19 January 2011 at 11:44 am Peter G. Klein 4 comments
| Peter Klein |
A funny (to me) New Yorker cartoon about diversification, appearing at the height of the conglomerate merger wave of the late 1960s and early 1970s. Click to enlarge. (I’ve been looking for this for a while; found it when cleaning out an old file cabinet.)
Entry filed under: - Klein -, Business/Economic History, Strategic Management, Theory of the Firm.
Nicolai J. Foss and Peter G. Klein, Organizing Entrepreneurial Judgment: A New Approach to the Firm (Cambridge University Press, 2012).
Peter G. Klein and Micheal E. Sykuta, eds., The Elgar Companion to Transaction Cost Economics (Edward Elgar, 2010).
Peter G. Klein, The Capitalist and the Entrepreneur: Essays on Organizations and Markets (Mises Institute, 2010).
Richard N. Langlois, The Dynamics of Industrial Capitalism: Schumpeter, Chandler, and the New Economy (Routledge, 2007).
Nicolai J. Foss, Strategy, Economic Organization, and the Knowledge Economy: The Coordination of Firms and Resources (Oxford University Press, 2005).
Raghu Garud, Arun Kumaraswamy, and Richard N. Langlois, eds., Managing in the Modular Age: Architectures, Networks and Organizations (Blackwell, 2003).
Nicolai J. Foss and Peter G. Klein, eds., Entrepreneurship and the Firm: Austrian Perspectives on Economic Organization (Elgar, 2002).
Organizations and Markets 
1.
Jon | 20 January 2011 at 10:50 am
At least it would not be completely unrelated diversification… :-)
Boise is a forest products company. Assuming Santa makes most of his presents out of wood, this takeover situation looks more like vertical integration to me.
2.
Peter Klein | 20 January 2011 at 11:45 am
True, but in the late 1960s Boise was a diversified conglomerate with operations not only in lumber, sawmills, construction, paper, and real-estate development, but also mobile homes, school buses, trucks, publishing, and even electronics. It had a reputation as an aggressive acquirer, like ITT, Gulf & Western, Litton, and the other headline-grabbers of its day.
My favorite descriptor of this era comes from a 1993 Fortune magazine article on Peter Grace’s retirement. “For decades, the Great Conglomerateur had piled company on company, turning W.R. Grace into a purveyor of everything from bull semen to grilled cheese sandwiches.”
3.
Jon | 21 January 2011 at 2:46 am
Hi Peter,
Aha, I did know that. Thanks for the primer on Boise’s history!
Now I also see that this is a really funny cartoon!
Jon
4.
Michael E. Marotta | 24 January 2011 at 10:49 am
Societies evolve – and beyond recording those changes, some engage in prediction.
In his book, The Evolution of Finance Capitalism, (Augustus M. Kelley, 1938), George W. Edwards asserted that the age of the sole entrepreneur launching or expanding a business from savings was over. Moreover, finance capitalism would continue to dominate the markets specifically because the mechanisms of selling risk allowed huge capitalizations, not only of businesses, but of nations.
Then came Mergers and Acquisitions. Based on the view from the late 1970s, Charles R. Spruill echoed the expectations of George W. Edwards. Spruill’s thesis in Mi>Conglomerates and the Evolution of Capitalism was that the lone entrepreneur had been eclipsed by the innovator of mergers and acquisitions. To Spruill, the portfolio managers who put together such firms as Gulf+Western, Ling-Temco-Vought and ITT were the new innovators and risk takers. The modern conglomerate is to our time what the trusts were to the nineteenth century. In this view, conglomerates create powerful synergies, bringing together “accumulation, innovation, financial management, political incentives, and technological breakthroughs.” (Spruill 94)
In our time we have Steve Jobs, Bill Gates, and many capitalist innovators. Their firms (especially Microsoft) did indeed acquire other companies. They were truly the creations of finance capital IPOs. Yet, sole enterpreneurship of the Silicon Valley style would be instantly recognizable to Adam Smith who did not place much faith in corporations.