In 1874 the co-partnership of Russell and Company began in the small Renfrewshire town of Port Glasgow when Joseph Russell, Anderson Rodger and William Todd Lithgow took over the former McFadyen and Company-owned Bay yard. With Russell as senior partner, the firm established a formidable reputation for its shipbuilding prowess. All three partners profited on their original investment and by 1879 had expanded their shipbuilding interests by leasing from the Greenock Harbour Trustees the former mid-Cartsdyke yard of J.E. Scott at Greenock to construct standardised sailing vessels.

Although shipbuilding had only become important in Port Glasgow since the 1860s, the development of iron shipbuilding and of suitably engined steamships was generally well established on the Clyde. By 1870 Clyde shipbuilding firms accounted for two-thirds of all British steamship output and for seventy percent of all iron-built ships. At Greenock, Scotts had completed the last wooden vessel of note in the district, Canadian, in 1859. Russell and Company, under the design direction of the younger partner, William Todd Lithgow, quickly found its market niche building three- and four-masted barques to semi-standardised designs with interchangeable components. With cargo capacity more important than speed in many trades, these competitivelypriced vessels soon became attractive to prospective owners. This strategy, aided by local shipowning connections, was reinforced by the partners’ willingness to take shares in the vessels they built. Nor was the firm afraid in times of low demand to take the calculated gamble to build ships speculatively from stock designs in anticipation of a quick sale when conditions improved. As the tonnage of these Russell-built, slab-sided sailing ships increased, their marketability was enhanced, particularly for the North American Pacific coastal trades in grain, nitrates and timber.

The success of this initial strategy, aided by tried and trusted methods of construction, gave the firm confidence to shift to building economical steam-powered tramp ships. In 1881 the partners leased the Port Glasgow dry dock and a year later purchased an open site from Henry Murray at Kingston where they laid out a new six-berth shipyard for steel ship construction. The Kingston yard reputedly was the first on the Clyde to introduce electricity in place of steam for driving power around 1891. The firm's Bay and Cartsdyke yards were also modernised contemporaneously, although the partners continued to build in iron on competitive grounds due to the higher cost of steel.