Please rotate your device to landscape mode to view the charts.

Business Creation and Political Turmoil: Ireland versus Scotland before 1900

Journal: Business History Review

Date: 20221201

Author: Adams, Robin J. C.; Campbell, Gareth; Coyle, Christopher; Turner, John D.

Abstract:
What effect does political instability in the form of a potential secession from a political union have on business formation? Using newly collected data on business creation, we show that entrepreneurial activity in Ireland in the late nineteenth century was much lower than Scotland, and this divergence fluctuated over time. Several factors may have contributed to this, but we argue that political uncertainty about the prospect of a devolved government in Ireland played a role. The effects were most acute in the North of Ireland, the region that was most concerned by potential changes.

Link: Google Scholar

Background and Context

Historical Setting

The study examines Ireland in the late 19th century when the Home Rule movement sought autonomy from the United Kingdom, creating political uncertainty particularly between 1870-1900.

Research Question

The researchers investigate whether political instability around potential Irish Home Rule affected business creation compared to Scotland, which faced no similar constitutional uncertainty.

Methodology

Analysis of newly collected data on 6,995 company registrations in Ireland and Scotland between 1856-1900, combined with newspaper coverage of Home Rule to measure political uncertainty.

Divergence in Business Creation Between Ireland and Scotland

  • Shows dramatic difference in company formation between regions over time
  • Scotland saw 4,663 new companies while Ireland had only 2,332
  • Gap widened significantly after 1870 when Home Rule debates began

Sectoral Distribution Shows Northern Ireland's Industrial Focus

  • Northern Ireland dominated in industrial sectors like textiles and shipping
  • Southern Ireland had higher concentrations in agriculture and utilities
  • Shows regional economic specialization before partition

Peak Periods of Home Rule Discussion and Market Volatility

  • Shows correlation between Home Rule debates and market uncertainty
  • Major volatility spikes occurred during 1886 and 1893 Home Rule Bills
  • Demonstrates direct impact of political uncertainty on financial markets

Regional Impact of Home Rule Bills on Business Creation

  • Business creation declined most sharply in anti-Home Rule North
  • Dublin and South showed more resilience during political uncertainty
  • Demonstrates regional variation in response to constitutional uncertainty

Stock Price Declines During Home Rule Bills

  • Northern Irish companies saw largest stock price declines during Home Rule debates
  • First Bill (1886) led to 10.1% decline in North vs 11.5% in Dublin
  • Second Bill (1893) saw 9.4% decline in North with smaller impacts elsewhere

Contribution and Implications

  • First comprehensive study showing how political uncertainty around potential constitutional change affected business creation in 19th century Ireland
  • Demonstrates that effects of political instability were most acute in regions most opposed to change
  • Suggests Northern Ireland's later industrial decline may have roots in earlier period of political uncertainty

Data Sources

  • Company registration data from Table 1 showing breakdown of 6,995 companies by sector and decade
  • Regional distribution data from Table 2 showing percentage of companies by sector in different regions
  • Stock price impacts from text on pages 736-737
  • Home Rule newspaper mentions and volatility data from Figure 7
  • Regional business creation patterns from Figure 6