Economists have extensively examined the performance of the cotton industry during its take-off period and early phases of the industrial revolution. Positive financial performance can generally be assumed for a take-off industry but cannot be expected to apply evenly. The boom-slump cycle was a prominent feature of the industry. Recent scholarship has downplayed the disruptive aspects of industrialization, arguing that it was a more gradual and local phenomenon than previously thought. These interpretations have been predicated on the prior and independent dominance of the commercial and financial services sectors, and their elites of ‘gentlemanly capitalism’. Cotton, along with a small number of other vital industries such as iron and transportation, are regarded as instances of specific productivity improvement, with the rest of the economy ‘mired in pre-modern backwardness’. These discussions have centred on the Schumpeterian view of rapid growth, based on a disequilibrium model in which capital market imperfections allow innovative firms to restrict entry, thereby earning long-run super-normal profits. Neoclassical interpretations, in contrast, argue that firms were relatively untroubled by capital market imperfections and experienced few problems accessing finance, facilitating entry and rapid adjustments to equilibrium profit levels, with the gains from technological innovation transmitted through falling prices. The evidence above, reviewed in chapter 1, shows that there is some truth in all these explanations since the transition from one model to another typically relied on the modernization of only one section of the value chain at a time. Within each model stage of development, innovation and traditional business practice coexisted.

Questions about which firms were particularly profitable, when and why, therefore offer a potentially useful new perspective on the industrial revolution in the cotton industry. For example, how different were profits in the four stages of development? Were transitions between the models motivated by the offer of potential additional profits?