Explaining corporate success: The structure and performance of British firms, 1950-84

David Higgins and Steven Toms

Business History, 2011, vol. 53, issue 1, 85-118

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 multi-divisional 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.

Keywords: strategy; structure; and performance; sustained competitive advantage; British business and organisational change (search for similar items in EconPapers)
Date: 2011
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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DOI: 10.1080/00076791.2011.546668

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