degree of
order to the market by consolidating IBMs offerings in a few
standard models, in reality the system included machines of numerous variations.
Contrary to predictions, RCA and GE never competed successfully with Systed360, despite conspicuous efforts to market
similar lines. The poor match between these firms organizational
capabilities and the tasks inherent to computer production again
holds the key. Neither RCA nor GE had much experience mar-
keting complex products to business people who were not scientists and engineers[l8]. Since feedback from the business machines market remained an important ingredient in IBMs success,
the absence of an established marketing and support team almost
certainly handicapped its two competitors. As Kellys remarks to
Watson suggest, RCA and GE no doubt hoped that their traditions
of manufacturing their own components would compensate for
deficiencies in marketing. But IBMs experience with backward
integration into component production suggests to me that those
firms experience with vacuum tube production might well have
worked to their detriment. Manufacturers o f vacuum tubes did not
generally achieve success with semiconductors, an industry that
came to be dominated by new firms [19]. Companies that manufactured components, moreover, often tended to exaggerate their
importance and neglect packaging. Again, the IBM case suggests
that packaging remained essential even with the rise of solid state.
Though the materials changed, the outlook and approach remained much the same. Like many other observers of the industry, Kelly had exaggerated the importance of one technical feature
and underestimated the importance of organizational capabilities
that facilitated coordinated action on many features at once.

Public Policy and the IBM Paradigm

Though the approach to computing embodied in Systed360
emerged from the private pursuit of profit by a firm operating in a
largely unregulated environment, the product achieved such phenomenal success that IBMs strategy in effect constituted a national policy toward computing That was certainly the view from
abroad, at least Throughout the sixties and seventies, governments in most industrialized countries scrambled to encouiage
firms that would mimic IBM and keep the American colossus at

bay. Americans themselves, secure in their position of world leadership, pursued a less interventionist strategy. Government actually reduced its role as a procurer of computing technology and
instead came to rely almost wholly upon the tools and traditions
of antitrust to monitor the industry. IBM, with its enormous share
of the market, presented an obvious target. From the moment the
firm entered into a consent decree with the Justice Department in
1956 until a 13-year lawsuit against it was deemed without
merit in 1982, IBM attracted virtually continual attention from
antitrust investigators and the courts. These proceedings chastened IBM, but they ultimately left the firm intact and effectively
certified the paradigm of computing it had long pursued.
In reaching this series of antitrust judgements, Americans
struck basically the same compromise that had characterized so
many of IBMs own decisions regarding computing. They
weighed the benefits of standardization against the potential for
further innovation. Influential figures in the regulatory apparatus viewed the computer giant as a useful intermediary between
a rapidly changing technology and a market of consumers who
were anxious to put that technology to a variety of uses. By
controlling such a large share of the market for central processors and peripherals, IBM instilled a measure of stability into an
industry that very well could have foundered in a sea of conflicting, incompatible approaches. It provided the emerging
semi-conductor industry with demand for standardized components, and it enabled programmers to develop a few basic languages and then allocate their energies toward developing specific applications. The consent decree of 1956 sought to ensure
that IBM would perform a similar function for manufacturers of
punched cards and peripherals. The decree required IBM to sell,
as well as lease, its products and to allow consumers to purchase parts of their systems from competitors [20].
In taking this approach to the nascent computer industry, government followed patterns it had developed in response to other
emergent industries [21]. At the turn of the century, for instance,
antitrusters had tolerated a duopoly of General Electric and
Westinghouse in electric power. These firms quickly established
standards and helped rapidly transform a technical novelty into a
utility that local power companies, manufacturers of appliances,
and consumers could take for granted [22]. Of more immediate
relevance to computing, perhaps, were stances taken toward the
telephone system and broadcasting networks. In telephony, state
and federal governments had struck a basic bargain with AT&T,
allowing it to function as a near-monopolist so long as it subjected
itself to rate regulation and pursued a vigorous program of innovation [23]. If AT&T showed signs of abusing its power, as when
it attempted to monopolize network radio broadcasting during the
twenties, the government again threatened antitrust action. When
AT&T agreed to act as a common carrier, providing long-distance
services to anyone wishing to link together a series of radio or
television stations, broadcasting came into the hands of a few
powerful networks. They, too, soon found themselves operating
under the regulatory umbrella of the Federal Communications
Commission [24]. The FCC sought to ensure that broadcast networks would not control the content of programming but would
instead act as brokers between programmers and the public. Justice Department officials hoped IBM would perform a similar

intermediary function in computing, acting as a broker or common carrier for component manufacturers and programmers.
The governments strategy was not without risks. A firm with
IBMs market power could potentially exert pressure on suppliers
and customers and effectively dictate technical choices for the
industry as a whole. For a decade after the consent decree, competitors made little headway in getting their peripherals attached
to IBM systems. Some industry observers complained that banks
and insurance companies unduly influenced IBM and kept it from
aggressively pursuing applications and approaches to computing
that would have suited more creative customers. By the early sixties,

