Changing Corporate Effects on US Business Performance Since the 1970s

A simmering debate in strategic management pits two conflicting views on the impact of corporate-level factors on affiliated business units. 'Mainstream' proponents hold that corporate effects on business performance are substantial, while 'revisionist' proponents hold that corporate effects are insubstantial compared to the impact of industry-related and macroeconomic factors shaping business performance. We provide a basis for reconciling these opposing views. With a broad sample of operating returns for US firms, we estimate corporate and other variance components of business performance in 17 successive four-year moving windows from 1979 to 1997. Corporate variance components of business performance shift from modest (5%) in the early-1980s as proposed by revisionists to quite substantial (33%) by the mid- 1990s as proposed by mainstream proponents. We conjecture that new theoretical insights on and practices developing the strategic capabilities of corporations through more focused diversification have promoted this evolution and reinvigorated the corporate strategy field.