Business corporations interact with household units and government agencies to make investments in productive capabilities required to generate innovative goods and services. When they work harmoniously, these three types of organizations constitute 'the investment triad'. The Biden administration's Build Back Better agenda to restore sustainable prosperity in the United States has focused on investment in productive capabilities by government agencies and household units. Largely absent from the Biden agenda have been policy initiatives to ensure that, given government and household investment in productive capabilities, the governance of major U.S. business corporations supports investment in innovation. This Element explains how corporate financialization, manifested by predatory value extraction in the name of 'maximizing shareholder value', undermines investment in innovation in the United States. It concludes by outlining a policy framework, beginning with a ban on stock buybacks, that confronts predatory value extraction and puts in place social institutions that support sustainable prosperity.

For more than 20 years, William Lazonick has been one of the world's leading analysts of the dynamics of industrial development and change in international economic leadership. This impressive volume presents a coherent selection of Professor Lazonick's most important work on industrial development in Britain and the United States.The first part of the book contains articles on the decline of the British economy, including a recent summary of the debates on the British cotton textile industry and international competition. The second part focuses on labour, management and technology in the rise and recent decline of the US economy, and includes an up-to-date summary essay on organizational capabilities in American industry. Professor Lazonick's essays make historical analysis relevant to the present and put economic analysis back in touch with evolving reality. This approach, together with his unique combination of historical, statistical and theoretical methodologies, will ensure that this volume proves invaluable to economists and historians alike.

In an age of intense international competition, enterprises, regions and nations depend on their organizational capabilities to gain competitive advantage in global markets.This volume brings together critical scholarly contributions to historical and contemporary debates over the origins and characteristics of organizational capabilities that result in competitive advantage. Included are case studies drawn from textiles, chemicals, automobiles, computers and agriculture that illustrate how organizational capabilities generate sustained competitive success. In a new introduction, the editors, who have themselves been in the forefront of analysing the dynamics of innovation and industrial development, provide a state-of-the-art survey of the subject.

The tension between innovation and financialisation is central to the business corporation. Innovation entails a 'retain-and-reinvest' allocation regime that can form a foundation for stable and equitable economic growth. Driven by shareholder-value ideology, financialisation entails a shift to 'downsize-and-distribute'. This Element investigates this tension in global pharmaceuticals, focusing on the two leading UK companies AstraZeneca and GlaxoSmithKline. In the 2000s both adopted US-style governance, including stock buybacks and stock-based executive pay. Over the past decade, however, first AstraZeneca and then GlaxoSmithKline transitioned to innovation. Critical was the cessation of buybacks to refocus capabilities on investing in an innovative drugs pipeline. Enabling this shift were UK corporate-governance institutions that mitigated US-style shareholder-value maximisation. Reinventing capitalism for the sake of stable and equitable economic growth means eliminating value destruction caused by financialisation and supporting value creation through collective and cumulative innovation. This title is also available as Open Access on Cambridge Core.

This book explains the changes in industrial leadership from Britain to the United States earlier in this century and from the United States to Japan more recently, in terms of the changing business investment strategies and organizational structures in these nations. The author criticizes economists for failing to understand these historical changes. The book shows that this intellectual failure is not inherent in the discipline of economics; there are important traditions in economic thought that the mainstream of the economics profession has simply ignored.

William Lazonick explores how technological change has interacted with the organization of work, with major consequences for national competitiveness and industrial leadership. Looking at Britain, the United States, and Japan from the nineteenth century to the present, he explains changes in their status as industrial superpowers. Lazonick stresses the importance for industrial leadership of cooperative relations between employers and shop-floor workers. Such relations permit employers to use new technologies to their maximum potential, which in turn transforms the high fixed costs inherent in these technologies into low unit costs and large market shares. Cooperative relations can also lead employers to invest in the skills of workers themselves--skills that enable shop-floor workers to influence quality as well as quantity of production.

To build cooperative shop-floor relations, successful employers have been willing to pay workers higher wages than they could have secured elsewhere in the economy. They have also been willing to offer workers long-term employment security. These policies, Lazonick argues, have not come at the expense of profits but rather have been a precondition for making profits.

Focusing particularly on the role of labor-management relations in fostering "flexible mass production" in Japan since the 1950s, Lazonick criticizes those economists and politicians who, in the face of the Japanese challenge, would rely on free markets alone to restore the international competitiveness of industry in Britain and the United States.

Predatory Value Extraction explains how an ideology of corporate resource allocation known as 'maximizing shareholder value' (MSV) that emerged in the 1980s came to dominate strategic thinking in business schools and corporate boardrooms in the United States. Undermining the social foundations of sustainable prosperity, it resulted in employment instability, income inequity, and slow productivity growth. In explaining what happened to sustainable prosperity, William Lazonick and Jang-Sup Shin focus on the growing imbalance between value creation and value extraction in the U.S. economy, and the corporate-governance institutions that determine this balance in the nation's major business corporations. The imbalance has become so extreme that predatory value extraction is now a central economic activity, to the point at which the U.S. economy as a whole can be aptly described as a value-extracting economy. Balancing the contributions of economic actors to value creation with their power to extract value provides the foundation for stable and equitable economic growth. When certain economic actors are able to assert their power to extract far more value than they contribute to the value-creation process, an imbalance occurs which, when extreme, leads to dire economic, political, and social consequences. This book not only explores these consequences, but also sets out an agenda for restoring sustainable prosperity.

Alfred D. Chandler, Jr. was, by general consensus, the pre-eminent business historian of the twentieth century. Through a prodigious body of work, Chandler made the study of the evolution of business enterprise integral to the study of the evolution of economy and society. His work combined detailed historical investigations with grand sociological syntheses. As a result, Chandler's study of the modern business enterprise invited social scientists and business academics as well as historians to contribute to our understanding of a central institution of our time.
Chandler revealed how managerial activity was central to the functioning of successful industrial corporations, and hence to the performance of the economy as a whole. This book gathers together contributions from management scholars fundamentally influenced by the work of Chandler to discuss management innovation, the ways in which people who exercise strategic control over the allocation of resources put in place organizational structures that can enable an enterprise to prosper and grow. The volume offers a range of perspectives to examine the challenges that corporate management encounters.