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² Chandler, , “The Competitive Performance of U.S. Industrial Enterprises since the Second World War,” Business History Review 68 (Spring 1994): 1–72.CrossRefGoogle Scholar

³ French, Michael, “Structural Change and Competition in the United States Tire Industry, 1920–1937,” Business History Review 60 (Spring 1986): 28–54.CrossRefGoogle ScholarFrench, , The U. S. Tire Industry: A History (Boston, Mass., 1990)Google Scholar; French, , “Structure, Personality, and Business Strategy in the U.S. Tire Industry: The Seiberling Rubber Company, 1922–1964,” Business History Review 67 (Summer 1993): 246–275.CrossRefGoogle Scholar

⁴ Sull, Donald N., Tedlow, Richard S., and Rosenbloom, Richard S., “Managerial Commitments and Technological Change in the U.S. Tire Industry,” Industrial and Corporate Change 6 (Mar. 1997): 461–500.CrossRefGoogle Scholar

⁵ Nevin, John J., “The Bridgestone/Firestone Story,” California Management Review (Summer 1990): 114–132.CrossRefGoogle Scholar

⁶ Blackford, Mansel G., and Kerr, K.Austin, BF Goodrich: Tradition and Transformation 1870–1995 (Columbus, Ohio, 1996), chap. 8.Google Scholar

⁷ David Harkleroad, “Pneumatiques Michelin II” INSEAD Case Study (1978).

⁸ Denoual, Daniel-Guy, “The Diffusion of Innovations: An Institutional Approach” (Ph.D. diss., Harvard Business School, 1990).Google Scholar

⁹ Line, Value, Firestone Analysis (11 July 1975): 161.Google Scholar

¹⁰ Love, Steve and Giffels, David, Wheels of Fortune: The Story of Rubber in Akron (Akron, Ohio, 1998): 153Google Scholar; Dekkers L. Davidson, “Managing Product Safety: The Case of the Firestone 500,” Harvard Business School, Case 9–383–130 (1983).

¹¹ For a fuller discussion of why successful companies fail to adapt to changes in their competitive environment, see Sull, Donald N., “Why Good Companies Go Bad,” Harvard Business Review (July-Aug. 1999).Google ScholarPubMed

¹² Firestone Tire Rubber Company Annual Reports (1960–1969); Tire Business, U.S. Tire Industry Profile (19 Nov. 1990): 8–9.

¹³ United Rubber Workers, Report on the Structure of the Tire Industry (1980), United Bubber Workers Archives, Akron, Ohio.Google Scholar

¹⁴ Firestone Tire & Rubber Company Annual Reports (1960–1969).

¹⁵ Center for Research in Security Prices, CRSP Stock Files, (Chicago, 1996).

¹⁶ Firestone Tire & Rubber Company Annual Report (1969): 3.

¹⁷ Peters, Thomas J. and Waterman, Robert H., In Search of Excellence (New York, 1982).Google Scholar

¹⁸ Firestone Tire & Rubber Company Annual Report, (various years).

¹⁹ Ravenscraft, D. J. and Scherer, F. M., Mergers, Selloffs and Economic Efficiency (Washington, D.C., 1987)Google Scholar; Firestone Tire & Rubber Company, Internal Financial Reports (various years). All Firestone internal documents cited in this article are located in the Firestone Archives, Akron, Ohio.

²⁰ Minutes of the Executive Committee Meeting (various years).

²¹ Firestone Tire & Rubber Company Economic Department, Rubber Industry Handbook (various years).

²² On entrepreneurs in the tire industry, see John Dick, “The Effect of Technological Innovations on the Structure of the Tire Industry” (master's thesis, University of Akron, 1979); Dick estimates the peak number of competitors at 178 in 1920, while Klepper and Simons use Thomas' Register of American Manufacturers and estimate the peak number producers at 274 in 1922 in Klepper, Steven and Simons, Kenneth L., “Technological Extinctions of Industrial Firms: An Inquiry into their Nature and Causes,” Industrial and Corporate Change 6:2 (Mar. 1997).CrossRefGoogle Scholar The “murderous” price wars are described in the American Economic Review, a journal not normally noted for its hyperbole. See Reynolds, Lloyd, “Competition in the Rubber Tire Industry,” American Economic Review (Oct. 1938): 459.Google Scholar On the ranking of American industrial companies, see Chandler, Scale and Scope, appendix A.

