The central concern of this article is the relationship between changes in corporate governance and the exploitation of scale and scope economies by British firms. in order to explain this relationship, a theoretical model integrating the main aspects of corporate governance with strategy and structure is developed. It is then applied to examine changes in the British corporate economy in the period 1950-2000. British business has been criticized for its limited exploitation of scale and scope economics, adoption of scientific management, the multi-divisional structure and the associated benefits of large-scale high throughput production. These practices revolutionized US corporations in the early part of the twentieth century, but it was not until the period 1950-80 that they were most closely emulated by British businesses. Since 1980, however, there has been a pronounced trend towards divestment of subsidiaries in multi-divisional organizations, driven by changes in the institutions of British capitalism that have had an impact on managerial behavior via alterations in governance and monitoring arrangements. At the same time. there is recent evidence pointing to the persistence of diversification and the conglomerate form in the British economy. Nonetheless, the perceived value of flexibility in smaller scale production has received greater attention in the research literature. Changes in the structure of the British economy since 1980 also suggest a relatively limited scope fur diversification beyond certain levels. Meanwhile, another set of research findings suggests British companies performed poorly relative to international competition in the post- war period, which was also the period of greatest M-Form adoption, but that performance improved during the 1980s. These issues raise several important questions for British business history. First, what were the conditions that led British firms to expand the scope of their activities and adopt the multi-divisional from the 1950s onwards? Second was diversification and multi-divisional adoption linked to the poor performance of the economy? Third, what were the reasons for apparent reductions in diversification after 19801? Fourth, what were the performance consequences of these most recent changes? For the purposes of answering these questions, the debates referred to above can he reduced as follows. The essence of the debate on industry structure is the contrast between Chandler's model of how organizations successfully capture scale and scope economies and the alternative model of flexible specialization. On productivity and industry structure the essence of the debate is between the (evolutionary, neo-Schumpeterian) view that markets failed to allocate goods and services efficiently and the (neo-classical) view that vested interests trapped important sectors in low output equilibrium through collusion and political lobbying. There have been recent attempts to synthesise these perspectives. When applied to British business history by Broadberry and Crafts, this synthesis examined the question of incentives, but concentrated on the bargaining environment and collusive practices. This analysis was criticized for promoting the assumption of rational 'maximizing' behavior but ignoring subjective elements and for concentrating on labor rather than managerial responsibility, although these issues remain a question of debate. More recently, Broadberry and Crafts acknowledged the role of shareholder monitoring and cited empirical evidence from the period 1985-94 illustrating the relationship between share ownership structure and productivity. However, agency costs in the large firm arc taken as given in order to examine the relationship between the degree of competition and productivity performance. An alternative, hitherto unexplored, is to examine changes in agency cost and their impact through time. A corporate governance-based analysis offers a fresh perspective on these debates other reasons. For example, it provides a framework that accommodates rational hut non-profit maximizing managerial behavior and identifies constraints on entrepreneurial behavior. Moreover, whilst the above debates may be satisfactory parameters for discussions about the pre- 1980 period, it is difficult to extend beyond that period without considering the institutional and governance-based changes that have occurred since. Indeed, governance is central to the process of innovation and technological progress, since encouragement of creativity through decentralization simultaneously gives rise to free-riding and opportunistic behavior. Nonetheless, little research has been conducted on the effects of corporate governance, and the changes implemented in British during the Thatcher experiment there fore form a particularly useful case study. Moreover, if institutional changes in governance arrangements were important post-1980, it seems likely that governance arrangements before then were also significant, even though neglected in the main debates. This returns us to the central issue of the article, how important were changes in systems of corporate governance, relative to changes in scale and scope economies in the evolution of British business in the period 1950-2000? To address these questions, this article proceeds as follows. The second section. below, reviews relevant theory incorporating scale and scope-based determinants of strategy and structure, information cost, voice and exit components of corporate governance, and proposes a synthesis. This synthesized view is then tested with reference to two contrasting historical episodes: diversification, conglomeration and the multi-divisional, 1950-80; and divestment and restructuring, 1980-2000. A final section evaluates the strengths and weaknesses of the proposed framework, indicating a possible research agenda that could provide useful insights into the nature of British business evolution. [ABSTRACT FROM AUTHOR]