Organizational Innovation: The Multidivisional Structure

1. General Faced with the types of internal operating problems that emerge as the U- form enterprise increases in size and complexity, the DuPont Company, under the leadership of Pierre S. duPont, and General Motors, under Alfred P. Sloan, Jr., devised what Chandler refers to as the multidivisional (or M-form) structure in the early

The multidivisional structure: Competition in the Capital Market

1. Frictionless Capital Markets  As the remarks of Bork and Bowman cited in Section 2.2 of Chapter 6 make clear, advocates of received microtheory are loath to concede that capital markets may fail to operate frictionlessly. Partly for this reason, the fiction that managers operate firms in fully profit maximizing ways is main- tained.

The multidivisional structure: Optimum Divisionalization

The M-form structure is thoroughly corrupted when the general management involves itself in the operating affairs of the divisions in an extensive and continuing way. The separation between strategic and operating issues is sacrificed in the process; the indicated internalization of capital market functions with net beneficial effects can scarcely be claimed. Accountability is

The “M-form hypothesis” and Concluding Remarks

Although the M-form structure was initially devised and imitated as a means by which to correct local conditions of inefficiency and subgoal pursuit, it has subsequently had pervasive systems consequences. These systems effects are partly attributable to competition in the product market; unadapted firms have found it necessary, as a survival measure, to eliminate

The multidivisional structure: A Classification Scheme

As noted, a major problem is posed for testing the M-form hypothesis in that, if all divisionalized firms are classified as M-form firms, without regard for the related internal decision-making and control apparatus, an overassignment to the M-form category will result. Some divisionalized firms are essentially holding companies, in that they lack the requisite

Conglomerate organization: The Affirmative Emphasis

An understanding of the conglomerate phenomenon is impeded if all conglomerates are treated as though they were indistinguishable one from another. Some types may pose genuine public policy problems, others have had an invigorating competitive influence, and still others have had essentially neutral effects. Those that combine mixtures of the first two types pose

Conglomerate organization: Competition in the Capital Market

Internal organization has an influence on competition in the capital market in three respects. First, divisionalized firms (of the appropriate kind) more assuredly assign cash flows to high yield uses. The arguments here are already familiar from the preceding chapter. Second, the divisionalized firm is well-suited to serve as a takeover agent. Acquired firms

Conglomerate organization: Public Policy Issues

Public policy issues of three kinds are posed by the conglomerate. First, there is the possibility that conglomerates are especially prone to engage in what are thought to be anticompetitive practices. Charges of reciprocity and of predatory cross-subsidization are commonly lodged against conglomerates. Second, conglomerate mergers may impair competition by weakening the threat of

Conglomerate organization: Some Evidence

Despite the intensive attention that has been given to the conglomerate phenomenon over the past twenty years —and especially the past ten years— there has been surprisingly little effort made to evaluate the performance consequences of the conglomerate corporation. Markham’s recent study, referred to above, is an exception. Weston and Mansinghka’s review of the

Conglomerate organization: Concluding Remarks

A transactional interpretation of the conglomerate, in which the limita- tions of capital markets in corporate control respects are emphasized, reveals that conglomerate firms (of the appropriate kind) are not altogether lacking in social purpose. If maintaining the market for corporate control is thought generally to be beneficial, if reallocating resources away from lower

Conglomerate organization: The Affirmative Emphasis

An understanding of the conglomerate phenomenon is impeded if all conglomerates are treated as though they were indistinguishable one from another. Some types may pose genuine public policy problems, others have had an invigorating competitive influence, and still others have had essentially neutral effects. Those that combine mixtures of the first two types pose

Conglomerate organization: Competition in the Capital Market

Internal organization has an influence on competition in the capital market in three respects. First, divisionalized firms (of the appropriate kind) more assuredly assign cash flows to high yield uses. The arguments here are already familiar from the preceding chapter. Second, the divisionalized firm is well-suited to serve as a takeover agent. Acquired firms

Conglomerate organization: Public Policy Issues

Public policy issues of three kinds are posed by the conglomerate. First, there is the possibility that conglomerates are especially prone to engage in what are thought to be anticompetitive practices. Charges of reciprocity and of predatory cross-subsidization are commonly lodged against conglomerates. Second, conglomerate mergers may impair competition by weakening the threat of

Conglomerate organization: Some Evidence

Despite the intensive attention that has been given to the conglomerate phenomenon over the past twenty years —and especially the past ten years— there has been surprisingly little effort made to evaluate the performance consequences of the conglomerate corporation. Markham’s recent study, referred to above, is an exception. Weston and Mansinghka’s review of the

Conglomerate organization: Concluding Remarks

A transactional interpretation of the conglomerate, in which the limita- tions of capital markets in corporate control respects are emphasized, reveals that conglomerate firms (of the appropriate kind) are not altogether lacking in social purpose. If maintaining the market for corporate control is thought generally to be beneficial, if reallocating resources away from lower

Technical Innovation and Market Structure: The Conventional Dichotomy

The discussion of technical innovation begins with an examination of the conventional dichotomy. Although this requires that a good deal of old material be covered, it seems essential that this matter be put to rest at the outset. This completed, a series of recent refinements to the technical innovation-market structure issue are then considered

Technical Innovation and Market Structure: Refinements

Some of the major qualifications and refinements that have emerged from recent research on the technical progress question are considered here. Essentially the argument comes down to this: Research and development is not one large, undifferentiated whole. Distinctions with respect to productivity, major versus minor inventions, other market structure dimen- sions, research responsiveness, basic

Organizational Innovation and Market Structure

1. Economic Importance of Organizational Innovations As the study of innovation goes, organizational innovation, by compari- son with technical innovation, is a relatively neglected subject. Conceivably this is because, judged at least in economic terms, it is much less important. This is contradicted, however, by views such as Arrow’s, who contends : “Truly among

Market structure: A Systems Approach

While there are important exceptions, the literature relating technical innovation to firm size and industry structure yields the following average tendencies: R & D expenditures (expressed in relation to firm size) are not usually greater and are often lower for the very largest firms in an industry by comparison with its large but somewhat

The Current Approach to Unlawful Monopolization

Antitrust policy has long been plagued by the problem of continued dominance1 of an industry by a single firm which has obtained its position bylawful means. Traditional judicial interpretations of the offense of mono- polization under section 2 of the Sherman Act2 have focused on the presence or absence of predatory or exclusionary tactics