Boulton and Watt

company · earth · economy · Soho, Handsworth, Birmingham

The Birmingham partnership formed in 1775 between Matthew Boulton, proprietor of the Soho Manufactory, and James Watt, and one of the most instructive business models of the period because the firm largely did not sell engines. It sold the right to use the patent, and charged a premium calculated as a share — customarily a third — of the value of the coal the customer saved by using a Watt engine rather than a Newcomen engine of equal duty. That is a royalty priced on measured thermodynamic performance, which required both parties to agree a method of measuring engine duty, and it made the firm's income a direct function of the fuel economy of its own design. Boulton supplied what Watt could not: capital, a workforce of skilled metal trades, and the political competence to obtain the 1775 Act extending the patent to 1800. The partnership is also the clearest case of the period's intellectual networks doing real work, both men being members of the Lunar Society of Birmingham alongside Josiah Wedgwood, Joseph Priestley and Erasmus Darwin.