Corporate diversification and innovation: Managerial myopia or inefficient internal capital markets?
Author
Abstract
Suggested Citation
DOI: 10.1002/mde.3191
Download full text from publisher
References listed on IDEAS
- Henry G. Manne, 1969. "Economic Policy and the Regulation of Corporate Securities," Books, American Enterprise Institute, number 917976, September.
- Smith, Clifford Jr. & Watts, Ross L., 1992.
"The investment opportunity set and corporate financing, dividend, and compensation policies,"
Journal of Financial Economics, Elsevier, vol. 32(3), pages 263-292, December.
- Smith, C.W. & Watts, R.L., 1992. "The Investment Oppotunity set and Corporate Financing, Dividend and Compensation Policies," Papers 92-02, Rochester, Business - Financial Research and Policy Studies.
- David J. Teece, 2003.
"Competition, Cooperation, and Innovation Organizational Arrangements for Regimes of Rapid Technological Progress,"
World Scientific Book Chapters, in: Essays In Technology Management And Policy Selected Papers of David J Teece, chapter 16, pages 447-474,
World Scientific Publishing Co. Pte. Ltd..
- Teece, David J., 1992. "Competition, cooperation, and innovation : Organizational arrangements for regimes of rapid technological progress," Journal of Economic Behavior & Organization, Elsevier, vol. 18(1), pages 1-25, June.
- Stein, Jeremy C, 1997.
"Internal Capital Markets and the Competition for Corporate Resources,"
Journal of Finance, American Finance Association, vol. 52(1), pages 111-133, March.
- Jeremy C. Stein, 1995. "Internal Capital Markets and the Competition for Corporate Resources," NBER Working Papers 5101, National Bureau of Economic Research, Inc.
- Ishtiaq P. Mahmood & Will Mitchell, 2004. "Two Faces: Effects of Business Groups on Innovation in Emerging Economies," Management Science, INFORMS, vol. 50(10), pages 1348-1365, October.
- Klein, Peter G, 2001.
"Were the Acquisitive Conglomerates Inefficient?,"
RAND Journal of Economics, The RAND Corporation, vol. 32(4), pages 745-761, Winter.
- Peter G. Klein, 1997. "Were the Acquisitive Conglomerates Inefficient?," Industrial Organization 9711001, University Library of Munich, Germany, revised 04 Feb 2002.
- Zahra, Shaker A., 1995. "Corporate entrepreneurship and financial performance: The case of management leveraged buyouts," Journal of Business Venturing, Elsevier, vol. 10(3), pages 225-247, May.
- Cohen, Wesley M. & Levin, Richard C., 1989. "Empirical studies of innovation and market structure," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 18, pages 1059-1107, Elsevier.
- Henry G. Grabowski, 1968. "The Determinants of Industrial Research and Development: A Study of the Chemical, Drug, and Petroleum Industries," Journal of Political Economy, University of Chicago Press, vol. 76(2), pages 292-292.
- Lasse B. Lien & Peter G. Klein, 2013. "Can the Survivor Principle Survive Diversification?," Organization Science, INFORMS, vol. 24(5), pages 1478-1494, October.
- Seru, Amit, 2014. "Firm boundaries matter: Evidence from conglomerates and R&D activity," Journal of Financial Economics, Elsevier, vol. 111(2), pages 381-405.
- Bruce R. Barringer & Allen C. Bluedorn, 1999. "The relationship between corporate entrepreneurship and strategic management," Strategic Management Journal, Wiley Blackwell, vol. 20(5), pages 421-444, May.
- Susan Athey & Mohsen Bayati & Nikolay Doudchenko & Guido Imbens & Khashayar Khosravi, 2021.
"Matrix Completion Methods for Causal Panel Data Models,"
Journal of the American Statistical Association, Taylor & Francis Journals, vol. 116(536), pages 1716-1730, October.
- Susan Athey & Mohsen Bayati & Nikolay Doudchenko & Guido Imbens & Khashayar Khosravi, 2017. "Matrix Completion Methods for Causal Panel Data Models," Papers 1710.10251, arXiv.org, revised Apr 2022.
- Susan Athey & Mohsen Bayati & Nikolay Doudchenko & Guido Imbens & Khashayar Khosravi, 2018. "Matrix Completion Methods for Causal Panel Data Models," NBER Working Papers 25132, National Bureau of Economic Research, Inc.
