The Corporation: Growth, Diversification and

This book reviews the theory of the firm and the large modern corporation. Examining the process of entrepreneurial capitalism in which firms come into existence, then managerial capitalism and the changing motives of management in corporations -The Corporationis a thorough and thoughtful account. Of interest to students and academics in the area, this book will also prove to be an intriguing read for professionals.

Dennis C. Mueller is Professor of Economics at the University of Vienna, Austria.

Acknowledgments

xii

Introduction

1

(6)

The nature of profits

7

(6)

Uncertainty and profit

7

(2)

Mobility and profit

9

(1)

Information, mobility, and profit

10

(2)

Notes on the literature

12

(1)

The nature of the firm

13

(16)

The nature of a contract

13

(2)

The firm as an insurance contract

15

(2)

The firm as a coordination contract

17

(5)

The nature of the firm

22

(1)

Hierarchy in the firm

23

(1)

Conflicts between the firm's team members

24

(2)

Conclusions

26

(2)

Notes on the literature

28

(1)

The Schumpeterian firm

29

(34)

The product life cycle

29

(4)

The causes of shakeouts

33

(4)

Entry and exit

37

(7)

First-mover advantages and dynamic competition

44

(9)

First-mover disadvantages

53

(1)

The persistence of profits

53

(1)

First-mover advantages and the persistence of profits

54

(4)

Evolutionary models of firms and industries

58

(4)

Conclusions

62

(1)

Notes on the literature

62

(1)

The managerial corporation

63

(30)

The separation of ownership from control

63

(2)

The principal--agent problem

65

(3)

The goals of managers

68

(12)

The firm's life cycle

80

(2)

Constraints on managerial discretion

82

(6)

Managerial compensation

88

(3)

Conclusions

91

(2)

Corporate governance

93

(26)

Ownership and control around the world

94

(4)

The goals of corporate actors

98

(7)

The impact of managerial entrenchment

105

(3)

The impact of ownership identity

108

(2)

The impact of boards of directors

110

(1)

The importance of legal systems

110

(6)

Conclusions

116

(3)

Investment

119

(37)

The basic investment decision

119

(1)

The accelerator theory

120

(1)

Cash flow models

121

(6)

The neoclassical theory of investment

127

(1)

Expectations theories of investment

128

(1)

The neoclassical cost of capital and the Modigliani and Miller theorems

129

(6)

The capital asset pricing model (CAPM)

135

(6)

Empirical investigations of the determinants of investment

141

(4)

Rates of return on investment

145

(6)

Differences in qm across country legal systems and sources of funds

151

(4)

Conclusions

155

(1)

The determinants of mergers

156

(19)

Market power increases

158

(2)

Efficiency increases

160

(2)

Speculative motives

162

(1)

The adaptive (failing firm) hypothesis

163

(1)

The market for corporate control hypothesis

164

(1)

The economic disturbance hypothesis

165

(1)

Financial efficiencies

166

(2)

The capital redeployment hypothesis

168

(1)

The life-cycle-growth-maximization hypothesis

169

(1)

The winner's-curse-hubris hypothesis

170

(1)

The eclectic hypothesis

170

(1)

Testing competing hypotheses about the determinants of mergers

171

(4)

The effects of mergers

175

(33)

On profitability

175

(5)

On market shares and growth

180

(3)

Market power or efficiency?

183

(2)

Mergers effects on productivity

185

(1)

Mergers' effects on share prices -- methodological issues

185

(3)

The first wave -- 1972--83

188

(6)

The second wave -- post-1983

194

(11)

The motives of managers once again

205

(1)

Conclusions

206

(2)

Conclusion

208

(5)

The future of the corporation and the future of capitalism

208

(1)

The future of corporation

208

(3)

The future of corporate capitalism

211

(2)

Notes

213

(9)

References

222

(19)

Name index

241

(6)

Subject index

247

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The Corporation: Growth, Diversification and Mergers

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The Corporation: Growth, Diversification and Mergers

Summary

Author Biography

Table of Contents

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