The Adoption of the Multidivisional Form of Organization: A Contingency Model*

Mahoney, Joseph T.

doi:10.1111/j.1467-6486.1992.tb00652.x

Cited by 42 publications

(31 citation statements)

References 107 publications

(142 reference statements)

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“…Chandler's (1962) thesis illustrates how resources and mental models of managers interact. Some firms' managers were uniquely positioned to create a significant organizational breakthrough (e.g., the multidivisional form; Mahoney, 1992a (Amit and Schoemaker, 1993 …”

Section: Resources and Capabilitiesmentioning

confidence: 99%

The management of resources and the resource of management

Mahoney

1995

Journal of Business Research

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618

333

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This paper argues that the resource-based approach of deductive economics, the dynamic capabilities approach of strategy process, and organization theory research on organizational learning need to be joined in the next generation of resource-based research. This suggested redirection of resourcebased research implies a return to a "resource-learning" theory of the firm begun by Penrose (1959).A synthesis of resource-based theory and learning theory allows us to examine how two sources of firm heterogeneity (resources and mental models) are intertwined. THE MANAGEMENT OF RESOURCES AND THE RESOURCE OF MANAGEMENTA consensus is beginning to emerge in strategic management that calls for an active attempt to increase the dialogue between behavioral and economic approaches to strategy issues (Amit and Schoemaker, 1993;Barney, 1992;Eisenhardt, 1989;Mahoney, 1992b;Schoemaker, 1993;Zajac, 1992). In the spirit of this pluralistic and balanced approach (Bowman, 1990;Rumelt, Schendel and Teece, 1991), it is suggested that the literature on organizational learning (behavioral literature) can and should be united with the emerging resource-based view of the firm (a more economic approach).Specifically, this paper argues that a holistic approach which combines behavioral logic with economic logic is necessary for advancing the theory of invisible assets (Itami and Roehl, 1987) and sustainable competitive advantage. Williamson (1991) notes the uncertainty of whether the dynamic capabilities approach (Nelson and Winter, 1982;Prahalad and Hamel, 1990;Rumelt, 1984; Teece, 1990) --in which organizational learning should certainly be a part --and the resource-based approach (Barney, 1991;Conner, 1991;Peteraf, 1993;Wernerfelt, 1984) will play out individually or in combination. The argument here is that communication can and should flow freely between participants of the two approaches. In fact, the two approaches naturally blend into each other (Mahoney and Pandian, 1992 (Collis, 1991;Tallman, 1991). In the resource-based view, the concept of strategy is considered as a "continuing search for rent" (Bowman, 1974, p. 47) (Penrose, 1959).In contrast to (strong form) efficient market theorists, most resource-based theorists insist that short-term economic rents are possible (Schoemaker, 1990 (Conner, 1991). Third, entrepreneurial (Schumpeterian) rent may be achieved by risk-taking and entrepreneurial insight in an uncertain/complex environment (Rumelt, 1987;Schumpeter, 1934).Fourth, the firm may be able to appropriate rents when resources are firm-specific (Aharoni, 1993 (Andrews, 1980, pp. 63-71; Ansoff, 1965, pp. 90-102; Hofer and Schendel, 3 1978, pp. 144-153; Selznick, 1957, pp. 42-56 (Barney, 1991;Demsetz, 1973;Powell, 1992b productive services from existing resources present a "jig-saw puzzle" for balancing processes (Penrose, 1959, p. 70). Excess capacity due to indivisibilities, and cyclical demand, to a large extent drives the diversification process (Chandler, 1962;Farjoun, 1993 At all times there exists w...

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Section: Resources and Capabilitiesmentioning

confidence: 99%

The management of resources and the resource of management

Mahoney

1995

Journal of Business Research

Self Cite

618

333

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“…In fact, recent empirical research suggests that in the case of the adoption of the multidivisional structure both efficiency and power politics matter (Mahoney, 1991b;Palmer, Friedland, Jennings, & Powers, 1987). While recognizing the legitimacy of alternative theoretical perspectives and the inevitable limitations inherent in relying on one "conceptual lens" (Allison, 1971), this paper nonetheless, pushes hard on the efficiency orientation to predict organizational form.…”

Section: A Framework For Predicting Organizational Formmentioning

confidence: 99%

The choice of organizational form: Vertical financial ownership versus other methods of vertical integration

Mahoney

1992

Strategic Management Journal

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360

253

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“…Of course, an important premise underlying the use of an autonomous, multidivisional organizational structure within a multinational firm is that the activities between autonomous units can be effectively separable and that there is little interaction required among these units (Mahoney, 1992;Williamson, 1975). However, this premise of low economies of scope between subsidiaries does not always hold true.…”

Section: Theory and Hypothesesmentioning

confidence: 99%

Examining the Penrose effect in an international business context: the dynamics of Japanese firm growth in US industries

Tan

Mahoney

2005

Manage Decis Econ

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Penrose (1959) theoretically developed the research proposition that the finite capacities of a firm's internally experienced managers limit the rate at which the firm can grow in a given period of time. One empirical implication that follows logically from this line of reasoning is that a fast-growing firm will eventually slow down its growth in the subsequent time period because its firm-specific management team, which is posited to be inelastic at least in the short run, is unable to handle effectively the increased demands that are placed on these internally experienced managers due to increased complexity as well as the time and attention that the new managers require from these internally experienced managers. Consequently, inefficiency in the firm's current operations will follow if the firm maintains its high rate of growth. The research proposition that a firm cannot remain operationally effective if it maintains high rates of growth in successive time periods, and that consequently those firms with foresight typically will slow down their growth in the subsequent time period is known as the 'Penrose effect' in the research literature, and this effect of dynamic adjustment costs has been examined and corroborated in a few empirical research studies. However, researchers have not yet examined the Penrose effect in an international business context.The current paper examines the Penrose effect in an international business context by exploring under what conditions Japanese firms achieve high growth in consecutive time periods in the entered US industries. The empirical results indicate that, consistent with Penrose's (1959) resource-based theory prediction, Japanese multinational firms that entered in US industries where the extent of knowledge tacitness, globalization, and unionization was high, rapid expansion growth in one time period had negative impacts on growth in the subsequent time period. Thus, dynamic adjustment costs limit the rate of the growth of the firm and the development of dynamic capabilities in this international business context, which suggests that the Penrose effect may be widely applicable to international business and corporate strategy. Copyright # 2005 John Wiley & Sons, Ltd. INTRODUCTIONHow a firm evolves over time has been an important issue in the fields of strategic management and industrial organization economics (Kor and Mahoney, 2000;Nelson and Winter, 1982). Looking at the historical business record from an organizational capabilities and technology trajectories perspective, Chandler (1990) suggests that modern business enterprises arise from the economies of scale and scope that are made possible by the development of new technologies. Furthermore, a number of researchers who approach these business issues more deductively in economic *Correspondence to: Department of Business Administration, College of Business, University of Illinois at Urbana-Champaign, USA. E-mail: josephm@uiuc.edu science come to a similar conclusion to Chandler's (1990) more inductive business h...

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The Adoption of the Multidivisional Form of Organization: A Contingency Model*

Cited by 42 publications

References 107 publications

The management of resources and the resource of management

The management of resources and the resource of management

The choice of organizational form: Vertical financial ownership versus other methods of vertical integration

Examining the Penrose effect in an international business context: the dynamics of Japanese firm growth in US industries

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