No firm was better positioned to

perceive these marketing opportunities
than IBM, the largest accounting
machine company, and one with
established outlets around the world.
sophisticated scientific users had begun to look elsewhere for
computers. At about the same time, many within the technical
press roundly criticized IBM for not utilizing the new integrated
circuitry in its Systed360 computers. Several potential customers
expressed disappointment that the new series of machines did not
offer better time-sharing capabilities. Such criticisms suggested
that IBM had struck a balance that unnecessarily impeded innovation. Its sometimes frantic efforts to make up the deficiencies did
little to dispel that impression or to discourage the Justice Department from launching a new investigation [25].
The major antitrust suit that resulted, announced in January
1969, serves as vivid testimony to the seriousness with which the
American government pursued the course of compromise. Viewed
from an international perspective, the suit appeared preposterous.
At the time it was launched, governments in virtually every advanced industrial nation were busily trying to imitate IBM [26]. In
Great Britain, the government had just negotiated the merger of
several firms into giant ICL, a national champion modeled expressly after IBM [27]. Three years before, the British government had commissioned a study in which one of that countrys
ablest economists explained how IBMs greatest asset was its
ability to strike technical compromises [28]. In Japan, government
had launched a multifaceted policy involving direct subsidies and
other incentives. By fostering extensive cooperation between
electronics manufacturers and potential consumers, Japan set out
to nurture organizations that would function like IBM. The government explicitly targeted performance standards equal to those
of Systed360 and Systed370. In a rare departure from its standard policy, Japan had even permitted IBM to build a manufacturing plant within its borders [29].
Why would the United States prosecute a firm so admired by
others? In part, of course, the decision reflects the innocent selfabsorption of a nation that had not yet realized that it was already
under the pressure of international competition. Few yet worried
that antitrust proceedings might handicap Americans abroad. Of
much greater concern to many within the regulatory community
of the 1960s was a mounting feeling that the bargains struck with
institutions such as AT&T had not yielded the anticipated social

IEEE Annals of the History of Computing, Vol. 18, No. 2, 1996 35

Fostering a Capacity for Compromise: Business, Government, and Stages of innovation

benefit^.^ Old antitrusters and others within government, goaded

by leftists and disillusioned liberals in the academy, were persuaded that government agencies protected large corporations as
much as they regulated them. At the same time, a growing body
of neoclassical economists, enamored with the power of market
mechanisms to allocate resources and encourage efficiency,
sought to substitute Competition for regulation and bureaucracy.
These impulses would eventually find expression on both sides of
the political spectrum. Richard Nixon drew on them in putting
forth his initiative to return federal revenue back to the states, and
Jimmy Carter embraced them when he authorized a guru of the
deregulation movement, Albert Kahn, to remove the blanket of
Civil Aeronautics Board protection from the airline industry.
By 1968, such sentiments had already begun to reach the telecommunications industry. That year, for instance, the FCCs Bernard Strassburg had, with little provocation, taken steps to ensure
that AT&T keep its network open to entry technologies such as
mobile telephones and computers, which might someday feed
signals and data into the phone system. Strassburg wanted to
make sure AT&T did not use its control of transmission technology to dictate developments in computing and telephony. At the
time, an upstart named Microwave Communications Incorporated
had just begun to accuse AT&T of using its local affiliates to
block access to MCIs alternative long-distance transmission system. Its multifaceted legal and technical challenge would culrnnate 14 years later with a shocking settlement that called for
AT&T to divest itself of the local companies and to compete
openly in long distance.
The decision to prosecute IBM can only be understood within the
context of this watershed moment in American political economy.
Seemingly the chief actor in the entire regulatory apparatus had
embarked on a fundamental reexamination of the brokering
agreements that had characterized much of American economic
policy. IBM could hardly have hoped to escape the tide. Fittingly,
the case against it marched in almost exact parallel with that against
AT&T, each reaching its denoument on a single aftemoon in 1982.
The contrasting outcomes of those cases prompted some to see
a conspiratorial tradeoff, in which a pro-business administration
achieved compromise by pardoning one guilty party while publicly sacrificing another. But the two judgements actually reflected
the same basic philosophy. In each case, government officials had
sought ultimately to assure themselves that leading firms had not
abused their power in ways that stifled innovation and threatened
the good outcomes that market competition could achieve. This
was the common thread of the deregulation movement. Though
proceedings such as those against AT&T and IBM necessarily
focused on particular behaviors and complaints, the overarching
consideration for the Department of Justice in 1982 was whether
the government was protecting monopoly or not. Without government protection, Assistant Attorney General Baxter thought,
monopoly could not exist unless it was efficient and innovative.
Measured on that basis, the contrasting moves of the Justice Department were consistent and prescient as well. For whatever one
might think of the merits of the case against IBM or of the para7. My analysis of the deregulation movement follows closely that of
Peter Temin, with Louis Galambos, The Full of the Bell System: A Study in
Pvices and Politics.Cambridge, 1987.
8. An investigation begun by the FCC in 1976 applied additional pressure on the firm to further open its network to data transmission.