- DeAngelo, Harry & Rice, Edward M., 1983. "Antitakeover charter amendments and stockholder wealth," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 329-359, April.
- Cardinal, Laura B. & Opler, Tim C., 1995. "Corporate diversification and innovative efficiency an empirical study," Journal of Accounting and Economics, Elsevier, vol. 19(2-3), pages 365-381, April.
- John R. Graham & Michael L. Lemmon & Jack G. Wolf, 2002. "Does Corporate Diversification Destroy Value?," Journal of Finance, American Finance Association, vol. 57(2), pages 695-720, April.
- Raghuram Rajan & Henri Servaes & Luigi Zingales, 2000.
"The Cost of Diversity: The Diversification Discount and Inefficient Investment,"
Journal of Finance, American Finance Association, vol. 55(1), pages 35-80, February.
- Raghuram Rajan & Henri Servaes & Luigi Zingales, "undated". "The Cost of Diversity: The Diversification Discount and Inefficient Investment," CRSP working papers 357, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- Raghuram Rajan & Henri Servaes & Luigi Zingales, 1998. "The Cost of Diversity: The Diversification Discount and Inefficient Investment," NBER Working Papers 6368, National Bureau of Economic Research, Inc.
- Rajan, Raghuram G & Servaes, Henri & Zingales, Luigi, 1998. "The Cost of Diversity: The Diversification Discount and Inefficient Investment," CEPR Discussion Papers 1801, C.E.P.R. Discussion Papers.
- Raghuram Rajan & Henry Servaes & Luigi Zingales, "undated". "The Cost of Diversity: The Diversification Discount and Inefficient Investment," CRSP working papers 463, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- Robert E. Carpenter & Bruce C. Petersen, 2002. "Capital Market Imperfections, High-Tech Investment, and New Equity Financing," Economic Journal, Royal Economic Society, vol. 112(477), pages 54-72, February.
- Bronwyn H. Hall, 1988.
"The Effect of Takeover Activity on Corporate Research and Development,"
NBER Chapters, in: Corporate Takeovers: Causes and Consequences, pages 69-100,
National Bureau of Economic Research, Inc.
- Bronwyn H. Hall, 1987. "The Effect of Takeover Activity on Corporate Research and Development," NBER Working Papers 2191, National Bureau of Economic Research, Inc.
- Raghuram G. Rajan & Luigi Zingales, 1998.
"Power in a Theory of the Firm,"
The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(2), pages 387-432.
- Raghuram G. Rajan & Luigi Zingales, "undated". "Power in a Theory of the Firm," CRSP working papers 335, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- Rajan, Raghuram G & Zingales, Luigi, 1998. "Power in a Theory of the Firm," CEPR Discussion Papers 1777, C.E.P.R. Discussion Papers.
- Raghuram G. Rajan & Luigi Zingales, 1997. "Power in a Theory of the Firm," NBER Working Papers 6274, National Bureau of Economic Research, Inc.
- Robert H. Gertner & David S. Scharfstein & Jeremy C. Stein, 1994. "Internal versus External Capital Markets," NBER Working Papers 4776, National Bureau of Economic Research, Inc.
- Robert E. Hoskisson & Michael A. Hitt, 1988. "Strategic control systems and relative r&d investment in large multiproduct firms," Strategic Management Journal, Wiley Blackwell, vol. 9(6), pages 605-621, November.
- William P. Wan, 2005. "Country Resource Environments, Firm Capabilities, and Corporate Diversification Strategies," Journal of Management Studies, Wiley Blackwell, vol. 42(1), pages 161-182, January.
- Robert H. Gertner & David S. Scharfstein & Jeremy C. Stein, 1994. "Internal versus External Capital Markets," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(4), pages 1211-1230.
- Cohen, Wesley M & Levinthal, Daniel A, 1989. "Innovation and Learning: The Two Faces of R&D," Economic Journal, Royal Economic Society, vol. 99(397), pages 569-596, September.
- Michael Goold & John J. Quinn, 1990. "The paradox of strategic controls," Strategic Management Journal, Wiley Blackwell, vol. 11(1), pages 43-57, January.
