Document Type

Thesis

Publication details

Forster, GP 2010, 'The decay of corporations and an analysis of their business fitness landscapes', PhD thesis, Southern Cross University, Lismore, NSW.

Copyright GP Forster 2010

Abstract

Large, established, and once successful corporations and their associated brands continually emerge and disappear in any healthy, competitive business environment. However an important trend is emerging in that the average survival time for large established corporations is getting shorter and shorter. This observation is of critical importance to business analysts, investors, executives and corporate directors, for it is a core parameter in determining the long term valuation of a business. More than ever, effective strategic management needs improved tools to aid in the analysis and forecasting of the corporate life cycle, especially in a business environment undergoing rapid, discontinuous change

This research provides a detailed study of corporate survival trends, and examines and extends the existing landscapes, tools, models and indexes used to monitor the corporate life cycle. The research results in the creation of a new business fitness landscape model, introduces two new business risk parameters, creates a new business diversity fitness index, completes a macro analysis of the extinction rates associated with the 100 largest public corporations in the United States from 1955 to 2008, and applies the new tools and models to selected Fortune 100 corporations.

The research finds that the mean lifetime of the United States’ largest corporations has decreased significantly over the last 53 years and that there appears to be a 15 year periodic cycle in peak decay rates. Furthermore the research establishes a new theoretical model for viewing the mean-life and half-life of large corporations and for studying the impact that related and unrelated diversification in industry participation has on a corporation's effective lifespan. In conclusion, the research suggests that established corporations don’t survive just by being the fittest, but that they survive rapid discontinuous change by finding a new optimum position in a new business fitness landscape. In a very dynamic and changeable business fitness landscape, the largest corporations which have multiple, viable, but not necessarily the fittest positions in the fitness landscape, should experience lower rates of decay.

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