²³ Jeszeck, Charles A., “Plant Dispersion and Collective Bargaining in the Rubber Tire Industry” (Ph.D. diss., University of California, Berkeley, 1982), 32.Google Scholar

²⁴ Love and Giffels, Wheels of Fortune, 300–303; United Rubber Workers, A Brief History of the United Rubber Workers. Akron, Ohio: United Rubber Workers internal document.

²⁵ Love and Giffels, Wheels of Fortune, 314.

²⁶ Peters and Waterman, In Search of Excellence, front page.

²⁷ Sull, Donald N., “Organizational Adaptation and Inertia in a Declining Market: A Study of the U.S. Tire Industry” (Ph.D. diss., Harvard Business School, 1996), 105Google Scholar. Firestone was not alone in developing this stream of new products and its competitors also barraged customers with a series of new products, see French, The U.S. Tire Industry, 94.

²⁸ Sarah C. Benioff, “The Tire Industry, 1973,” Harvard Business School, Case 9–391–008 (1990): 16.

²⁹ Love and Giffels, Wheels of Fortune, 146; Firestone Tire & Rubber Company Annual Report (1969): 17.

³⁰ The seminal theoretical and empirical research on intra-firm resource allocation processes was conducted by Bower, Joseph L., Managing the Resource Allocation Process (Boston, 1970)Google Scholar. The resource allocation process in Firestone is documented in Sull, “Organizational Adaptation and Inertia,” 96–106.

³¹ The Board of Directors generally accepted most recommendations of the Executive Committee without discussion for three reasons. First, the members of the Executive Committee constituted a majority of the Board. Second, Raymond C. Firestone chaired both the Executive Committee and the board of Directors through 1973. Finally, the Board was dominated by insiders, with the first outside board member without close ties to the Firestone family elected in 1972.

³² Report of Appropriations (various years). These documents were kept for every capital investment proposal brought before the Executive Committee, and detailed the department originating the proposal, a description of the proposal, the date of first proposal, the amount requested and the committee's ultimate disposition. Taken together, these reports constitute a paper trail for analyzing capital budgeting by proposal over time within Firestone.

³³ There is no evidence that the Committee scrutinized big-ticket projects while rubber-stamping smaller requests. In the late 1960s, the median value of approved projects was approximately $500,000 while the median value of cancelled projects was less than one-half of that amount.

³⁴ Descriptions of Firestone's internal capital budgeting process are drawn from interviews with former Firestone presidents: Lee Brodeur, interview with author, tape recording, Akron, Ohio, 11–13 Aug. 1994 and Mario DiFederico, interview with author, tape recording, Akron, Ohio, 10 May 1995. Both men had served as Firestone's president.

³⁵ Dick, J. S., “How Technological Changes Have Affected the Tire Industry's Structure,” Elastomerics (Nov. 1980): 43.Google Scholar

³⁶ Reiff, R., “Firestone's Lost Harvey's Touch,” Akron Beacon Journal, 3 Dec. 1978.Google Scholar

³⁷ Remarks of the CEO to Annual Stockholders' Meeting (various years).

³⁸ Proxy Statement (1976): 2–7.

³⁹ Sull et al., “Managerial Commitments,” table 1.

⁴⁰ Harry Millis, interview with author, 21 July 1994. Millis was a leading tire industry analyst.

⁴¹ Gaffey, J. D., The Productivity of Labor in the Rubber Tire Industry, (New York, 1938): 161–2.Google Scholar

⁴² Love and Giffels, Wheels of Fortune, 47.

⁴³ Ibid., chap. 5.

⁴⁴ John Nevin, interview with author, tape recording, Akron, Ohio, 21 Sept. 1994; Lee Bro-deur interview; Love & Giffels, Wheels of Fortune.

⁴⁵ Tom Reese (former Firestone Vice President of Sales), interview with author, tape recording, Cleveland, Ohio, 19 July 1994; and Paul Vatter (member of Firestone's Board of Directors during the late 1970s and early 1980s), interview with author, tape recording, Boston, Mass., 22 July 1994.

⁴⁶ Brodeur interview.

