User Firms in the 18th Century Iron Industry

Example

From Sonali Shah (in Open Beyond Software):

"We’ve seen many examples of individual users working together, but there are also examples of user firms working together. All firms use products that they do not sell to consumers, e.g. the information technology activities of investment banks. Allen’s (1983) study of the 18th century iron industry found that firms cooperated and shared information pertaining to the design and construction of blast furnaces. Improved blast furnace design increased the temperature of the blast and significantly reduced fuel consumption. According to Allen, the science behind blast furnace technology was not well understood. No one could predict how design changes would affect furnace performance, so development took the form of trial-anderror learning. Firms were limited in their ability to independently experiment as construction costs were high. By sharing experiences with different designs, firms could multiply the number of experiments from which to learn and collectively improve the technology." (http://faculty.washington.edu/skshah/Shah%20-%20Open%20Beyond%20Software.pdf)