Worldly Power : MAKING OF THE WALL STREET JOURNAL by Edward E. Scharff (Beaufort: $18.95; 300 pp.)

The Wall Street Journal’s current advertising campaign hawks the newspaper as “The daily diary of the American Dream.” The slogan might aptly describe the newspaper’s history as well.

Begun in 1882 as a service to rush bits of news called “flimsies” around Wall Street, Dow Jones & Co., as it was then known, grew to become the nation’s largest--and perhaps best--newspaper, in large part because it maintained an atmosphere of informality and innovation long before “entrepreneurial” became a term of art.

Much of the credit is due Bernard Kilgore, who envisioned the potential of a national financial newspaper at a time, the 1940s, when the Journal was still poor sister to the Dow Jones ticker. Kilgore invented the analytical news feature story that would prove the model for all newspapers in the TV era. He helped develop the mix of tradition and irreverence that would make the Journal so engaging. Later, as head of Dow Jones, he would oversee the innovation of technological advances that would make the Journal a printing miracle.

In “Worldly Power: The Making of the Wall Street Journal,” Edward E. Scharff has written one of the first books outside Dow Jones sponsorship to trace the history of the Journal phenomenon, and Scharff’s independence adds much to the public knowledge.

Scharff, senior editor of Institutional Investor, assesses with insight and without undue reverence the strengths and limitations of the men who forged the Journal’s success: Kilgore, adman Robert Feemster, current chairman Warren Phillips. The prose is engaging, the anecdotal structure thoughtful and easygoing.

Scharff fully notes, for instance, Kilgore’s administrative limitations while capturing his wit and energy, depicted in such memos as one instructing an editor: “If I see ‘upcoming’ in the paper again, I’ll be downcoming and someone will be outgoing.”

However valuable this fine book will prove, though, it does not, at end, do the Journal full credit. Scharff’s copious research and pleasant prose are harmed by lack of a broader analysis of why the Journal, and not some other financial daily, emerged preeminent.

A key Scharff thesis, for instance, is that the paper’s success came largely because “The Wall Street Journal would be almost the only major American newspaper owned by a family that did not feel compelled to install its heirs as publishers and editors.” This notion ignores that such successful newspapers as The New York Times, Washington Post and Los Angeles Times all are headed by heirs.

After eloquently tracing Kilgore’s reign, the book also hurtles toward conclusions at such speed that it ignores developments most relevant to current readers. Scharff fails to note, for instance, Phillips’ shrewd pricing and limited expansion strategies that would push the Journal to its final ascendancy. He handles the emergence of current leadership, such as managing editor Norman Pearlstine, in one page.

Scharff also neglects the paper’s present problems, such as a circulation drop since 1984 of 111,219. He ends instead with a two-page treatment of the stock manipulation scandal in 1984, involving Journal columnist R. Foster Winans, and fails to perceive that the atmosphere at the Journal whose passing he bemoans is precisely what allowed the Winans episode to occur.