The impact of ownership type on organizational performance

In this dissertation, I suggest that the "separation of ownership and control" found in U.S. public corporations results in decreased firm performance, as dispersed shareholders fail to encourage managers to make strategic decisions that enhance firm performance. Theory is developed that suggests certain types of large-block shareholders achieve "social control" of the firm, allowing them to shape strategy and investment decisions. Social control occurs as certain types of large-block owners use a complex mixture of contractual and social mechanisms to influence managers as they make key strategic decisions. Theory from organizational behavior, sociology, economics and corporate law is drawn upon to better understand how certain types of large-block owners actually influence strategic decisions made within firms. These large-block owners are viewed as active participants in political processes within corporations. By contrast, dispersed owners found in many large public corporations simply "vote with their feet" when firm strategies become misaligned with the competitive environment.;Large-sample empirical evidence on the U.S. textile industry 1983-1992 reveals that large-block director and officer, sustained, and family ownership each lead to superior strategy and investment decisions, as well as increased firm performance. The sample consists of U.S. public textile firms, 1983-1992. These data are analyzed using econometric models that combine event study techniques with pooled cross-sectional time series analyses. In this way, the models account for the recent consolidation of firms in the textile industry, while capturing how firm ownership affects investment and performance over time.;In addition, capital expenditures and employee to sales ratios were examined as additional dependent variables. Early-generation family owners were found to have significantly higher capital investment to sales ratios and lower employee to sales ratios, suggesting that these firms implemented many of the strategic shifts necessary to remain competitive in the U.S. textile industry. By contrast, older-generation family owners were found to have lower capital expenditure ratios and higher employee to sales ratios, suggesting that these firms were sluggish in reacting to changes in the competitive environment of the U.S. textile industry. Field research is then used to explore the subtle procedural mechanisms and interpersonal relationships that family owners rely upon in order shape firm strategies. This research suggests that family owners actively participate in the executive selection process, and significantly shape firm strategy and investment decisions through many informal conversations with managers.