- Meulbroek, Lisa K & Mitchell, Mark L & Mulherin, J Harold & Netter, Jeffry M & Poulsen, Annette B, 1990. "Shark Repellents and Managerial Myopia: An Empirical Test," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1108-1117, October.
- Wulf, Julie, 2009. "Influence and inefficiency in the internal capital market," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 305-321, October.
- David S. Scharfstein & Jeremy C. Stein, 2000.
"The Dark Side of Internal Capital Markets: Divisional Rent‐Seeking and Inefficient Investment,"
Journal of Finance, American Finance Association, vol. 55(6), pages 2537-2564, December.
- David S. Scharfstein & Jeremy C. Stein, 1997. "The Dark Side of Internal Capital Markets: Divisional Rent-Seeking and Inefficient Investment," NBER Working Papers 5969, National Bureau of Economic Research, Inc.
- Sharon Belenzon & Tomer Berkovitz, 2010.
"Innovation in Business Groups,"
Management Science, INFORMS, vol. 56(3), pages 519-535, March.
- Sharon Belenzon & Tomer Berkovitz, 2007. "Innovation in Business Groups," Economics Series Working Papers 368, University of Oxford, Department of Economics.
- Sharon Belenzon & Tomer Berkovitz, 2007. "Innovation in Business Groups," CEP Discussion Papers dp0833, Centre for Economic Performance, LSE.
- Holthausen, Robert W. & Larcker, David F. & Sloan, Richard G., 1995. "Business unit innovation and the structure of executive compensation," Journal of Accounting and Economics, Elsevier, vol. 19(2-3), pages 279-313, April.
- R. Schmalensee & R. Willig (ed.), 1989. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 1, number 1.
- Lee Fleming, 2001. "Recombinant Uncertainty in Technological Search," Management Science, INFORMS, vol. 47(1), pages 117-132, January.
- John G. Matsusaka, 1993.
"Takeover Motives during the Conglomerate Merger Wave,"
RAND Journal of Economics, The RAND Corporation, vol. 24(3), pages 357-379, Autumn.
- Matsusaka, J.C., 1991. "Takeover Motives During the Conglomerate Merger Wave," Papers 91-33, Southern California - School of Business Administration.
- Oguzhan Ozbas & David S. Scharfstein, 2010. "Evidence on the Dark Side of Internal Capital Markets," The Review of Financial Studies, Society for Financial Studies, vol. 23(2), pages 581-599, February.
- Michael J. Leiblein & Tammy L. Madsen, 2009. "Unbundling competitive heterogeneity: incentive structures and capability influences on technological innovation," Strategic Management Journal, Wiley Blackwell, vol. 30(7), pages 711-735, July.
- Elisa Ughetto, 2008. "Does internal finance matter for R&D? New evidence from a panel of Italian firms," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 32(6), pages 907-925, November.
- Jarrell, Gregg A. & Poulsen, Annette B., 1987. "Shark repellents and stock prices : The effects of antitakeover amendments since 1980," Journal of Financial Economics, Elsevier, vol. 19(1), pages 127-168, September.
- W. Glenn Rowe & Patrick M. Wright, 1997. "Related And Unrelated Diversification And Their Effect On Human Resource Management Controls," Strategic Management Journal, Wiley Blackwell, vol. 18(4), pages 329-338, April.
- Hicheon Kim & Robert E. Hoskisson & William P. Wan, 2004. "Power dependence, diversification strategy, and performance in keiretsu member firms," Strategic Management Journal, Wiley Blackwell, vol. 25(7), pages 613-636, July.
- Hyun-Han Shin & René M. Stulz, 1998. "Are Internal capital Markets Efficient?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(2), pages 531-552.
- Belén Villalonga, 2004. "Does Diversification Cause the "Diversification Discount"?," Financial Management, Financial Management Association, vol. 33(2), Summer.
- David J. Teece & Richard Rumelt & Giovanni Dosi & Sidney Winter, 2000.
"Understanding Corporate Coherence: Theory and Evidence,"
Chapters, in: Innovation, Organization and Economic Dynamics, chapter 9, pages 264-293,
Edward Elgar Publishing.
- Teece, David J. & Rumelt, Richard & Dosi, Giovanni & Winter, Sidney, 1994. "Understanding corporate coherence : Theory and evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 23(1), pages 1-30, January.