⁴⁷ Brodeur interview; Nevin interview; DiFederico interview. Reiff, R., “Surviving the Shakedown: Three Firestone Plants Provide Contrasts in Survival,” Akron Beacon Journal, 21 Jan. 1980.Google Scholar

⁴⁸ Minutes of the Board of Directors' Meetings (21 Sept. 1976 and 13 Oct. 1976).

⁴⁹ Minutes of the Board of Directors' Meetings (13 Dec. 1977). The company would go to great lengths to protect its employees, and paid $3 million to ransom a middle manager kidnapped by Argentinean terrorists in 1973.

⁵⁰ Michael van der Poel, “Michelin III: The United States,” unnumbered INSEAD case (1982).

⁵¹ Blackford and Kerr, B.F. Goodrich, 276.

⁵² Consumer Reports, “Tires,” Consumer Reports, (August 1968): 404–409.

⁵³ Sull et al., “Managerial Commitments.”

⁵⁴ O'Reilly, Maurice, The Goodyear Story (Elmsford, NY, 1981): 156–159.Google Scholar French, The U.S. Tire Industry, 94.

⁵⁵ Millis interview; Brodeur interview.

⁵⁶ Firestone Tire & Rubber Company Annual Report, (1969): 3–5.

⁵⁷ Love and Giffels, Wheels of Fortune, 146; Firestone Tire & Rubber Company Annual Report, (1969): 17.

⁵⁸ D. Daryl Wyckoff, “Firestone Tire and Rubber Company,” Harvard Business School, Case 9–684–044 (1984); French, The U.S. Tire Industry, 101; Jeszeck, “Plant Dispersion” 64–65.

⁵⁹ Value Line, Tire & Rubber Industry, (17 Oct. 1969).

⁶⁰ Brodeur interview.

⁶¹ Minutes of the Executive Committee Meeting (3 Nov. 1972).

⁶² Minutes of the Executive Committee Meeting (6 Dec. 1972).

⁶³ DiFederico interview.

⁶⁴ Sull, “Organizational Adaptation and Inertia,” 111, table 4.

⁶⁵ Wyckoff, “Firestone,” 3; Davidson, “Managing Product Safety,” 4.

⁶⁶ Love and Giffels, Wheels of Fortune, 150.

⁶⁷ Ibid., 150–151.

⁶⁸ Ibid., 152.

⁶⁹ Sull, “Organizational Adaptation and Inertia,” 111.

⁷⁰ Internal Financial Reports (1968–1972).

⁷¹ Remarks of CEO to Annual Stockholders' Meeting (1972).

⁷² Minutes of the Executive Committee Meeting (6 Dec. 1972).

⁷³ Minutes of the Board of Directors' Meetings (21 Mar. 1978 and 13 Mar. 1980).

⁷⁴ On deteriorating profits, see Minutes of the Board of Directors' Meeting (23 Mar. 1976); on stock price and credit rating, see Minutes of the Board of Directors' Meetings (25 May 1976 and 16 Nov. 1976); and on need for financial plan, see Minutes of the Board of Directors' Meeting (21 Aug. 1979).

⁷⁵ Minutes of the Board of Directors' Meetings (20 June 1978 and 14 Nov. 1978); Minutes of the Board of Directors' Meeting (16 Oct. 1979).

⁷⁶ Minutes of the Board of Directors' Meetings (21 June 1977, 23 Aug. 1977, 21 Mar. 1978, 13 Nov. 1979).

⁷⁷ Minutes of the Board of Directors' Meeting (21 Mar. 1978).

⁷⁸ Transcript of Chairman's Remarks to the Annual Stockholders Meeting (1973–1979).

⁷⁹ Minutes of the Board of Directors' Meeting (21 Feb. 1978).

⁸⁰ Ibid. Other top managers agreed. North American Tire Operations President Frank LePage told the other members of the Executive Committee “that he was not spending enough money to keep the Domestic Tire business healthy, and yet he had difficulty in promising a satisfactory rate of return on the money actually being spent because of the nature of the market.” Minutes of the Executive Committee Meeting (16 Mar. 1979).

⁸¹ Nevin interview.

⁸² Roy Gilbert (former Vice President who worked closely with Nevin), interview with author, tape recording, Fairlawn, Ohio, 10 Aug. 1994.

⁸³ Proxy statements (various years). Riley owned over three times as many shares as his successor John Nevin when the latter led Firestone's restructuring. Employment Agreement between John Nevin and Firestone (1 Dec. 1979).

