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In the 1980s, the corporate form shifted from multidivisional forms to corporate groups of subsidiaries. Although many aspects of corporate change during the 1980s have been examined, the magnitude and nature of changes in corporate form have received relatively little attention. Moreover, this transformation of corporate form has been inadequately explained by the dominant theoretical perspectives on corporate form—managerialism, institutionalism, and agency theory. A new theory that incorporates dimensions of the existing perspectives is presented. This perspective maintains that corporate change occurs as a dialectical process, which in the 1980s involved a shift of corporate control from managers to owners, resulting from a crisis in the accumulation of capital in the corporation. After gaining control through institutional investments, owners insisted on greater return on their investments. Mergers and acquisitions transferred corporate capital from corporations, controlled by managers, to shareholders. The relative utility of this perspective compared to existing perspectives for explaining the transformation of corporate form in the 1980s is demonstrated, and hypotheses for understanding changes in corporate form in the 1990s are proposed.

In 1986 the dominant form of the Fortune 500 industrial corporation changed from the multidivisional form (MDF) to the multisubsidiary form (MSF) (Zey and Camp 1996). We examine two major organizational perspectives (historical managerialism and agency theory) and an alternative perspective, the political economy contingency theory of capital accumulation (PECTA), to explain the transformation of Fortune 500 corporate form from MDF to MSF. Using event history analysis, we analyze data from 1981-1995 to define the covariates of this change, thereby predicting the risk of change to the now dominant MSF. The historical managerialism model considers assets as an indicator of size, operating profit margin as an indicator of efficiency, and return on sales as an indicator of profitability. The two major variables of the agency theory model are cash flow and debt-to-equity ratio. The alternative PECTA model considers tax savings resulting from changes brought about by the Tax Reform Act of 1986, percentage of shares held by institutional investors, shareholder return on equity, production-to-administrative intensity, dollar amount of acquisitions, and dollar amount of divestitures. Controlling for the natural log of gross assets, which has the strongest relationship to risk of transformation in dominant form from MDF to MSF, we found that the percentage of shares held by institutional investors, the sum of tax-free transactions (spin-offs, split-offs, and stock swaps), the total merger and acquisition activity, and the two-year lagged difference in the rate of first-level subsidiarization all had significant effects on the transformation of corporate form from the MDF to the now dominant MSF.During the late 1970s and early 1980s, internal control systems of corporations largely failed to increase productivity, rate of profitability, and workers' wages. In 1986, business policy makers responded to the forces that rendered internal control mechanisms