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Managerial Capitalism beyond the Firm

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Chandler cautions that market control was not the only reason for mergers at the turn оf the century, as a number оf merger-makers saw such combinations as the legal prerequisites to administrative centralization and rationalization. DuPont, for instance, did not seek to gain a complete monopoly through consolidation. Rather, it saw advantages associated with being the low-cost provider with a dominant market share, able to maintain high capacity utilization by expanding share in recession and reducing it during periods оf expansion.   While some mergers initially created little more than federations out оf previously independent companies, Chandler asserts that "nearly all the mergers that lasted did so only if they successfully exploited the economics оf scale and (to a much lesser extent) those оf scope".

The merger movement is to Chandler the most important single episode in the evolution оf the modern industrial enterprise in the United States from the 1880s to the 1940s as it permitted the rationalization оf American industries in a way that did not begin in Britain and Germany until the 1920s. Moreover, nationwide consolidation tended to reduce family control, which in turn facilitated putting representatives оf investment banks and other financial institutions, оften important in arranging to finance for mergers and acquisitions, on the boards оf American industrial enterprises for the first time.

However, the influence оf the financiers waned as the companies were able to finance long-term investment as well as current operations from retained earnings, and the influence оf management correspondingly increased. By World War I managerial capitalism had taken root in America, and the companies that were "the first to make the essential, interrelated, three-pronged investments in production, distribution, and management remained the leaders from the 1880s to the 1940s", not only in the United States but also, Chandler argues, in Britain and Germany.

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