36 IEEEAnrzaZs of the History of Computing, Vol. 18, No. 2, 1996

digm of computing the company had advanced, no one could

argue that the computer industry lacked dynamic forces of change
during and after the period the lawsuit was contested. Technology-based competition would accomplish for computing what
Justice Department lawyers had done for telephony.

Proliferating Options,
Persistent Compromises
The fundamental source of change in computing during the
seventies and eighties remained the same as before. Continual
refinement of solid state production technology made avalable
processors of much higher speed and also dramatically iiicreased the memory and storage capacities of computing systems Increased capacities gave programmers much greater
latitude Instead of devoting the lions share of their energies to
conserving processor time, programmers increasingly could
focus their efforts on making computers receive data in different
forms, manipulate it in various ways, and present the results in
more comprehensible fashion Data processing continued its
metamorphosis into information processing
Much of this transformation occurred within the basic paradigm IBM had established Indeed, Systed360 and its successors
performed even better than IBM had hoped The modular design
enabled IBM to incorporate the benefits of volume production,
dnving down prices and bnnging computing into far more realins
than it had ever reached before Modularity also gave IBM the
flexibility to respond to shifting demands for computing applications Its systems met the growing interest in time-shaiing and
also proved capable of accommodating the veritable revolution in
pnnting and copying that occurred following introduction of the
Xerox 914 photocopier during the early 1960s
Though IBM managers and shareholders certainly had ample
cause to celebrate, critics of the company could find considerable solace as well System/360 and its successors did, after all,
make computing available to far more consumers and enable
them to perform a much broader iange of tasks There weie
signs, moreover, that IBM would face increasing competition as
its machines grew more commonplace The combination of
modularity and systems applications such as time-sharing
opened huge opportunities for equipment manufacturers to concentrate on building lower-cost versions of common components such as printers and terminals The 1956 consent deciee
had at last begun to bear fruit Additional competition came
from dynamic new firms such as Digital Equipment Company
and Wang Industries Taking advantage of the plummeting cost
and shrinkmg size of components, these start-up companies
built mini-computers tailored to serve particular types of users [39] They carved out niches in the steadily expanding market for computing DEC, led by the maverick engineer and
businessman Kenneth Olsen, marketed a series of Personal Data
Processors that proved especially attractive to scientists and to
educators in university computing programs Wang, formed by
Harvard University professor An Wang, focused on office applications Touting the image of a paperless office, Wang emphasized network installations The phenomenal success of such
firms prompted IBM to respond with an array of new computers
targeted for particular markets
9. This and the following three paragraphs owe much to [30]

