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Firm Diversification in the European Union: New Insights on Return to Core Business and Relatedness

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Abstract

According to ex-ante expectations, one effect of the increased competitive pressure within the Single Market was to drive firms to reduce diversification and refocus on their core business. This paper addresses two main questions: the extent and the purpose of multi-product strategies. Using a large database of 223 leading manufacturing firms in the EU, we document whether EU leaders reduced diversification over the decade 1987-1997. We then investigate if firms have de-diversified by re-focussing around a core of related activities, testing for alternative measures of "core" and "relatedness". Our results confirm that firms readjusted corporate structures around one (or more) core(s) of related activities.

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File URL: http://www.ceris.cnr.it/ceris/workingpaper/2002/wp08_02_Rondi_Vannoni.pdf
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Bibliographic Info

Paper provided by Institute for Economic Research on Firms and Growth - Moncalieri (TO) in its series CERIS Working Paper with number 200208.

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Length: 37 pages
Date of creation: Dec 2002
Date of revision:
Handle: RePEc:csc:cerisp:200208

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Web page: http://www.ceris.cnr.it/
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Related research

Keywords: Firm diversification; European integration; Return to Core;

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  1. repec:ccp:journl:v:19:y:2001:i:8:p:1315-1346 is not listed on IDEAS
  2. 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.
  3. Frank R. Lichtenberg, 1990. "Industrial De-Diversification and its Consequences for Productivity," NBER Working Papers 3231, National Bureau of Economic Research, Inc.
  4. 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.
  5. Rubin, Paul H, 1973. "The Expansion of Firms," Journal of Political Economy, University of Chicago Press, vol. 81(4), pages 936-49, July-Aug..
  6. Davide Vannoni, 2000. "The diversifield firm: non formal theories versus formal models," ECONOMIA E POLITICA INDUSTRIALE, FrancoAngeli Editore, vol. 2000(106).
  7. Davies, Stephen & Rondi, Laura & Sembenelli, Alessandro, 2001. "European Integration and the Changing Structure of EU Manufacturing, 1987-1993," Industrial and Corporate Change, Oxford University Press, vol. 10(1), pages 37-75, March.
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