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

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Author Info
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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Publisher 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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  1. 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. [Downloadable!]
  2. E.J. Malecki, 1980. "Corporate organization of R and D and the location of technological activities," Regional Studies, Taylor and Francis Journals, vol. 14(3), pages 219-234, June. [Downloadable!] (restricted)
  3. 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. [Downloadable!]
  4. Nicolai J. Foss & Torben Pedersen, . "Transferring Knowledge in MNCs: The Role of Sources of Subsidiary Knowledge and Organizational Context," IVS/CBS Working Papers 00-12, Department of Industrial Economics and Strategy, Copenhagen Business School. [Downloadable!]
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  5. Staffan Canback, 1998. "Managerial diseconomies of scale: Literature survey and hypotheses anchored in transaction cost economics," Industrial Organization 9810001, EconWPA, revised 09 Jan 1999. [Downloadable!]
  6. 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. [Downloadable!] (restricted)
  7. Nicolai J. Foss, . "Strategy, Bargaining, and Economic Organization: Some Thoughts on the Transaction Cost Foundations of Firm Strategy," IVS/CBS Working Papers 00-11, Department of Industrial Economics and Strategy, Copenhagen Business School. [Downloadable!]
  8. Martin Desrochers & Klaus P. Fischer, 2005. "The Power of Networks: Integration and Financial Cooperative Performance," Cahiers de recherche 0514, CIRPEE. [Downloadable!]
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  9. Staffan Canback, 1998. "Transaction cost theory and management consulting: Why do management consultants exist?," Industrial Organization 9810002, EconWPA, revised 09 Jan 1999. [Downloadable!]
  10. Michael Dietrich, 2003. "The importance of management and transaction costs for large UK firms," Applied Economics, Taylor and Francis Journals, vol. 35(11), pages 1317-1329, July. [Downloadable!] (restricted)
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