The Finance Conception of Control- "the Theory That Ate New York?" Reply to Fligstein*

reaffirm our conclusions, theoretical framework, and interpretation of results pertaining to the acquisition of firms in the 1960s, showing how Fligstein mischaracterizes each of these components of our paper. We maintain that our framework of organization analysis, which focuses on the interests and capacities of corporate elites, is compatible with Fligstein's proposed institutional, historical approach. However, we contend that Fligstein's finance conception of control theory fails as a singlehanded explanation of the likelihood of acquisition in the 1960s. To accommodate our diverse findings, Fligstein strips his argument of its distinctive focus. Fligstein claims that our results fail to show that "the American capitalist class is mainly organized through network interlocks, particularly interlocks with banks, and that this interlock structure explains the 1960s merger movement" (p. 500) and "do not add up to a sociological theory of the social organization of capitalism" (p. 502). This criticism is moot, because we do not contend our results support these conclusions. Fligstein correctly quotes us as saying that "ownership relationships and network ties among the business elite had a significant impact on acquisition behavior in the 1960s" (Palmer, Barber, Zhou, and Soysal 1995:493). However, he neglects our other conclusions: That resource-dependence relations also influenced the likelihood of acquisition and that "economic factors were powerful determinants of corporate acquisitions in this period" (p. 491). Our last sentence reads "Taken together, these results imply that future research should eschew attempts to develop a unified theory of corporate acquisitions, however appealing it might be on grounds of parsimony, if it hopes to provide a comprehensive account of the subject" (p. 495). Fligstein asserts that our results on ownership and interlocks, which we argue undermine his earlier claim that ownership and interlock relations have little influence on corporate behavior (Fligstein and Brantley 1992), are insignificant. He is wrong, largely because he incorrectly equates the framework underpinning our hypotheses with a highly simplified version of power-structure theory. In fact, our framework is based on four assumptions: (1) The elites (managers and directors) who run large corporations occupy positions in the class structure of American society; (2) the class positions of corporate elites have two dimensions-location in the mode of production (in which ownership relations are crucial) and location in elite social networks (in which corporate board positions are important); (3) the class positions of corporate elites shape their interests and capacities for economic and political action, which in turn shape the behavior of the firms they command; and (4) the class interests and capacities of corporate elites and their impact on corporate behavior are-to use two of Fligstein's favorite words-historically and institutionally contingent. We address Fligstein's assessment of our results regarding ownership and interlocks in light of this characterization of our framework. Fligstein contends that the reported negative effect of stock ownership by managers * Direct correspondence to Donald Palmer, Graduate School of Management, University of California, Davis, CA 95616 (Internet: DAPALMER @UCDAVIS.EDU). The authors thank Nicole Biggart, Roger Friedland, Mark Mizruchi, Michael Schwartz, Yasemin Soysal, and Linda Stearns for their helpful comments on an early draft of this reply.