- Sanjai Bhagat & Andrei Shleifer & Robert W. Vishny, 1990.
"Hostile Takeovers in the 1980s: The Return to Corporate Specialization,"
Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(1990 Micr), pages 1-84.
- Vishny, Robert W. & Bhagat, Sanjai & Shleifer, Andrei, 1990. "Hostile Takeovers in the 1980s: The Return to Corporate Specialization," Scholarly Articles 8705861, Harvard University Department of Economics.
- Richard R. Nelson, 1959. "The Simple Economics of Basic Scientific Research," Journal of Political Economy, University of Chicago Press, vol. 67(3), pages 297-297.
- Himmelberg, Charles P & Petersen, Bruce C, 1994.
"R&D and Internal Finance: A Panel Study of Small Firms in High-Tech Industries,"
The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 38-51, February.
- Charles P. Himmelberg & Bruce C. Petersen, 1991. "R&D and internal finance: a panel study of small firms in high-tech industries," Working Paper Series, Macroeconomic Issues 91-25, Federal Reserve Bank of Chicago.
- R. Glenn Hubbard & Darius Palia, 1999. "A Reexamination of the Conglomerate Merger Wave in the 1960s: An Internal Capital Markets View," Journal of Finance, American Finance Association, vol. 54(3), pages 1131-1152, June.
- McEachern, William A & Romeo, Anthony A, 1978. "Stockholder Control, Uncertainty and the Allocation of Resources to Research and Development," Journal of Industrial Economics, Wiley Blackwell, vol. 26(4), pages 349-361, June.
- Kamien,Morton I. & Schwartz,Nancy L., 1982. "Market Structure and Innovation," Cambridge Books, Cambridge University Press, number 9780521293853, December.
- Mark Rogers, 2002. "The Influence of Diversification and Market Structure on the R&D Intensity of Large Australian Firms," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 35(2), pages 155-172, June.
- Andrew Delios & Paul W. Beamish, 1999. "Ownership strategy of Japanese firms: transactional, institutional, and experience influences," Strategic Management Journal, Wiley Blackwell, vol. 20(10), pages 915-933, October.
- Zoltan Acs & David Audretsch, 1990. "Innovation and Small Firms," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262011131, April.
- Servaes, Henri, 1996. "The Value of Diversification during the Conglomerate Merger Wave," Journal of Finance, American Finance Association, vol. 51(4), pages 1201-1225, September.
- Chevalier Judith, 2004. "What Do We Know About Cross-subsidization? Evidence from Merging Firms," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 4(1), pages 1-29, April.
- Stephen R Gates & William G Egelhoff, 1986. "Centralization in Headquarters–Subsidiary Relationships," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 17(2), pages 71-92, June.
- R. Schmalensee & R. Willig (ed.), 1989. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 2, number 2.
- Graham, John R. & Harvey, Campbell R. & Puri, Manju, 2015.
"Capital allocation and delegation of decision-making authority within firms,"
Journal of Financial Economics, Elsevier, vol. 115(3), pages 449-470.
- John R. Graham & Campbell R. Harvey & Manju Puri, 2011. "Capital Allocation and Delegation of Decision-Making Authority within Firms," NBER Working Papers 17370, National Bureau of Economic Research, Inc.
Citations
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
Cited by:
- Zhiwen Su & Mingyu Zhang & Jianjun Sun & Wenbing Wu, 2023. "Agribusiness diversification and technological innovation efficiency: A U‐shaped relationship," Agribusiness, John Wiley & Sons, Ltd., vol. 39(2), pages 322-346, March.
Most related items
These are the items that most often cite the same works as this one and are cited by the same works as this one.- Stefan Erdorf & Thomas Hartmann-Wendels & Nicolas Heinrichs & Michael Matz, 2013. "Corporate diversification and firm value: a survey of recent literature," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 27(2), pages 187-215, June.
- An Yan, 2006. "Value of Conglomerates and Capital Market Conditions," Financial Management, Financial Management Association International, vol. 35(4), pages 5-30, December.
- Patrick Bielstein & Mario Fischer & Christoph Kaserer, 2018. "The cost of capital effect of M&A transactions: Disentangling coinsurance from the diversification discount," European Financial Management, European Financial Management Association, vol. 24(4), pages 650-679, September.