Meanwhile, miniaturization unleashed an alternative path of

innovation that fell entirely outside the IBM paradigm and the
realm of institutional users it served. Individual enthusiasts began
to patch together one-of-a-kind computers of limited capacity.
They combined small processors, made possible by continual
improvements in integrated-circuit technology, with keyboards
and monitors scavenged from terminals or obtained from parts
suppliers. These self-proclaimed hackers formed clubs, wrote
newsletters, and pored over catalogs in search of the latest components and programs. Infused with a strong anti-institutional
ideology and renegade spirit, they brought the vision of a home
computer into reality, much as the amateur radio operators of an
earlier day had demonstrated the potential of voice transmission
and home reception to a world dominated by the ship-to-shore
wireless telegraphs of the Marconi Company.
As in the case of those eulier hobbyists, however, the era of
the unshackled amateurs did not last for long. Apple Computer,
the creation of hackers Stephen Wozniak and Steven Jobs, imposed a degree of order on the personal computer market when it
introduced the Apple I1 in 1976. Though Apple portrayed itself as
David to IBMs Goliath, within the realm of the hackers it actually filled a role quite analogous to that which Big Blue had performed in the postwar computer industry. Rather than offer a
stripped-down, expandable kit that customers could assemble and
refine themselves, Apple sold a standard machine that included its
own monitor, disk drive, and keyboard. The company also provided several basic software packages. Many enthusiasts complained that Jobs and Wozniak made overly conservative choices
and did not press the technical boundaries of microcomputing.
But compared to virtually any other supplier of home computers,
Apple projected an image of stability, and as a result it enticed
large numbers of less technically inclined customers into the domain of the hackers. Apples revenues soared from three-quarters
of a million dollars in 1977 to just under a billion dollars in 1983.
Not surprisingly, several other firms soon mimicked Apple,
with considerable success. By far the most important imitator
was IBM itself, which launched a crash program to develop a
microcomputer of its own. This effort resulted in the Personal
Computer. Introduced in 1981, it immediately captured 26% of
the market. The impact of the PC went well beyond IBMs own
sales, moreover, because the products modular design and extensive use of licensed components left other manufacturers free
to produce clones that accounted for another 50 percent or more
of the market. In effect, IBM with the PC repeated its experience with System/360 in mainframe computing, only in fast
forward. Drawing on its market presence and its capacity for
technical compromise, IBM provided a platform that helped
rapidly transform the desktop computer into a standardized
mass-produced commodity, then watched as low-cost competitors undercut it in the marketplace.
Within a short time of its decision to drop the antitrust case,
then, the Justice Department could feel satisfied that the computer
industrv had entered a oeriod of vibrant economic and technical
compe;ition. But thou& growing commodification had diminished IBMs prominence, it had by no means eliminated the need
for the technical balancing act that had long characterized the
computer industry and its leading firm. Computers remained machines of indeterminate purpose. rndeed, as they grew
commonplace and came into the hands of a more diverse popula-

tion, the possibilities of what they might do continued to expand.

Yet so too did the chances increase that programmers would become mired in a myriad of incompatible approaches. Meanwhile,
the drive toward miniaturization continued apace, keeping designs
in perpetual flux. Within the separate but parallel realms Apple
and IBM had created, designers and programmers thus still
needed to strike compromises and achieve a balance between
standardization and customization.

Contrary to predictions, RCA and GE

never competed successfully with
System/360, despite conspicuous
efforts to market similar lines.
By the mid-eighties, that balancing act had come to focus on
two fundamental issues-the design and production of the microprocessor, and the basic operating language. With Apple,
both were proprietary; in the case of the PC, they were shaped
respectively by Intel and Microsoft, the firms IBM had chosen
as its original suppliers. In a move that clearly heralded its
prominence in hardware production, Intel in the early nineties
began advertising directly to consumers. It gave its processors
catchy names and insisted that machines containing its processors carry an Intel Inside sticker. Meanwhile, Microsoft had
grown larger even than IBM. As owner of the MS-DOS and
Windows programs, it supplied the essential gateways through
which most users gained access to their personal computers.
Like IBM in the early mainframe computer industry, these
powerful firms established a degree of uniformity in the essentials
of computing without closing off the potential for further development. They continued to introduce new generations of processors and operating systems that placed greater computing power
in the hands of individual consumers. Their influence and market
power gave suppliers of memory, printers, and monitors confidence to pursue techniques of mass production. Most importantly,
10. The remainder of this paper is based on accounts widely available
in the technical and business press.
11. In choosing to obtain its basic components under license from these
two firms, IBM had at last fulfilled the prophecy of Mervin Kelly and seen
its business pass into the hands of its suppliers. Why IBM chose this
course remains something of a mystery. Some observers see the move as
the product of the sort of rigidity that plagues large institutions. Typically,
they cite comments by the head of the PC design team to the effect that he
did not trust IBMs own semiconductor facility to make the processors a
top priority. The PC group did not build its own semiconductor production
line because IBM management did not want to duplicate facilities. Others
have portrayed the move simply as a strategic blunder, in which managers
facing intense time pressure failed to appreciate the longer term implications of their decision. Neither explanation, of course, fits the image of an
organization skilled in striking the sorts of compromises necessary to keep
it at the center of the industry.
We would do well to remember, however, that IBM achieved far
greater success with the PC than most analysts expected. Most believed
a firm so tied to the business market could not respond to the demands
of a mass consumer market. That IBM did so, even while continuing to
thrive in its conventional arenas amidst intense foreign competition, is
in many ways quite a powerful testimony to its organizational flexibility. IBM pursued the licensing strategy, moreover, at a time when the
Justice Department suit had stretched across a decade without resolution. By licensing the processor and the operating system, IBM assumed
the sort of intermediary position antitrust regulators had often sanctioned, and which had proven so beneficial i n the past,

