Between 1981 and 1995 the dominant form of Fortune 500 firms changed from the multidivisional form to the multisubsidiary form (Zey and Camp 1996). The explanation for the movement toward subsidiarization originates in changes during the late 1970s and 1980s in the political economy, the relationship between corporations and capital, and the regulation of corporations. As a result of the declining capital accumulation of the 1970s, the federal government instituted two measures of corporate welfare, the Tax Reform Act of 1986 (TRA86) and the Revenue Act of 1987 (RA87), that provided corporations with nontaxable ways to restructure their acquisitions and divisions as subsidiaries. Thus, by the process of subsidiarization, corporations were able to continue capital flows. We examine the increase in subsidiarization from 1981-1995 as a means of assessing the utility of four theoretical perspectives to explain change in corporate form. A one-way random effects panel analysis demonstrates how corporate financial conditions, national business laws, and organizational characteristics combine to affect the rate of subsidiarization of U.S. corporations. Separate panel models for 1981-1985 (pre-TRA86) and 1986-1995 (post-TRA86) reveal that changes in corporate tax laws affect capital accumulation and result in significant change in corporate form. This analysis supports the structural political economy contingency theory arguing that change in capital accumulation, brought about by macro changes in political legal conditions of corporations, leads to the transformation of corporate form.
|Original language||English (US)|
|Number of pages||28|
|State||Published - Jan 1 1998|