Academic journal article Administrative Science Quarterly

Late Adoption of the Multidivisional Form by Large U.S. Corporations: Institutional, Political, and Economic Accounts

Academic journal article Administrative Science Quarterly

Late Adoption of the Multidivisional Form by Large U.S. Corporations: Institutional, Political, and Economic Accounts

Article excerpt

of a third firm. There are, however, at least two reasons why nondirectional ties might stimulate MDF adoption, while directional ties would not. First, nondirectional ties might be better than directional ties at conveying new information between firms about preferred business practices. Granovetter (1973, 1974) considered weak ties superior to strong ties as conduits of information, partly because they are more likely to tap sources not already available to an actor. Others have made a similar argument, noting that indirect ties establish structural equivalence between linked actors, while direct ties facilitate cohesion. Burt (1987) has demonstrated that in the case of medical innovations, structural equivalence stimulates INTRODUCTION

The view that organizations are embedded in networks of social relationships is widely advertised as an alternative to the economic account of organizational behavior in general (Granovetter, 1985) and structural change in particular (Palmer et al., 1987). To simplify, economic theories assume that organizations are situated in atomized markets and adopt structures that maximize firm efficiency (Williamson, 1975; Nelson and Winter, 1982). The embeddedness perspective assumes that organizations are situated in networks of social relationships and adopt structures irrespective of efficiency considerations. Within the embeddedness perspective, political and institutional approaches are often counterposed to one another. Political theory assumes that organizations are composed of competing coalitions with different interests and capacities for influence and adopt structures that bolster their dominant coalition's power (Pfeffer and Salancik, 1978; Pfeffer, 1981). Political competition has both inter- and intraorganizational dimensions. Coalitions competing for power on the interorganizational level include various ownership groups (e.g., capitalist families and financial institutions) and on the intraorganizational level, a variety of managerial cliques (e.g., sales, finance, production, etc). Institutional theory assumes that organizations adopt structures that are considered legitimate by other organizations in their fields, regardless of political considerations. Legitimated structures can be transmitted to organizations in a field through tradition, represented by the field's founding organizations; through imitation, based on the field's currently most prevalent forms; through coercion, exercised by the field's dominant organizations; and through normative pressures, diffused through educational organizations and social networks (Meyer and Rowan, 1977; Scott, 1988).

This paper explores the influence of institutional, political, and economic factors on adoption of the multidivisional form (MDF) among large U.S. corporations in the 1960s. The spread of the MDF marked an important development in American business history. This form, which organizes tasks according to the product or geographic markets to which outputs are directed and separates tactical from strategic decision making, emerged early in this century as an alternative to the unitary form (UF), which groups tasks according to their position in the technological system and centralizes most decisions. The MDF allowed corporations to expand their size and scope dramatically (Chandler, 1962, 1977) and to regulate territorial growth increasingly within and between nations (Barnet and Muller, 1974; Palmer and Friedland, 1987).

Our primary purpose is to explore the institutional account of organizational change in greater scope than previous research. In particular, we formulate hypotheses regarding the effects of normative and coercive pressures on MDF adoption. Normative pressures are hypothesized to operate through both elite business school training of corporate chief executive officers (CEOs) and interlocking corporate boards of directors. Coercive pressures are hypothesized to operate through both nonfinancial and financial corporate resource dependence. …

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