- Stefan Erdorf & Thomas Hartmann-Wendels & Nicolas Heinrichs & Michael Matz, 2012. "Corporate Diversification and Firm Value: A Survey of Recent Literature," Cologne Graduate School Working Paper Series 03-01, Cologne Graduate School in Management, Economics and Social Sciences.
- Hovakimian, Gayané, 2016. "Excess value and restructurings by diversified firms," Journal of Banking & Finance, Elsevier, vol. 71(C), pages 1-19.
- Glaser, Markus & Müller, Sebastian, 2006. "Der Diversification Discount in Deutschland : existiert ein Bewertungsabschlag für diversifizierte Unternehmen?," Papers 06-13, Sonderforschungsbreich 504.
- Holger Mueller, 2016. "Reallocation of Capital and Labor within Firms," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 152(4), pages 289-303, October.
- Shih-Chu Chou & Ramachandran Natarajan & Kenneth Zheng, 2022. "Conglomerate internal informational advantage and resource allocation efficiency," Review of Quantitative Finance and Accounting, Springer, vol. 59(2), pages 717-748, August.
- Glaser, Markus & Müller, Sebastian, 2006. "Der Diversification Discount in Deutschland: Existiert ein Bewertungsabschlag für diversifizierte Unternehmen?," Sonderforschungsbereich 504 Publications 06-13, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
- Hoechle, Daniel & Schmid, Markus & Walter, Ingo & Yermack, David, 2012. "How much of the diversification discount can be explained by poor corporate governance?," Journal of Financial Economics, Elsevier, vol. 103(1), pages 41-60.
- Siraj, Ibrahim & Hassan, M. Kabir & Maroney, Neal, 2020. "Product demand sensitivity and the corporate diversification discount," Journal of Financial Stability, Elsevier, vol. 48(C).
- Matsusaka, John G. & Nanda, Vikram, 2002. "Internal Capital Markets and Corporate Refocusing," Journal of Financial Intermediation, Elsevier, vol. 11(2), pages 176-211, April.
- McNeil, Chris R. & Moore, William T., 2005. "Dismantling internal capital markets via spinoff: effects on capital allocation efficiency and firm valuation," Journal of Corporate Finance, Elsevier, vol. 11(1-2), pages 253-275, March.
- Alhenawi, Yasser & Krishnaswami, Sudha, 2015. "Long-term impact of merger synergies on performance and value," The Quarterly Review of Economics and Finance, Elsevier, vol. 58(C), pages 93-118.
- Gautier, Axel & Heider, Florian, 2002. "The Benefit and Cost of Winner Picking: Redistribution Vs Incentives," Bonn Econ Discussion Papers 31/2002, University of Bonn, Bonn Graduate School of Economics (BGSE).
- Kim, Sehoon, 2020. "Disappearing Discounts: Hedge Fund Activism in Conglomerates," MPRA Paper 100876, University Library of Munich, Germany.
- Datta, Sudip & D'Mello, Ranjan & Iskandar-Datta, Mai, 2009. "Executive compensation and internal capital market efficiency," Journal of Financial Intermediation, Elsevier, vol. 18(2), pages 242-258, April.
- Stein, Jeremy C., 2003.
"Agency, information and corporate investment,"
Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 2, pages 111-165,
Elsevier.
- Jeremy C. Stein, 2001. "Agency, Information and Corporate Investment," NBER Working Papers 8342, National Bureau of Economic Research, Inc.
- Yan, An & Yang, Zaihui & Jiao, Jie, 2010. "Conglomerate investment under various capital market conditions," Journal of Banking & Finance, Elsevier, vol. 34(1), pages 103-115, January.
- Klein, Peter G, 2001.
"Were the Acquisitive Conglomerates Inefficient?,"
RAND Journal of Economics, The RAND Corporation, vol. 32(4), pages 745-761, Winter.
- Peter G. Klein, 1997. "Were the Acquisitive Conglomerates Inefficient?," Industrial Organization 9711001, University Library of Munich, Germany, revised 04 Feb 2002.
Corrections
All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:mgtdec:v:41:y:2020:i:8:p:1403-1416. See general information about how to correct material in RePEc.
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www3.interscience.wiley.com/cgi-bin/jhome/7976 .
Please note that corrections may take a couple of weeks to filter through the various RePEc services.