Structural Change in Corporate Organization

The purpose of this review is to assess the adequacy of various economic and sociological explanations in accounting for certain key features of change in large-scale corporations, including vertical integration, product related and unrelated diversification, and the implementation of the multidivisional form. We first review the various economic theories that purport to explain these phenomena, including the structure-conduct-performance perspective, the literature on managerial discretion, transaction cost analysis, contingency theory, and the evolutionary theory of economic change. All of these literatures have efficiency mechanisms that drive their explanations although they work in different ways. We then consider sociological approaches including the literatures in organizational theory on institutionalization and power. Our review of the empirical work provides little support for the economic view of vertical integration and unrelated product diversification, and only modest support for the economic view of product-related diversification and the multidivisional form. The sociological views aid in understanding all of these phenomena to some extent. We conclude by suggesting that the concept of organizational fields may be useful in understanding these structural changes