Abstract
Predictions from dominant strands of the management strategy and business
history literature suggest that the adoption of the multi-divisional form is
associated with corporate success. There is theoretical support for this contention
and, in certain non-British contexts and historical periods, also some
confirmatory evidence. To examine the relationship in the British case, this
article examines the strategy and structure characteristics of successful firms
between 1950 and 1984. To do so it utilises an extensive accounting database to
compute the return on capital employed for all quoted companies in the period.
Using this measure, and applying it to a sub-sample of long-run surviving
companies, it produces a ranking of firms according to profitability. A sample of
best performing firms is matched to a paired sample of firms selected from the
bottom of the financial performance ranking, and their organisation structures
are contrasted. Examples are used to illustrate cases where strategies have been
well supported by the structures adopted and have successful financial
performance outcomes. A tendency for firms to adopt holding company
structures in preference to the multi-divisional form is identified, particularly
before 1970. Transitions from the functional to the holding company form tend to
be successful in general and appear more successful than transitions to the multidivisional
form, again in the earlier decades in particular. These findings cast
doubt on the universal applicability of the Chandler–Williamson model of the
large, professionally managed, multi-divisional enterprise.
history literature suggest that the adoption of the multi-divisional form is
associated with corporate success. There is theoretical support for this contention
and, in certain non-British contexts and historical periods, also some
confirmatory evidence. To examine the relationship in the British case, this
article examines the strategy and structure characteristics of successful firms
between 1950 and 1984. To do so it utilises an extensive accounting database to
compute the return on capital employed for all quoted companies in the period.
Using this measure, and applying it to a sub-sample of long-run surviving
companies, it produces a ranking of firms according to profitability. A sample of
best performing firms is matched to a paired sample of firms selected from the
bottom of the financial performance ranking, and their organisation structures
are contrasted. Examples are used to illustrate cases where strategies have been
well supported by the structures adopted and have successful financial
performance outcomes. A tendency for firms to adopt holding company
structures in preference to the multi-divisional form is identified, particularly
before 1970. Transitions from the functional to the holding company form tend to
be successful in general and appear more successful than transitions to the multidivisional
form, again in the earlier decades in particular. These findings cast
doubt on the universal applicability of the Chandler–Williamson model of the
large, professionally managed, multi-divisional enterprise.
| Original language | English |
|---|---|
| Pages (from-to) | 85 — 118 |
| Number of pages | 33 |
| Journal | Business History |
| Volume | 53 |
| Issue number | 1 |
| DOIs | |
| Publication status | Published - Jan 2011 |