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Organizational Structure and Economic Performance: A Test of the Multidivisional Hypothesis

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  • Henry Ogden Armour
  • David J. Teece

Abstract

This paper empirically investigates the proposition that the organization and operation of the large enterprise along "M-form" multidivisional lines favors goal pursuit and least-cost behavior more nearly associated with the neoclassical profit maximization hypothesis than a number of alternative organizational forms. Using a sample of petroleum firms during the period 1955-1973, a positive relationship between M-form structure and profitability is observed during the period in which the M-form innovation was being diffused. This relationship is no longer observed once an organizational form equilibrium is achieved. The results provide support for the "Markets and Hierarchies" paradigm, but additional studies are needed to affirm the generality of the finding.

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Bibliographic Info

Article provided by The RAND Corporation in its journal Bell Journal of Economics.

Volume (Year): 9 (1978)
Issue (Month): 1 (Spring)
Pages: 106-122

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Handle: RePEc:rje:bellje:v:9:y:1978:i:spring:p:106-122

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Cited by:
  1. Nicolai J. Foss, 2002. "The Strategy and Transaction Cost Nexus Past Debates, Central Questions, and Future Research Possibilities," DRUID Working Papers 02-04, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
  2. Martin Desrochers & Klaus P. Fischer, 2003. "Theory and Test on the Corporate Governance of Financial Cooperative Systems: Merger vs. Networks," Cahiers de recherche 0334, CIRPEE.
  3. Norman, Patricia M. & Artz, Kendall W. & Martinez, Richard J., 2007. "Does it pay to be different? Competitive non-conformity under different regulatory regimes," Journal of Business Research, Elsevier, vol. 60(11), pages 1135-1143, November.
  4. Martin Desrochers & Klaus P. Fischer, 2005. "The Power of Networks: Integration and Financial Cooperative Performance," Cahiers de recherche 0514, CIRPEE.
  5. Martin Spechler, 1982. "Organization and economic behavior: An interpretation of recent findings," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 118(2), pages 366-380, June.
  6. Argyres, Nicholas S., 1995. "Technology strategy, governance structure and interdivisional coordination," Journal of Economic Behavior & Organization, Elsevier, vol. 28(3), pages 337-358, December.

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