A Test of Alfred Chandler's Theory of Corporate Control Page: 3
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Schmidt, George Leo, A Test of Alfred Chandler's Theory of Corporate Control. Doctor
of Philosophy (Accounting), August 1996,76 pages, 11 tables, 4 figures,
reference 52 titles.
Alfred Chandler, in Scale and Scope: The Dynamics of Industrial Capitalism
(1990), suggests that the acquisition of targets is an alternative to direct investment in
research and development (R&D). Chandler suggests that the failure of accounting to
recognize investment in R&D as an asset may have made R&D less attractive.
This study focuses on the relationship between investment in R&D and capital
expenditures and a set of partitions based on Chandler's three technology types ("high-
tech," "stable-tech," and "low-tech") and three possible merger activity classes (acquirer
next year, target next year, and neither acquirer nor target next year).
Chi-square contingency tables are used to test the independence of merger class
and technology type, a frequency test. Regression is used to test the relationship between
R&D and sales and between capital expenditures and sales, with the sample partitioned
by technology type and by merger class in a 3-by-3 research design. The sample is
23,146 firm years from 1974-1988 for 2,659 firms categorized into industry groups based
on Chandler's criteria. The financial data are from COMPUSTAT data files.
The frequency of being an acquirer is the same for high-tech and stable-tech
firms (11.2 versus 11.5 percent of firm years) and higher for low-tech firms (13.9 percent
of firm years). High-tech firms that are acquirers next year have 79% lower investment
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Schmidt, George Leo. A Test of Alfred Chandler's Theory of Corporate Control, dissertation, August 1996; Denton, Texas. (https://digital.library.unt.edu/ark:/67531/metadc277938/m1/3/: accessed March 28, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; .