From Scott, W. R., & Davis, G. F. (2015). Organizations and organizing: Rational, natural and open systems perspectives. Routledge.

1. Base for Organization Theory
Instructors: Prof. Ming-Chi Tsai
Presenter: Le Uyen Ngo (Hillary/吳黎苑)
ORGANIZATION THEORY
CHAPTER 13
THE RISE AND TRANSFORMATION
OF THE CORPORATE FORM
Scott, W. R., & Davis, G. F. (2015). Organizations and organizing:
Rational, natural and open systems perspectives. Routledge.
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2. ORGANIZATIONS AND SOCIETY
2
Organizations Society
absorbed
• Organizations are the key to society because large organizations
have absorbed society.
• Organizations are themselves being increasingly absorbed by
society as well as by wider global processes.

3. THE MOST CONSEQUENTIAL
ORGANIZATIONS OF THE TIME
3
• Railroads
the quintessential professional managerial firms, providing the engine
of modernization for an industrializing society
• the Prussian bureaucracy
a model of the rational organization
• General Motors
a model of the multidivisional structure and competent management
in general
• Wal-Mart
the prototypical large American organization.

4. THE MOST CONSEQUENTIAL
ORGANIZATIONS OF THE TIME
4
• Organization theory seeks to provide an understanding of the
intersection of biography and history in social structure.
• The history of the development of modern society is also a
history of the development of special-purpose organizations.
• As moving from an industrial to a post-industrial society, the
idea of any particular organization providing the model for
organizing seems increasingly suspect.

5. FROM FORD RIVER ROUGE TO LINUX
5
• Ford River Rouge plant: a tightly bounded rational system
par excellence
• Linux: a loosely coupled open system
An evolution from
• rational systems, organized for the efficient production of goods,
• to natural systems that increasingly enveloped their members,
• to open systems in which “goods” and “members” are often
virtual.
 The bookends of this process could be the Ford River
Rouge plant at one end, and Linux at the other.

6. OUTLINE
Changing forms of organizations
Are organizations still the
defining structures of
society?
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7. CHANGING FORMS OF ORGANIZATIONS
From Corps to Corporation
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• Guild
trade corporations typically given a monopoly by the monarch
on a particular kind of trade in a particular location
• Chartered companies
these companies were chartered by the king, receiving exclusive
rights to trade in a particular part of the world, and were
supported by shares that could be sold on the open market.
Two important transitional forms:

8. CHANGING FORMS OF ORGANIZATIONS
From Corps to Corporation
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Corporations’ features:
• a separate legal personality: the corporation is not the
aggregate of its “members,” and thus the ability to make
contracts and own property;
• unlimited life: its continued existence under the law is not
dependent on particular persons and it can carry on
indefinitely;
• limited liability: people who own it are not liable for debts
taken on by the corporation
 enabling corporations to grow to vast size and influence.

9. CHANGING FORMS OF ORGANIZATIONS
Railroads: Origins of the Managerial Firm
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Defining Features
functional, unitary or U-form: the conventional structure
composed of a central management unit and several
functionally organized departments.

10. CHANGING FORMS OF ORGANIZATIONS
Railroads: Origins of the Managerial Firm
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Associated Developments
• The appropriate role for governments in an industrial
market economy
• The widespread use of stock markets to fund business
• A class of “robber barons”
• The interaction of business elites and governments
• The opening of vast markets for agricultural export

11. CHANGING FORMS OF ORGANIZATIONS
The Corporation in the Twentieth Century
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Diversification: The M-form (multidivisional)
• consisted of a general corporate office and several product-
based or regional divisions, each of which contained functionally
differentiated departments.
• well suited for firms operating in diverse markets; or firms that
failed to support a strategy of diversification with an appropriate
multidivisional structure suffered for it.

12. CHANGING FORMS OF ORGANIZATIONS
The Corporation in the Twentieth Century
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American Exceptionalism?
• No other economy came to be dominated by vertically
integrated M-forms with dispersed ownership, operating in
oligopoly industries.
• In other industrial nations, governments grew up before
business.

13. CHANGING FORMS OF ORGANIZATIONS
The Corporation in the Twentieth Century
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Convergence and Divergence: Alternative Pathways?
• Convergence
the typical large industrial firm in Western Europe was
diversified and divisionalized.
• Divergence
the structures of corporate boards, and the extent of
ownership dispersion, continued to retain distinct national
differences through the end of the twentieth century

14. CHANGING FORMS OF ORGANIZATIONS
The Corporation in the Twentieth Century
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Variation and Continuity
• By analogy, bricolage, and outright copying, actors create
institutions and organizations, engendering family
resemblances that persist over time.
• Institutions created for one purpose can be adapted for other
purposes.
• Institutional entrepreneurs often invent or import new
modes of organizing from other fields.
• Institutions also spread through direct copying.

15. ARE ORGANIZATIONS STILL THE
DEFINING STRUCTURES OF SOCIETY?
Class versus Organizations
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• Organization theorists have followed Weber in viewing the
organization as the most critical structure of society.
• Class theorists, following Marx, have seen social classes as
defining the essential divisions in society.
 provides an illuminating contrast for how social scientists
have told history.

16. ARE ORGANIZATIONS STILL THE
DEFINING STRUCTURES OF SOCIETY?
Organizations and States
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• Three central types of social actors have evolved as the
major foci of agentic power into the modern period: nation-
state, organizations, and individuals.
Nation-states are under much pressure to exhibit the same
structures and programs.
Organizations have become more alike over time.

17. ARE ORGANIZATIONS STILL THE
DEFINING STRUCTURES OF SOCIETY?
Organizations and States
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Similarities
• Corporations in the United States provide many of the social
welfare benefits that states provide elsewhere.
• States are becoming more like corporations in their
operations and rhetoric.
 service providers to their citizen-consumers
Competition
• states compete for incorporation revenues through the
bodies of corporate law they provide.

18. ARE ORGANIZATIONS STILL THE
DEFINING STRUCTURES OF SOCIETY?
Organizations and States
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Similarities, Competition
• Railroad was the keystone industry of industrialization and
represented many of the central themes of the modern
corporation.
• Shipping is the keystone industry of globalized post-
industrialism and the postmodern corporation.

19. ARE ORGANIZATIONS STILL THE
DEFINING STRUCTURES OF SOCIETY?
Organizations and States
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Challenges and Changes
• Organization and the nation-state are both challenged and
changing, and experiencing the “creative destruction”
processes of intense competition and globalization.
• Theory about organizations has not yet caught up with these
developments.

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