Changing Corporate Effects on US Business Performance Since the 1970s

International Journal of Strategic Change Management, Vol. 2, 2009

33 Pages Posted: 28 Nov 2008

See all articles by Paul M. Vaaler

Paul M. Vaaler

University of Minnesota, Twin Cities - Law School and Carlson School of Management

Gerry McNamara

Michigan State University - The Eli Broad College of Business and The Eli Broad Graduate School of Management

Date Written: November 26, 2008

Abstract

A simmering debate in strategic management pits two conflicting views on the impact of corporate-level factors on affiliated business units. "Mainstream" proponents hold that corporate effects on business performance are substantial, while "revisionist" proponents hold that corporate effects are insubstantial compared to the impact of industry-related and macroeconomic factors on business performance. Both refer to evidence from broad-sample studies decomposing variance in US business performance in the 1980s and 1990s into corporate, industry macroeconomic and other components. We provide a basis for reconciling these opposing views based on when corporate effects on business performance are observed during this time. We identify a comparable sample of US firms, and then estimate corporate and other variance components of business performance in 17 successive four-year moving windows from 1979-1997. Consistent with revisionist views, we find modest (0-5%) corporate variance component estimates for windows from the late-1970s to the mid-1980s. From then on, however, corporate variance component estimates favor the mainstream view by increasing to as much as 33% of variance in business performance in the mid-1990s. Corporate effects have changed substantially after the late 1970s from modest to quite substantial influence on affiliated business-unit performance. We conjecture that new theoretical insights on and practices developing the strategic capabilities of corporations through more focused diversification have promoted this evolution and reinvigorated the corporate strategy field.

Keywords: corporate, strategy, performance, diversification, governance, variance, components

JEL Classification: G30, G32, G34, L10, L20, L22, O51

Suggested Citation

Vaaler, Paul M. and McNamara, Gerry, Changing Corporate Effects on US Business Performance Since the 1970s (November 26, 2008). International Journal of Strategic Change Management, Vol. 2, 2009. Available at SSRN: https://ssrn.com/abstract=1307764

Paul M. Vaaler (Contact Author)

University of Minnesota, Twin Cities - Law School and Carlson School of Management ( email )

229 19th Avenue South
Minneapolis, MN 55455
United States
612-625-4951 (Phone)
612-626-1316 (Fax)

HOME PAGE: http://carlsonschool.umn.edu/faculty/paul-vaaler

Gerry McNamara

Michigan State University - The Eli Broad College of Business and The Eli Broad Graduate School of Management ( email )

East Lansing, MI 48824-1121
United States

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