The Convergence of Production and Financial Organizations: KKR's Integration of Corporate Control for Continued Profits in the 1990s

• Published in: Social science quarterly Vol. 80; no. 3; pp. 487 - 503
• Main Authors: Wise, Dena, Zey, Mary
• Format: Journal Article
• Language: English
• Published: Malden, MA University of Texas Press 01.09.1999; Blackwell; University of Texas at Austin (University of Texas Press); University of Texas Press, in cooperation with the Southwestern Social Science Association
• Subjects: Business innovation; Business structures; Capital structure; Company management; Corporate management; Corporate strategies; Corporate structure; Corporations; Economic integration; Factors; Finance; Financial management; Industrial enterprises; Industry; Integration; Investment banking; Investment banks; Investment companies; Investment strategies; Management; Methods; Of General Interest; Organization; Organizational structure; Production engineering; Production management; Profit; Profits; Sociology; Sociology of organizations and enterprises. Bureaucracy and administration; Sociology of work and sociology of organizations; Strategic planning; Subsidiary companies; Survival; U.S.A; United States; United States Of America; New York; Finance; Production; Enterprise; Restructuration; Organizational structure; Organizational Change; Profit; Economic change
• ISSN: 0038-4941; 1540-6237

Objective. Extant studies document that during the 1970s, transformation in corporate strategy and structure resulted in financially managed industrial corporations (Davis, Diekmann, and Tinsley, 1994; Fligstein and Brantley, 1992). This study, in contrast, documents the convergence of financial and industrial corporations in the 1980s, and the resulting impact on financial-centered management. Methods. Focusing on the innovative investment banking firm of Kohlberg Kravis Roberts (KKR), we outline the management strategy and organizational structure of the 1980s and then trace changes to that strategy and structure made in response to late-1980 shifts in the financial and legal environments. Results. Our analysis demonstrates that KKR's innovative financial strategies of the 1980s gave way to new strategies and structures that integrated aspects of both financial-and production-centered foci. Conclusions. The results suggest that convergence of production-focused and financially focused firms during the 1980s resulted in more complex relationships than have been documented by previous studies. Successful negotiation of the economic and structural upheavals during the 1980s required not only astute strategy, but also governance and legal structures which provided the fluidity for dynamic resource allocation guided by both production and financial criteria.