⁸⁴ Transcript of Chairman's Remarks to the Annual Stockholders Meeting (9 Feb. 1980); Ibid. (21 Jan. 1978).

⁸⁵ Minutes of the Executive Committee Meeting (7 Mar. 1971); Nevin interview.

⁸⁶ Love and Giffels, Wheels of Fortune, 194–6.

⁸⁷ Reece interview.

⁸⁸ Sull, “Organizational Adaptation and Inertia,” 110–111.

⁸⁹ Ibid., 111. Entity value is defined as the sum of a corporation's total market capitalization and long term obligations.

⁹⁰ The Wall Street Journal, 22 Sept. 1977, 8 Dec. 1977, 11 Sept. 1978, 27 Sept. 1978; on Credit Card subsidy, Nevin interview.

⁹¹ Minutes of the Board of Directors' Meeting (13 Nov. 1979).

⁹² “Less Means More at Firestone,” Fortune, 20 Oct. 1980, 116.

⁹³ Oplinger, Doug, “Firestone Stockholders Get Say,” Akron Beacon Journal, 28 Jan. 1979Google Scholar; Toms, James, “Firestone Stockholders Want More,” Akron Beacon Journal, 30 Jan. 1979.Google Scholar

⁹⁴ Minutes of the Board of Directors' Meeting (13 Nov. 1979).

⁹⁵ Nevin, “The Bridgestone/Firestone Story,” 114–132.

⁹⁶ Schiller, Zachary and Frons, Marc, “John Nevin Rescued Firestone,” Business Week, 11 May 1987, 96.Google Scholar

⁹⁷ Ibid.

⁹⁸ Managing Director of Management Consulting Firm, interview with author, tape recording, Boston, Mass., 19 Sept. 1994. This consultant, who consented to an interview under the condition of anonymity, had worked closely with John Nevin.

⁹⁹ Ibid.

¹⁰⁰ Nevin interview; Brodeur interview.

¹⁰¹ Robert W. Ackerman, “Firestone, Inc.,” Harvard Business School, Case 9–388–127 (1988): 13.

¹⁰² Brodeur interview.

¹⁰³ Nevin interview.

¹⁰⁴ Proxy statements (1979–1982).

¹⁰⁵ Transcript of John Nevin's Remarks to the Annual Stockholder's Meeting (9 Feb. 1980).

¹⁰⁶ Nevin interview.

¹⁰⁷ Ibid.

¹⁰⁸ Brodeur interview.

¹⁰⁹ Minutes of the Board of Directors' Meetings (16 Sept. 1980, 21 Oct. 1980, 17 Mar. 1981, 16 June 1981).

¹¹⁰ Minutes of the Board of Directors' Meeting (19 Aug. 1980).

¹¹¹ Minutes of the Board of Directors' Meeting (28 Feb. 1981).

¹¹² Reese interview.

¹¹³ Nevin interview.

¹¹⁴ Ibid. See also “Surviving the Shakedown: Three Firestone Plants Provide Contrasts in Survival,” Akron Beacon Journal, 21 Jan. 1980.

¹¹⁵ Nevin interview.

¹¹⁶ For general discussion of traditional and revised management incentives see Nevin, Brodeur, and Gilbert interviews.

¹¹⁷ Nevin interview; Love and Giffels, The Wheels of Fortune, 261.

¹¹⁸ Nevin interview.

¹¹⁹ Love and Giffels, The Wheek of Fortune, 261.

¹²⁰ “Retread Time: Firestone Chief Tries to Raise Its Earnings, Gird for Diversification,” The Wall Street Journal, 11 Aug. 1981.

¹²¹ Ackerman, “Firestone, Inc.,” 10.

¹²² Minutes of the Board of Directors' Meeting (16 June 1981); Ackerman, “Firestone, Inc.,” 8.

¹²³ Ackerman, “Firestone, Inc.,” 9; Brodeur interview; Reese interview; Managing Director of Consulting Firm interview. Brodeur estimated that the combined revenues of these three former Firestone divisions exceeded $2 billion, which would have increased Firestone's corporate sales in 1987 by over 50 percent.

¹²⁴ Ackerman, “Firestone Inc.,” 9.

¹²⁵ Minutes of the Board of Directors' Meeting (28 Feb. 1981); Nevin interview.

