Abstract
This article examines why American and British firms adopted diversification strategies and multi-divisional structures in the middle of the twentieth century and why this strategy and structure was reversed towards the end. To explain such change, a theoretical framework links the firm resource base, corporate governance arrangements, and the impact on entrepreneurial activity, managerial behaviour and business performance. The model is then used to compare and contrast the long-run experiences of the American and British economies. Adoption of the American model by British firms was only partial between 1950 and 1980, but this meant that they were more easily able to adjust to capital market pressures to reduce diversification after 1980. In particular, their use of buy-outs was an effective vehicle for this restructuring. In the US, cheap debt and greater scrutiny from the capital markets was a threat to the model of managerial entrenchment that evolved up to 1980. Unlike in the UK, the role of the LBO was more temporary and ultimately mitigated by parent-to-parent subsidiary transfers creating opportunities for managerial re-entrenchment through financial and corporate restructuring.
| Original language | English |
|---|---|
| Pages (from-to) | 267-+ |
| Number of pages | 30 |
| Journal | Business History |
| Volume | 47 |
| Issue number | 2 |
| DOIs | |
| Publication status | Published - Apr 2005 |
Keywords
- BRITISH BUSINESS HISTORY
- RESOURCE-BASED VIEW
- MULTIDIVISIONAL FORM
- COMPETITIVE ADVANTAGE
- VENTURE CAPITALISTS
- MANAGEMENT BUYOUTS
- LEVERAGED BUYOUTS
- FIRM PERFORMANCE
- UNITED-STATES
- DIVERSIFICATION