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The Industry Life Cycle, Acquisitions and Investment: Does Firm Organization Matter?

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  • VOJISLAV MAKSIMOVIC
  • GORDON PHILLIPS

Abstract

We examine the effect of industry life‐cycle stages on within‐industry acquisitions and capital expenditures by conglomerates and single‐segment firms controlling for endogeneity of organizational form. We find greater differences in acquisitions than in capital expenditures, which are similar across organizational types. In particular, 36% of the growth recorded by conglomerate segments in growth industries comes from acquisitions, versus 9% for single‐segment firms. In growth industries, the effect of financial dependence on acquisitions and plant openings is mitigated for conglomerate firms. Plants acquired by conglomerate firms increase in productivity. The results suggest that organizational forms' comparative advantages differ across industry conditions.

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  • Vojislav Maksimovic & Gordon Phillips, 2008. "The Industry Life Cycle, Acquisitions and Investment: Does Firm Organization Matter?," Journal of Finance, American Finance Association, vol. 63(2), pages 673-708, April.
    • Handle: RePEc:bla:jfinan:v:63:y:2008:i:2:p:673-708
    DOI: 10.1111/j.1540-6261.2008.01328.x
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