IEEE Annals of the History of Computing, Vol. 18, No. 2, 1996 37

Fostering a Capacity for Compromise: Business, Government, and Stages of Innovation

software writers could proceed with some assurance that their
work would find a broad market and not be rendered obsolete by
subsequent changes in basic hardware or in the basic operating
system. As a result, the microcomputer industry sustained a vibrant competition to develop new applications, and computers
came to perform a much broader array of functions.
As with IBM before them, these dominant firms attracted vinlent criticism. Competitors and some consumers accused them of
wielding their market influence unfairly to close off technical alternatives. Critics of Microsoft sought antitrust action that would have
forced the company to sever all connections with hardware suppliers
and banned it from the applications business, in effect leaving the
firm to operate as a common carrier for specialized software programs written by others. A settlement announced in the summer of
1994 stopped short of either action. As it had in the case of IBM, the
Justice Department determined that Microsoft managed to provide a
healthy stability without stifling development.
Critics made even less headway against Intel. The Department
of Justice showed little inclination to interfere with a firm that,
regardless of its market share, clearly faced intense competition
from numerous domestic and foreign manufacturers. Indeed,
during the late eighties government had grown so concerned
about foreign competition that it had fostered Sematech, a cooperative effort among American semiconductor producers. Policy
makers hoped Sematech would promote compromise in design
and enable firms to capture the economies of standard production.
This cooperative effort passed out of existence in 1994, and responsibility for striking balances between the economies of volume production and the added value of specialized design again
became the exclusive province of private firms operating in a
competitive, oligopolistic marketplace. But with the industry so
recently returned to good health, it seemed unlikely that govemment would reverse field and prosecute the leading American firm.
Critics of Intel would have to satisfy themselves with the quiet
pleasure of watching the firm attempt to recover from an embarrassing gaffe with its premier Pentium processor, which consumers
discovered made small mathematical errors in certain applications.

o n ~ l ~ sand
i ~ Prospects
~ s
The Sematech venture and the Justice Department settlement
with Microsoft demonstrate both the continuing importance of
technical compromise to the computer industry and the sustained
commitment of public policy makers to promoting it.* Though
each left the dominant firms largely unaltered and free for the
moment to compete without significant restriction in the marketplace, they also left little doubt that all aspects of computing
would continue to operate under the watchful eye of the govemmeut. Indeed, by early 1995 a federal judge had already overturned the settlement between the Justice Department and Microsoft. As the former combatants joined in unlikely alliance to ap12 Whether Seinatech deserves any credit for the recovery of the
American semiconductor industry remains a matter of some question. The
decision not to renew its charter hardly suggests a ringing endorsement,
though defendcrs stress that Sematech had performed a vital service and
was simply no longer needed. Regardless of its effectiveness, however, the
initiative certainly does nothing to diminish the perceived importance of
flexible compromise to the computer industry. For it is precisely the ability to strike compromises that defenders claim for Sematech and that its
detractors claim for the open market.

