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Contests for Corporate ControlCorporate Governance and Economic Performance in the United States and Germany$
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Mary O'Sullivan

Print publication date: 2001

Print ISBN-13: 9780199244867

Published to Oxford Scholarship Online: November 2003

DOI: 10.1093/0199244863.001.0001

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Challenges to Post‐War Managerial Control in the United States

Challenges to Post‐War Managerial Control in the United States

(p.146) 5 Challenges to Post‐War Managerial Control in the United States
Contests for Corporate Control

Mary O'Sullivan

Oxford University Press

Beginning in the 1970s, the previously dominant US corporate enterprises faced an intensification of competition in both the mass‐production and high‐technology industries. The nature and gravity of the competitive threat varied, partly because of differences in resource allocation governance, yet in both types of industry, fundamental challenges to the technological and economic supremacy of the USA were posed by enterprises in different social environments that developed and utilized broader and deeper skill bases to generate higher‐quality, lower‐cost products. In the case of the Japanese especially, the challenges came from enterprises that integrated into processes of organizational learning not only managerial employees (as the Americans had done), but also shop‐floor employees and employees of subsidiary enterprises that functioned as suppliers and distributors. These competitive challenges demanded a response from US corporate enterprises, but as they struggled with what was going on in the productive sphere, the ground had also shifted in the financial sphere: in particular, with the rise of institutional investors, and the increasing pressures that they placed on corporate enterprises to deliver higher returns on their corporate stocks, the commitment of financial resources to corporate strategies came under considerable pressure. The two main sections of this chapter address these issues: Sect. 5.2 discusses the productive challenges and the rise of the new competition, and Sect. 5.3 discusses the growing pressures for financial liquidity, which manifested themselves in a particularly aggressive form in the 1980s with the rise of a market for corporate control, and when that market collapsed in the late 1980s, in leading institutional investors seeking other levers for influencing corporate resource allocation in a movement that has been characterized as the rise of institutional investor activism.

Keywords:   corporate control, corporate governance, financial liquidity, financial pressure, high‐technology industries, history, institutional investor activism, investment, Japan, managerial control, market competition, mass‐production industries, production, resource allocation, returns, USA

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