The owners were more interested in stable income than reinvestment in competitive advantage, taking out profit as dividends rather than making the “three-pronged investments”.
The corporate office let go of day-to-day operational responsibilities, instead focusing on performance monitoring of the divisions, planning and implementation of long-term corporate strategy, and specialist advice through corporate staff to the top and middle management of the divisions.
The staff usually was composed of the old financial department, a corporate personnel office and a central research laboratory.
In the new, capital-intensive industries increase in output came as a dramatic reduction in capital/labor ratios, due to new machines and processes.
Thus, economies of scale were much more important in capital-intensive industries, whereas in the labor-intensive one the large firm did not have significant advantages over the small ones.
The divisions had responsibilities for a single product line, or sometimes a geographical area.
Labor-intensive industries (such as textile, lumber, printing) did not provide competitive advantages for large integrated companies.
The complexity of the decision-making med the American companies to pioneer the multidivisional organizational structure.
Great Britain: Personal Capitalism Key characteristics: Family-owned companies, where the owners prefer to take out profit as dividends and keep their day-to-day influence, leading to Britain coming in late in the second industrial revolution.
One reason for this was the increasing “product-specificity”; as products became more complex, it was not cost-efficient to have a wholesaler handle the difficult transaction processes.
Another reason was competition; in the fierce battle for market share in an oligopolistic marketplace an intermediary who made his profit from handling products of more than one manufacturer became redundant.