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 National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3231.
Date of creation: Jan 1990
Date of revision:
Publication status: published as Journal of Economic Behavior and Organization, December 1992, forthcoming.
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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," Economics Working Paper Archive wp_35, Levy Economics Institute.
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