38 0 IEEEAnnals of the History of Computing, Vol. 18, No. 2, 1996

peal this decision, the specter of a long judge-led inquiry similar

to that which led to the break up of AT&T loomed before the
giant software supplier. Meanwhile the Justice Department itself
prohibited Microsoft from purchasing a competitor but voiced no
public objections when IBM bought the Lotus software development firm for a price in excess of three billion dollars. In restricting a horizontal combination involving the dominant firm while
tolerating a vertical integration on the part of a large competitor,
the govemments antitrust lawyers again embraced oligopoly as
the best means of maintaining a climate of vigorous competition
at the frontiers of the industry.
As the fruits of continuing miniaturization and manufacturing
economies drive all computing and communications technologies
toward a grand convergence in the common underpinnings of
digital technology, the vigilance of the regulatory community will
only increase. Drawing on the long traditions of American political economy, government officials will continue to pursue the
common carrier or brokering approach, with its emphasis on access and innovation. They have employed this approach almost
instinctively as they have observed the proposed mergers of entertainment companies with communications firms. They would
undoubtedly move swiftly to stifle any blatant attempts to assert
undue control over the basic transmission technologies or over the
crucial electronic components and the fundamental operating
systems upon which modem communications depend. The ongoing compromise between innovation and stability; achie<ed
through a mix of market mechanisms and public policy,, seems
likely to remain a hallmark of American communications and
computing even in the era of interconnectedness.

REFERENCES
The standard source is Ernest Braun, Revolution in Miniature:
The History and Impact of Semiconductor Electronics, New
York, 1978. For additional information, see Kenneth Flamm,
Creating the Computer: Government, Industry, and High Technology, Washington, D.C., 1988; Richard C. Lewin, The Semiconductor Industry, Government and Technical Progress: A
Cross-Industry Analysis, Richard R. Nelson, ed., New York,
1982, pp. 9-100; and David C. Mowery, Innovation, Market
Structure, and Government Policy in the Ainerican Semiconductor Electronics Industry: A Survey, Research Policy1
vol. 12, pp. 183-197, 1983. For an insightful introduction to the
concept of natural trajectories and to the related idea of technological paradigms, see Giovanni Dosi, Technological Paradigms
and Technological Trajectories, Research Policy, vol. 11,
pp. 147-162, 1982. Borrowing from theories o f scientific change,
Dosi suggests that technology moves forward in waves, with a
major breakthrough followed by a succession of modifications
that move naturally toward a readily perceptible end. He cites the
semiconductor industry as a prime example.
Gerald W. Brock, The U.S. Computer Industry: A Study of Market

Power, Cambridge, Mass., 1975; and Kenneth Flamm, Creating the

Computer, Washington, D.C., 1988.
For a well-documented example with close parallels to computing,

see Thomas Parke Hughes, British Electrical Industry Lag: 18821888, Technology and Culture vol. 3, pp. 27-44, 1962, and Thomas
P. Hugkes, Networks of Power: Electrification in Western Society,
1880-1930.Baltimore, 1983, pp. 227-261.
For an effort to place the history of American computing in the
larger context of telecommunications innovation and public policy,
see Steven W. Usselman, Computing and Cominunications Technology. The Encyclopedia of the United States in the Twentieth
Century, Stanley Kutler, ed., 1995.
On the evolutionary nature of economic development, see Richard R.
Nelson and Sidney G. Winter, An Evolutionary Theory of Economic

