Capital Mobilization and Southern Industry, 1880–1905: The Case of the Carolina Piedmont

As the American South commenced its modern industrialization in the late nineteenth century, it found itself handicapped not simply by its poverty, but also by its lack of institutionalized means for mobilizing investment capital for manufacturing. Using evidence from the first major southern manufacturing region, the Carolina Piedmont, we argue that the resulting high information and transactions costs forced industrial promoters to rely heavily upon small, local investors who preferred safety to innovation. As a result, southern manufacturing firms were hampered in their flexibility, and southern industrial structure was skewed toward mature industries with little developmental potential.