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This article contributes to the ‘factory debate’ by disentangling the effects of technological change and organizational change during the rise of the factory, using unique data from the weaving industry in early twentieth‐century Japan. During this period, a variety of production organizations co‐existed, as did a variety of technologies, which creates an excellent opportunity to evaluate the implications of the factory system. Using regression analyses and observation of descriptive data, this study finds that production value per worker was around two times larger in factories compared with weavers and outworkers under the putting‐out system, after controlling for the technological difference. This difference is supposed to reflect the difference in the mode of work—that is, working hours and work intensity—between factories and weavers and outworkers. Meanwhile, production per worker was two to three times larger for powered factories than non‐powered factories, other things being equal. Thus, the magnitude of the impact of organizational difference was almost comparable to that of technological difference.