Corporate Diversification, Value Maximization, and Organizational Capabilities
AbstractThis article develops a dynamic model of a firm in which diversification can be a value-maximizing strategy even if specialization is generally efficient. The central idea is that firms are composed of organizational capabilities that can be profitable in multiple businesses and that diversification is a search process by which firms seek businesses that are good matches for their capabilities. The theory can account for diversified firms trading at discounts compared to single-segment firms, as well as some empirical regularities that are challenging to the agency theory of diversification, such as positive returns to diversification announcements. Copyright 2001 by University of Chicago Press.
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Bibliographic InfoArticle provided by University of Chicago Press in its journal Journal of Business.
Volume (Year): 74 (2001)
Issue (Month): 3 (July)
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Web page: http://www.journals.uchicago.edu/JB/
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