THE DECLINE AND FALL OF THE CONGLOMERATE FIRM IN THE 1980S - THE DEINSTITUTIONALIZATION OF AN ORGANIZATIONAL FORM

In 1980, the conglomerate firm, a firm composed of several unrelated businesses, was perhaps the dominant corporate form in the United States. Yet, by 1990 this form had in effect become deinstitutionalized. Using comprehensive rime-series data from the 1980s on a population of the largest industrial firms in the United States, we demonstrate that this deinstitutionalization was effected by two processes: First, diversified firms were taken over at a high rate and their unwanted parts were typically sold off and second, the less diversified firms that survived shunned the strategy of conglomerate growth. The aggregate result was that by 1990 the largest industrial firms in the United States became considerably less diversified. Business rhetoric tracked the shift in this prevalent organizational form and practice by denouncing the ''firm-as-portfolio'' model in favor of a network model of regularized economic exchange. We argue that an unintended consequence of the successful spread of the conglomerate form was to replace the conceptualization of the corporation as a sovereign actor with a reductionist view of the firm as a network without boundaries or a nexus-of-contracts among separate individuals. We discuss the implications of this conceptualization for organization theory.