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    Responding to the ambiguity, the overseas branches tried to secure their own military identity in defiance of London, and with this goal in mind founded three mini-kingdoms of their own—Bombay, Madras and Calcutta—by the end of the seventeenth century. In the beginning of their history, these settlements were no more than well-defended villages. They lacked good harbours (Madras had none), were poorer in resources relative to some of the older European settlements such as Surat or Masulipatnam, and constantly in fear of attacks by enemies. But in the eighteenth century, as wars broke out in the interior, these port towns grew by attracting migrant merchants and artisans. By the mid-eighteenth century, the Company’s estate was to growbeyond these towns, and include large Mughal provinces. And by 1803, an empire was within sight. Neither the Crown nor the Company’s London office had actually planned an empire. And yet an empire happened. Why did it happen? The ambiguous position of the overseas branches provides one part of an answer.
    A fuller answer to the question, however, requires us to understand also the unfolding conditions of business in mid-eighteenth century India.
The Europeans and the world of Indian business
    The business world that evolved as a result of European presence in Indian markets was essentially a hybrid. It could not be otherwise, given that the Europeans operated in a world that was already adept at long-distance trade and had well-developed institutional conventions. Which elements in the conventions of Indo-European trade were distinctively European and which ones distinctively Indian, is not an easy question to answer. It was of course the case that the joint stock form was previously unknown in India. But this fact did not seem to make an impression upon the leading Indian businesses, who continued to function within family firms with community support. Two other ingredientsof European commercial success did, however, make a deep impression on the Indian merchants who collaborated with the Europeans. These were the efficient use of naval power and fortification as a bulwark for trade, and the availability of a framework of formal commercial contracts, enforceable by the state. Neither of these elements was indigenous. The coasts and the ports were not a major military priority for most Indian states before, and commercial contracts had existed at best as unwritten social conventions before. The fullest play of these elements can be seen in the three port cities that the English owned, which made them especially attractive for entrepreneurial Indians. As states grew weaker around them, the merchants and bankers migrated to the Company territories, and increasingly made use of the English commercial law in force in these territories.
    On the other hand, in recruiting the Indian partners and agents, the Company and the private traders needed to be mindful of social conventions of castes and communities, and needed to integrate indigenous skills, commercial acumen, capital and leadership structure into the businesses that they ran. The middleman or the agent was a crucial actor, and enjoyed much freedom and power as a result of the extent to which the Europeans had to depend on the agent. In turn, theposition of these actors in their own societies was enhanced by association with such a large firm.
    In the last twenty years, historians have suggested that the prospect of an empire lay hidden in the deep mutual dependence that had developed between the English Company, private traders, and Indian merchants. The argument is offered as an alternative to an older view advanced by historians sympathetic to the British rule in India that the Company became an empire because the Indian kingdoms were in a state of collapse, and anarchy ruled all round. The Company needed peace and brought about peace by the force of its own arms. This is valid, if at all, for certain regions of India,