Shetland Sheepdogs as they exist today are a relatively young breed. The original stock probably consisted of Scandinavian herding dogs from the same stock as the Norwegian Buhund or the Icelandic dog. (The Nordic herding dogs are rarely mentioned in the history of the breed, but there is every reason to assume that the original Norse settlers brought along their dogs as well as their small sheep, cows and horses. There is archaeological evidence of such dogs dating from before the transfer of the Shetland Islands to Scotland.)
When larger sheep began to be imported to the Islands from Scotland, it is reasonable to assume that they were accompanied by working collies related to the ancestors of the modern Rough Collie and the Border Collie, and earlier importations of Scottish dogs may have been made by the islanders. Crosses were also made to dogs off the fishing fleets, with the Icelandic dog and the Greenland Yakki dog being particularly mentioned.
No doubt the crofters (essentially small sharecroppers working as fishermen and in many cases not even owning their boats) bred some of their bitches to what they considered the best of the imported herding dogs. At this time the selection was probably mostly for working ability on small numbers of Shetland sheep, Shetland cows, and possibly even ponies. All were small, and the sheep in particular were extremely wild and agile, so agility, speed, biddability and the ability to work on a minimum of food would have been prized above size or ability to intimidate lazy stock (what is now called "power" in Border Collies.) Appearance would have been totally unimportant, and the old idea of shepherds not liking white dogs because they were hard to distinguish from the sheep is totally irrelevant here, as Shetland sheep come in every color possible to sheep.
Two stories often mentioned about the early Shelties should be mentioned here. The first, probably true (or at least sensible) states that the dogs were used not for herding so much as to keep the half-wild sheep out of the gardens and hayricks. Mine certainly try to do the same thing if a moose comes into the yard!
The second, which for a long time did not make much sense to me, is that the dogs were left on islands with sheep carried to the islands by boat to eat whatever vegetation was available. Why? There is nothing else to suggest that Shelties were ever predator control dogs, and in any event the small islands would probably not support predators of any size. Herding would not be needed until it was time to get the sheep back into the boats, and what would the dogs eat? The practice sounds like a way of teaching a dog to become a sheep killer if the dog and sheep were left alone for longer than a protected store of food (for the dog) that would not decay would last.
Unless...
Could the Shelties have been left on the islands to protect the little groups of sheep against bird attacks? Certainly it is not unusual for Shelties today to be very interested in and protective against birds.
Back to Sheltie history. Tourism (though perhaps not under that name) became important to the Island economy during the 19th century, and one of the things the Islanders found they could sell to the tourists was their little dogs. Tourists liked little, fluffy mites, and many of the Islanders began breeding to anything small and fluffy. The use of a Prince Charles Spaniel left behind by a visiting yacht is mentioned by Catherine Coleman, and Pomeraneans are also mentioned frequently. (A comment is needed here: Pomeranians at the turn of the century were much larger than today. I have a photograph of a typical Pomeranian from the Dogs article in the 1905 Encyclopedia Britannica, and the dog looks more like a small Samoyed than a modern Pom.) A number of the early dogs looked suspiciously like Papillions. Some were very short-legged and could have had Corgi ancestry. While I have not seen anything in print, I have always wondered if the brindle color, so strongly discriminated against from the first standard ever written, could have been brought in from the Scottish Terrier. If this was the case, the prohibition on brindle could have been aimed at eliminating the descendants of a terrier cross. (The Cardiganshire Welsh Corgi would be another potential source of brindle, but possibly a more acceptable one.)
By the end of the 19th and early in the 20th century, some of the Islanders realized that the original breed was vanishing. Crosses with Collies, possibly including show Collies, began to be made on the Islands at that time in an effort to recover the original type. (Note that the Collie at the end of the 19th century was not the same Collie we see at shows today, but much closer to the old farm Collie in type.) Other supporters argued that improvement in type could legitimately be made only by selection of those specimens showing the best of the old Island type. A third group existed, though not often referred to, that continued to breed for small size and pretty, fluffy pets. Shelties of all three types were exhibited through the first decade of the century and to some extent up to World War I. Collie breeders, who by that time had considerably refined the appearance of the modern show Collie, were vitriolic in their reaction to calling these little mongrels (actually a fairly mild description compared to some) Shetland Collies, and within a few months of the first registrations managed to induce the Kennel Club to change the name of the breed to Shetland Sheepdogs. The dogs which have most influence on our modern Sheltie, however, were the Collie crosses, often bred to the dogs selected for type.
I will not attempt to follow the political history of the breed, noting only that Collie crosses - and the controversy over these crosses - continued for at least the first three decades of the 20th century, with rumored crosses extending into the 30's and much later in the United States as well as Great Britain. At various times the controversy led to breakaway clubs for the breed. The differences betwen Kennel Club and American Kennel Club rules on crosses, and their changes with time, actually led to the loss of some of the breed's finest specimens when they were imported and then could not be registered in the United States. The ultimate winners, however, were those espousing show Collie type.
A total of 46 Shelties appeared in the Stud Book through the 1918 issue (reporting on 1917 shows.) The bloodlines and colors recorded provide some interesting insights on the state of the breed at that time. Half of the dogs were tricolors. The next most numerous color, with 11 registrations (less than a quarter of the total) was sable, with and without white. The remainder included 8 black and whites, 3 black and tans, and one blue, tan and white (this was Peat: not a blue merle, from contemporary accounts, but a uniform blue, like a blue Great Dane or Doberman with white and tan markings.)
Then shows and breeding were halted because of World War I. Dogs born during this period were barred from showing during their lifetimes. The breed was not yet strong enough, in numbers or quality, to shrug off this restriction, and many of the bloodlines prominant before the War were lost.