Change, Cambridge, Mass., 1982. For further elaboration on how the

model applies to the computer industry, see Steven W. Usselman, IBM
and Its Imitators: Organizational Capabilities and the Emergence of the
International Computer Industry, Business and Economic History,
vol. 22, no. 2, 1993,pp. 1-35. On the nature of economic activity in the
corporateera, see the work of Alfred D. Chandler, Jr., The Visible Hand,
Cambridge,Mass., 1977; Scale and Scope, Cambridge, Mass., 1990; and
Organizational Capabilities and the Economic History of the Industrial
Enterprise, J Economic Perspectives, vol. 6, no. 3, pp. 79-100, Summer
1992;and that of William Lazonick, Business Organizationand the Myth
of the Market Economy, Cambridge, 1991.
On Turing, see Andrew Hodges, Alan Turing: The Enigma. New
York, 1983.
Emerson Pugh, Memories that Shaped an Industry. Cambridge,
Mass., 1984.
James W. Cortada, Before the Computer: IBM, NCR, Burroughs, &
Remington Rand & the Industry They Created, Princeton, 1993; Arthur L. Norberg, High-Technology Calculation in the Early 20th
Century: Punched Card Machinery in Business and Government,
Technology and Culture, 1990; JoAnne Yates, CO-evolution of Information-Processing Technology and Use: Interaction Between the
Life Insurance and Tabulating Industries, Business History Review,
1993; Geoffrey Austrian, Hernian Hollerith: Forgotten Giant of Information Processing, 1982; Robert Sobel, IBM: Colossus in Transition, New York, 1981; and Usselman, IBM and Its Imitators.
Charles J. Bashe, et. al., IBMs Early Computers. Cambridge, Mass.,
1986; and Usselman, IBM and Its Imitators.
Richard R. Nelson, ed., Government and Technical Progress: A
Cross-Industry Analysis New York, 1982, especially the essays by
the editor, Introduction, pp. 1-9, and Government Stimulus of
Technological Progress: Lessons from American History, pp. 45 1482; Barbara Goody Katz and Almarin Phillips, The Computer Industry pp. 162-232; Bashe, IBMs Early Computers: Brock, The
U.S. Computer Industry; Flamm, Creating the Computer; Lewin,
The Semiconductor Industry; and Mowery, Innovation, Market
Structure, and Government Policy. On informed first users and other
useful concepts for understanding government policy toward science
and technology, see David C. Mowery and Nathan Rosenberg,
Technology and the Pursuit of Economic Growth, Cambridge, 1989.
Lewin, The Semiconductor Industry; Pugh, Memories; and Usselman, IBM and Its Imitators.
Bashe, IBMs Early Computers.
Flamm, Creating the Computer, p. 46. For additional information
and further analysis, see Arthur L. Norberg, New Engineering
Companies and the Evolution of the United States Computer Industry, Business and Economic History, vol. 22, no. 1, pp. 181-193,
1993.
Bashe, IBMs Early Computers, and Usselman, IBM and Its Imitators.
Cortada, Before the Computer.
Sobel, IBM: Colossus in Transition and IBM vs. Japan: The Struggle
for the Future. New York, 1986.
See Emerson Pugh, et. al., IBMs 360 and Early 370 Systems, Cambridge, Mass., 1991.
Margaret B.W. Graham,RCA and the Videodisc.Cambridge, 1986.
Dosi, Technological Paradigms; Lewin, The Semiconductor
Industry; and Mowery, Innovation, Market Structure, and Government Policy.
Sobel, IBM: Colossus in Transition.
For an excellent overview, see Louis Galambos and Joseph Pratt, The

Eric Barnouw, A Tower in Babel: A History of Broadcasting in the

United States to 1933, New York, 1966 and The Golden Web: A
History of Broadcasting in the United States, 1933-1953, New York,
1968, remain the starting points for an understanding of the emergence and evolution of networks. See also Walter B. Emery, Broadcasting and Government: Responsibilities and Regulations, East
Lansing, 1971.
Usselman, Creating Systed360.
Flamm, Creating the Computer.
Martin Campbell-Kelly, ICL: A Business and Technical History,
New York, 1989.
Christopher Freeman, Research and Development in Electronic
Capital Goods, National Institute Economic Review, vol. 34, pp. 4097, Nov. 1965.
Marie Anchordoguy, Computers Inc.: Jupan s Challenge to IBM,
Cambridge, Mass., 1989; Martin Fransman, The Market and Beyond:
Cooperation and Competition in Information Technology Development
in the Japanese System, Cambridge, 1990.

For an excellent history and analysis of the minicomputer and micmcomputer industries, see Richard N. Langlois, External Economies
and Economic Progress: The Case of the Microcomputer Industry,
Business History Review, vol66, pp. 1-50, (1992).

Steven W. Usselman is an Associate Professor in the School of History, Technology, and Society at the Georgia Institute of
Technology. His essay, IBM and Its Imitators, won the 1993 Newcomen Prize for
excellence in business history. He is writing
a book on the strategic issues and organizational difficulties associated with IBMs
move into computing, culminating with
Systeml360.

Rise of the Corporate Commonwealth: United States Business and

Public Policy in the Twentieth Century, New York, 1988.
Hughes, Networks of Power; Harold C . Passer, The Electrical
Manufacturers, 1875-1900: A Study in Competition, Technical
Change, and Growth, Cambridge, Mass., 1953; and Steven W. Us-

selman, From Novelty to Utility: George Westinghouse and the

Business of lnnovation during the Age of Edison, Business History
Review, vol. 66, pp. 2.5-304, 1992.
Louis Galambos, Theodore N. Vail and the Role of Innovation in
the Bell System, Business History Review, vol. 66, pp. 95-126,
1992.

IEEEAnnals of the History of Computing, Vol. 18, No. 2, 1996 39