Author: Thomas R. EisenmannPublisher:
ISBN:
Category :
Languages : en
Pages : 54
Book Description
Chandler observed that under managerial capitalism, salaried managers tended to pursue policies that promoted the long-term stability and growth of their enterprises. The U.S. cable television industry provides a case study of how managers responded when stability and growth were mutually consistent objectives, and when they were mutually exclusive. From the late 1950s through the early 1980s, agent-led newspaper publishers and television broadcasters invested aggressively in the cable business. Cable provided an outlet for reinvesting profits from their core businesses, where growth opportunities were limited. At the same time, these media companies increased their long-term stability by diversifying into cable, because cable threatened to cannibalize their core businesses. Beginning in the mid-1980s, however, investing in cable implied a tradeoff between stability and growth objectives. As a wave of mergers swept the cable industry, agent-led companies avoided acquisitions. Managers were concerned that acquisitions would dilute earnings and thus depress their stock prices, and that diverting capital from other divisions would precipitate disruptive internal conflict. Confronting an increasingly turbulent competitive environment during the first half of the 1990s, agent-led companies were much more likely to divest cable assets than owner-managed firms. In agent-led companies, managers believed that their cable units would require massive capital investments, and they were reluctant to "bet the company" on a business facing so much competitive, technological, and regulatory uncertainty. Owner-managers, emotionally attached to the cable industry and to the firms they had built, and often harboring dynastic ambitions, were more reluctant to sell: they were willing to gamble on growth.