| Summary: | It has been argued that the additional cost of transporting ring yarn in the vertically and geographically specialised Lancashire cotton industry was sufficiently high to deter spinners from adopting rings. The absence of a transition to large scale vertically integrated plants is seen as a form of entrepreneurial failure. In this paper we use new evidence to show that the majority of yarn could have been woven within the district in which it was spun, and, further, that in such areas, the average distance between spinners and weavers was a matter of yards. Transport costs were no more important for these firms than for vertically integrated ones. This yields a testable hypothesis: vertically specialised firms located in these areas should have been as ready to adopt rings as were integrated firms. We test this proposition and find it to be correct: co-located independent, vertically specialised firms were as likely to adopt rings as were vertically integrated firms. As such the industry's failure to move to large scale vertically integrated production cannot be characterised as a form of entrepreneurial failure.
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