Industrial De-Diversification and Its Consequences for Productivity
AbstractDue in large part to intense takeover activity during the 1980s, the extent of American firms' industrial diversification declined significantly during the second half of the decade. The mean number of industries in which firms operated declined 14 percent, and the fraction of single-industry firms increased 54 percent. Firms that were "born" during the period were much less diversified than those that "died", and "continuing" firms reduced the number of industries in which they operated. Using plant-level Census Bureau data, we show that productivity is inversely related to the degree of diversification: holding constant the number of the parent firm's plants, the greater the number of industries in which the parent operates, the lower the productivity of its plants. Hence de-diversification is one of the means by which recent takeovers have contributed to U.S. productivity growth. We also find that the effectiveness of regulations governing disclosure by companies of financial information for their industry segments was low when they were introduced in the 1970s and has been declining ever since.
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Bibliographic InfoPaper provided by Levy Economics Institute, The in its series Economics Working Paper Archive with number wp_35.
Date of creation: Jan 1990
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Other versions of this item:
- Lichtenberg, Frank R., 1992. "Industrial de-diversification and its consequences for productivity," Journal of Economic Behavior & Organization, Elsevier, vol. 18(3), pages 427-438, August.
- Frank R. Lichtenberg, 1990. "Industrial De-Diversification and its Consequences for Productivity," NBER Working Papers 3231, National Bureau of Economic Research, Inc.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Amar Bhide, 1989. "The Causes And Consequences Of Hostile Takeovers," Journal of Applied Corporate Finance, Morgan Stanley, vol. 2(2), pages 36-59.
- Wernerfelt, Birger & Montgomery, Cynthia A, 1988. "Tobin's q and the Importance of Focus in Firm Performance," American Economic Review, American Economic Association, vol. 78(1), pages 246-50, March.
- Frank R. Lichtenberg & Donald Siegel, 1987. "Productivity and Changes in Ownership of Manufactoring Plants," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(3), pages 643-684.
- Lichtenberg, Frank R, 1988. "Estimation of the Internal Adjustment Costs Model Using Longitudinal Establishment Data," The Review of Economics and Statistics, MIT Press, vol. 70(3), pages 421-30, August.
- Devra L. Golbe & Lawrence J. White, 1988. "A Time-Series Analysis of Mergers and Acquisitions in the U.S. Economy," NBER Chapters, in: Corporate Takeovers: Causes and Consequences, pages 265-310 National Bureau of Economic Research, Inc.
- Randall Morck & Andrei Shleifer & Robert W. Vishny, 1989.
"Do Managerial Objectives Drive Bad Acquisitions?,"
NBER Working Papers
3000, National Bureau of Economic Research, Inc.
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