The Rise and Fall of Big Lumber

The Rise and Fall of Big Lumber

  • Case
  • Teaching Notes

By 1850, lumber was the second-largest industry in the United States. When writing about the era of U.S. industrialization, historians have tended to focus on iron, steel, and smoke as the symbols of U.S. progress and prosperity. Although railroads and steelmaking were crucial for industrialization, wood remained an essential raw material for construction and fuel. New industrial technology made it easier to cut down trees and slice them into boards before shipping them across the country. But profits in the lumber industry were gained primarily through organizational advantages such as vertical and horizontal integration, increased economies of scale, and by improved knowledge of how to meet ever-changing supply and demand. The lumber industry peaked in the 1920s and declined in the 1930s. Lessons from the rise and fall of big lumber illustrate that not all progress is driven by technology improvements; rather, some progress is driven, at least in part, by organizational changes. But what are the natural limits of a company’s growth in an industry like lumber? If the market was concerned only with efficiency, what would be best: a single national company, competition between a small number of large firms, or a heterogeneous mix of companies of various sizes?

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