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Scope, Scale, and Concentration: The 21st‐Century Firm

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  • GERARD HOBERG
  • GORDON M. PHILLIPS

Abstract

We provide evidence using firm 10‐Ks that over the past 30 years, U.S. firms have expanded their scope of operations. Increases in scope were achieved largely without increasing traditional operating segments. Scope expansion significantly increases valuation and is realized primarily through acquisitions and investment in R&D, but not through capital expenditures. Traditional concentration ratios do not capture this expansion of scope. Our findings point to a new type of firm that increases scope through related expansion, which is highly valued by the market.

Suggested Citation

  • Gerard Hoberg & Gordon M. Phillips, 2025. "Scope, Scale, and Concentration: The 21st‐Century Firm," Journal of Finance, American Finance Association, vol. 80(1), pages 415-466, February.
    • Handle: RePEc:bla:jfinan:v:80:y:2025:i:1:p:415-466
    DOI: 10.1111/jofi.13400
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