Managerial Capitalism

The traditional mythic figure of economic change is the entrepreneur. Entrepreneurs, by definition of those who initiate and develop firms, spurred the growth of the American economy in the nineteenth century. The most successful entrepreneurs eventually steered their firms into a new organizational form that came to dominate by the turn of the twentieth century: the large corporation. The large corporation may have been created by entrepreneurs, but its development ultimately led to what many believed to be a qualitatively new system, known as corporate, or managerial, capitalism (Tosi, 2009).

The theory of managerial capitalism asserts that control of corporations and banks has shifted from capitalists to managerial specialists, technocrats and bureaucrats. The theory is based on the transition from ownership by individual capitalists to joint-stock ownership of enterprises and on the new role of managerial and organizational sciences in capitalist production. In the traditional capitalist enterprise, the owner of the firm is also the boss. The owner may hire subordinates to supervise the workforce, but these supervisors are clearly subordinate to the owner. This is another way of saying that in the traditional capitalist firm, ownership and control are fused. As the corporate form developed in the nineteenth century, and corporations began to issue stock to the public, the connection between ownership and control became problematic (Tosi, 2009).

Reference:

Tosi, H. L. (2009). Theories of Organization. Retrieved from The University of Phoenix eBook Collection database.