Facing Complexity in a New Technological System: Experiments in International Business (Sofina, 1898-1938)

The electric power industry became an international business since the first commercial ventures in electric lighting and power. The literature has emphasized the profusion of organizational forms assumed by foreign investment during the industry’s first decades: free-standing companies, multinational investment by manufacturing firms of electricity equipment, investment trusts, consortia of investors, and utility holdings (Haussman et al. 2008, Hertner and Nelles 2007, Neufeld 2016, Segreto 1994). The microeconomic and management challenges urging this rapid succession of organizational forms remain less well known. Moreover, the same ignorance exists regarding the influence this process of trial, adaptation, and change had on firms' internal organization and management capabilities. Thus, the methodology must combine an industry-level analysis with an in-depth study of specific companies to address these issues. The Société Financière de Transports et Enterprises Industrielles (Sofina, founded in Brussels, in 1898) constitutes an exemplary case for in-depth analysis. Its archive provides comprehensive information for reconstituting its business strategy and operations. Sofina’s evolution combined within the same firm the succession of different organizational forms for investing abroad: emergence as an investment trust, pivotal role in creating consortia of investors for launching foreign utilities, evolving later to an electric utility holding. The paper emphasizes the capital and technical challenges raised by the new electric technological system (Hughes) and its impact on Sofina’s adaptation process. At an industry level, it argues that the reconfiguration of German electrical manufacturers in the early twentieth century influenced their investment trusts and funds created abroad, as was the case of Sofina. Finally, the study explores the influence this change process had on Sofina’s managerial and engineering capabilities, explaining its ascent as one of the most prominent multinationals in the electric power industry.