TITLE

Declining U.S. Competitiveness: Reflections on a Crisis

AUTHOR(S)
Hill, Charles W.L.; Hitt, Michael A.; Hoskisson, Robert E.
PUB. DATE
February 1988
SOURCE
Academy of Management Executive (08963789);Feb1988, Vol. 2 Issue 1, p51
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
There is convincing evidence that the cause of declining competitiveness among United States firms is a slump in innovative activity. The authors contend that evolutionary developments in both the nature of the firm and the nature of the capital market have combined to create a business environment characterized by short-term profit maximization and risk avoidance. The result has been less innovative activity. The rise of the diversification movement, along with the subsequent adoption of decentralized multidivisional structures, have created an environment in which short-term profit maximization and risk avoidance thrive. Additionally, the rise of risk averse institutional investors as major stockholders and increasing incentives for investment bankers to engineer takeover bids have increased the pressures on top management to show good short-term earnings performance. Management has responded by implementing tight financial controls within the firm and pursuing strategies that deemphasize high-risk innovations. The authors review some possible solutions to the problem, including the use of leverage buyouts to reduce management's dependence on the stockmarket, changes in organizational control systems of large firms, and building closer ties between investors and the firms in which they invest.
ACCESSION #
4275596

 

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