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Relatedness, Coherence, and Coherence Dynamics Empirical Evidence from Italian Manufacturing

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Abstract

This paper investigates the determinants of coherence and coherence change using a sample of Italian leading firms in the period 1993-1996. Following a methodology developed by Teece et al (1994), the observed diversification patterns of our sample firms provide the information required to construct an index of relatedness between pair of sectors, which is in turn used to obtain a measure of firm’s coherence. The econometric analysis highlights that relatedness is higher when sectors share similar technological and marketing characteristics, and when they are positioned at different stages of the productive chain. Analogously, coherence is higher for firms active in industries characterised by similar R&D intensities and exploiting vertical integration links. Firms which enter the group of top 5 leaders are more coherent than the average. From a dynamic perspective, we find that coherence increases for firms with main activities in sectors which are expected to be more affected from EU integration. Finally, the results show that a deepening of vertical integration strategies is good for coherence change, while an increase of diversification brings a reduction in coherence.

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  • Stefano Valvano & Davide Vannoni, 2001. "Relatedness, Coherence, and Coherence Dynamics Empirical Evidence from Italian Manufacturing," CERIS Working Paper 200104, CNR-IRCrES Research Institute on Sustainable Economic Growth - Torino (TO) ITALY - former Institute for Economic Research on Firms and Growth - Moncalieri (TO) ITALY.
    • Handle: RePEc:csc:cerisp:200104
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    1. Nicholas Vonortas, 1999. "How do Participants in Research Joint Ventures Diversify?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 15(3), pages 263-281, November.
    2. Scott,John T., 2005. "Purposive Diversification and Economic Performance," Cambridge Books, Cambridge University Press, number 9780521022583, September.
    3. Moshe Farjoun, 1994. "Beyond Industry Boundaries: Human Expertise, Diversification and Resource-Related Industry Groups," Organization Science, INFORMS, vol. 5(2), pages 185-199, May.
    4. 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.
    5. David J. Teece, 2003. "Towards an Economic Theory of the Multiproduct Firm," World Scientific Book Chapters, in: Essays In Technology Management And Policy Selected Papers of David J Teece, chapter 15, pages 419-446, World Scientific Publishing Co. Pte. Ltd..
    6. Teece, David J., 1980. "Economies of scope and the scope of the enterprise," Journal of Economic Behavior & Organization, Elsevier, vol. 1(3), pages 223-247, September.
    7. Piscitello, Lucia, 2000. "Relatedness and coherence in technological and product diversification of the world's largest firms," Structural Change and Economic Dynamics, Elsevier, vol. 11(3), pages 295-315, September.
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    1. Stefano Valvano & Davide Vannoni, 2003. "Diversification Strategies and Corporate Coherence Evidence from Italian Leading Firms," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 23(1), pages 25-41, August.

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    More about this item

    Keywords

    relatedness; coherence; diversification;
    All these keywords.

    JEL classification:

    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm

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