This article addresses two questions: Why do firms centralize, and what determines the success and failure of technology transfers? First, it argues that centralization decreases the costs of technology transfers, especially if knowledge is tacit, by reducing transaction costs. Second, it argues that an important factor for the success of a technology transfer is the capacity of a firm to mitigate agency problems. The English East India Company (EEIC) is mostly studied as a trading body. This article analyzes the company’s attempt to become a producer of raw silk in Bengal. In order to improve the quality of Bengal raw silk and thus increase the silk’s trading potential, it decided to apply Piedmontese reeling technologies that relied on a centralized system of production, which significantly decreased the transmission costs of the technology transfer and was thus the key for its success. However, because the EEIC’s management system involved in silk manufacturing was not innovated, the transfer’s effectiveness was diminished.

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This article investigates the adaptations of the Italian silk technologies to the environment in Bengal. The case is particularly interesting as the English East India Company invested considerable effort into making the technologies operational in the new climatic and socioeconomic context. The article highlights the unequal focus on technical adaptations, although it points out that commercial and economic, and social adaptations were not completely neglected. It concludes that the key obstacle for the commercial success of the transferred technologies was the lack of attention to institutional adaptations. Institutional problems that arose were the result of lack of leadership and managerial innovations on the part of the Company rather than the technology itself.

and many seminar and conference participants. Yuchtman acknowledges financial support from the British Academy under the Global Professorships program. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

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