Relatedness, Coherence, and Coherence Dynamics Empirical Evidence from Italian Manufacturing
AbstractThis 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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Bibliographic InfoPaper provided by Institute for Economic Research on Firms and Growth - Moncalieri (TO) in its series CERIS Working Paper with number 200104.
Length: 32 pages
Date of creation: Jun 2001
Date of revision:
relatedness; coherence; diversification;
Find related papers by 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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- 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.
- 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.
- 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.
- Teece, David J., 1982. "Towards an economic theory of the multiproduct firm," Journal of Economic Behavior & Organization, Elsevier, vol. 3(1), pages 39-63, March.
- Stefano Valvano & Davide Vannoni, 2003. "Diversification Strategies and Corporate Coherence Evidence from Italian Leading Firms," Review of Industrial Organization, Springer, vol. 23(1), pages 25-41, August.
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