For a very detailed analysis of the 18th century development of the English novel, read Ian Watts' The Rise of the Novel: Studies in Defoe, Richardson and Fielding. Although it is somewhat dated, and underestimates the influence of the classical novel, it is still referenced by all literary critics discussing the issue as it was a landmark in criticism of the genre.
Several factors led to the emergence of the English novel. The first was the rediscovery of the ancient novel, its translation into French by Amyot, and then it re-translation into English and imitation by Lyly.
Next, rising vernacular literacy created an audience capable of reading the novel.
The rise and technological sophistication of printing allowed for inexpensive production of literature.
Circulating libraries created a subscription model that made novels affordable to an emerging middle class.
Like the epistolary and conduct manuals that influenced them, novels formed a guide to manners for the emerging middle class.
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