¹²⁶ Gilbert interview. See also Brodeur interview.

¹²⁷ Reese interview. See also Brodeur and DiFederico interviews.

¹²⁸ Transcript of John Nevin's Remarks to the Annual Stockholder's Meeting (9 Feb. 1980): 2.

¹²⁹ Gilbert interview. Other interviewees made the same point, see Consultant and DiFederico interviews.

¹³⁰ Sull, “Organizational Adaptation and Inertia.”

¹³¹ Nevin, “The Bridgestone/Firestone Story.” The Firestone board adopted a poison pill provision in 1986, which suggests that management feared the possibility of another takeover threat. Investor Responsibility Research Center, Directory of Antitakeover Defenses, (Washington, D.C., 1987).Google Scholar

¹³² Ackerman, “Firestone, Inc.,” 19.

¹³³ For the clearest expositions of punctuated equilibrium theory see Tushman, Michael and Romanelli, Elaine, “Organizational Evolution: A Metamorphasis Model of Convergence and Reorientation,” in Research in Organizational Behavior, edited by Cummings, L. L. and Staw, B. M. 7 (1985): 171–222Google Scholar and Gersick, C. J., “Revolutionary Change Theories: A Multilevel Exploration of the Punctuated Equilibrium Paradigm,” Academy of Management Review 16 (1991): 10–36.CrossRefGoogle Scholar

¹³⁴ Blackford & Kerr, BE Goodrich, 317.

¹³⁵ Sull et al., “Managerial Commitments,” 491–494.

¹³⁶ Blackford & Kerr, B.F. Goodrich, 276.

¹³⁷ Ibid., 277–278. Love & Giffels, Wheels of Fortune, 146.

¹³⁸ Blackford & Kerr, B.F. Goodrich, 290–292.

¹³⁹ Ibid., 278–9.

¹⁴⁰ Ibid.

¹⁴¹ Ibid., 296–7.

¹⁴² Sull et al., “Managerial Commitments,” 492.

¹⁴³ Ibid., table 7.

¹⁴⁴ Blackford & Kerr, B.F. Goodrich, 309–10.

¹⁴⁵ Blackford & Kerr, B.F. Goodrich, 363.

¹⁴⁶ Sull et al., “Managerial Commitments,” table 5.

¹⁴⁷ “Pumping up Morale in the Tire Business,” Industry Week (24 Aug. 1981).

¹⁴⁸ Sull, “Why Good Companies go Bad.”

¹⁴⁹ Baldwin, Carliss Y. and Clark, Kim B., “Capital-Budgeting Systems and Capabilities Investments in U.S. Companies after the Second World War,” Business History Review 68 (Spring 1994): 73–109.CrossRefGoogle Scholar

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¹⁵² Christensen, The Innovator's Dilemma, 42–48.

¹⁵³ Porter, Michael E., “Clusters and the New Economics of Competition,” Harvard Business Review (Nov.-Dec. 1998): 78.Google Scholar For the seminal work industrial clusters see Marshall, Alfred, Principles of Economics (London, 1922).Google ScholarMarshall, Alfred, Industry and Trade (New York, 1923).Google Scholar More recent work includes Brian Arthur, “Industry location and the importance of history,” CEPR paper no. 43, Stanford University (1986) and Krugman, David, Geography and Trade (Cambridge, Mass., 1991).Google Scholar

¹⁵⁴ For information on research intensive industries, see Chandler, Scale and Scope, 108.

¹⁵⁵ Jeszeck, “Plant Dispersion,” 396.

¹⁵⁶ Klepper, Steven and Simons, Kenneth L., “Technological Extinctions of Industrial Firms: An Inquiry into their Nature and Causes,” Industrial and Corporate Change 6:2 (Mar. 1997): 411.CrossRefGoogle Scholar Chandler, Scale and Scope, 108.

¹⁵⁷ Donald N. Sull, “Industrial Clusters and Organizational Inertia: An Institutional Perspective,” London Business School Working Paper (1999).

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¹⁶⁰ Ibid., 24–5.

¹⁶¹ See Klepper, Steven and Graddy, Elizabeth, “The Evolution of New Industries and the Determinants of Market Structure,” RAND Journal of Economics 21:1 (Spring 1990): 27–44.CrossRefGoogle Scholar Klepper and Simons, “Technological Extinctions,” 379–460.