Conglomerate Industry Choice and Product Differentiation / Gerard Hoberg, Gordon M. Phillips.

Format:

Book

Author/Creator:

Hoberg, Gerard.

Contributor:

National Bureau of Economic Research.

Phillips, Gordon M.

Series:

Working Paper Series (National Bureau of Economic Research) no. w17221.

NBER working paper series no. w17221

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2011.

Summary:

We use text-based computational analysis of business descriptions from 10-Ks to examine in which industries conglomerates are most likely to operate and to understand conglomerate valuations. We find that conglomerates are more likely to operate in industry pairs that are closer together in the product space and in industry pairs that have profitable opportunities "between" them. Conglomerate firms have lower stock market valuations than matched single-segment firms when their products are easier to replicate with single-segment firms. Conglomerate firms have stock market premiums when they have higher product differentiation and produce in more profitable industries. These findings are consistent with successful conglomerate firms having higher product differentiation and lower cost entry into profitable markets when operating in strategically chosen industry pairs.

Notes:

Print version record

July 2011.