IDEAS home Printed from https://ideas.repec.org/a/eee/jomega/v63y2016icp60-68.html
   My bibliography  Save this article

Potential gains from specialization and diversification further to the reorganization of activities

Author

Listed:
  • Blancard, Stéphane
  • Boussemart, Jean-Philippe
  • Chavas, Jean-Paul
  • Leleu, Hervé

Abstract

In economic activities, two main forces guide firm and market structures: specialization and diversification. This paper provides new insights on this topic. We propose measuring gains due to simulated division and/or merger processes of firms. Potential gains come from a reorganization of activities through specialization/diversification and/or size effects. From a database of French farms, our findings demonstrate that even if both processes are beneficial for farming systems, the division gains outweigh the gains obtained by a merger. Moreover, mix changes are more important following a division than following a merger, implying more specialization gains than diversification gains.

Suggested Citation

  • Blancard, Stéphane & Boussemart, Jean-Philippe & Chavas, Jean-Paul & Leleu, Hervé, 2016. "Potential gains from specialization and diversification further to the reorganization of activities," Omega, Elsevier, vol. 63(C), pages 60-68.
    • Handle: RePEc:eee:jomega:v:63:y:2016:i:c:p:60-68
    DOI: 10.1016/j.omega.2015.10.002
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0305048315002066
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.omega.2015.10.002?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. S Blancard & J-P Boussemart & H Leleu, 2011. "Measuring potential gains from specialization under non-convex technologies," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 62(10), pages 1871-1880, October.
    2. Baumol, William J, 1982. "Contestable Markets: An Uprising in the Theory of Industry Structure," American Economic Review, American Economic Association, vol. 72(1), pages 1-15, March.
    3. Troels Kristensen & Peter Bogetoft & Kjeld Pedersen, 2010. "Potential gains from hospital mergers in Denmark," Health Care Management Science, Springer, vol. 13(4), pages 334-345, December.
    4. Peyrache, Antonio, 2013. "Industry structural inefficiency and potential gains from mergers and break-ups: A comprehensive approach," European Journal of Operational Research, Elsevier, vol. 230(2), pages 422-430.
    5. Henry Tulkens, 2006. "On FDH Efficiency Analysis: Some Methodological Issues and Applications to Retail Banking, Courts and Urban Transit," Springer Books, in: Parkash Chander & Jacques Drèze & C. Knox Lovell & Jack Mintz (ed.), Public goods, environmental externalities and fiscal competition, chapter 0, pages 311-342, Springer.
    6. Chavas, Jean-Paul, 2008. "On the economics of agricultural production," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 54(4), pages 1-16.
    7. Banker, Rajiv D., 1984. "Estimating most productive scale size using data envelopment analysis," European Journal of Operational Research, Elsevier, vol. 17(1), pages 35-44, July.
    8. M. J. Farrell, 1959. "The Convexity Assumption in the Theory of Competitive Markets," Journal of Political Economy, University of Chicago Press, vol. 67, pages 377-377.
    9. Wu, Shunxiang & Prato, Anthony A., 2006. "Cost Efficiency and Scope Economies of Crop and Livestock Farms in Missouri," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 38(3), pages 1-15, December.
    10. Wu, Shunxiang & Prato, Tony, 2006. "Cost Efficiency and Scope Economies of Crop and Livestock Farms in Missouri," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 38(3), pages 539-553, December.
    11. Chavas, Jean-Paul, 2001. "Structural change in agricultural production: Economics, technology and policy," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 1, chapter 5, pages 263-285, Elsevier.
    12. De Witte, Kristof & Rogge, Nicky & Cherchye, Laurens & Van Puyenbroeck, Tom, 2013. "Economies of scope in research and teaching: A non-parametric investigation," Omega, Elsevier, vol. 41(2), pages 305-314.
    13. Dominique Deprins & Léopold Simar & Henry Tulkens, 2006. "Measuring Labor-Efficiency in Post Offices," Springer Books, in: Parkash Chander & Jacques Drèze & C. Knox Lovell & Jack Mintz (ed.), Public goods, environmental externalities and fiscal competition, chapter 0, pages 285-309, Springer.
    14. Atici, Kazim Baris & Podinovski, Victor V., 2015. "Using data envelopment analysis for the assessment of technical efficiency of units with different specialisations: An application to agriculture," Omega, Elsevier, vol. 54(C), pages 72-83.
    15. Peter Bogetoft & Dexiang Wang, 2005. "Estimating the Potential Gains from Mergers," Journal of Productivity Analysis, Springer, vol. 23(2), pages 145-171, May.
    16. Laurens Cherchye & Bram De Rock & Frederic Vermeulen, 2008. "Analyzing Cost-Efficient Production Behavior Under Economies of Scope: A Nonparametric Methodology," Operations Research, INFORMS, vol. 56(1), pages 204-221, February.
    17. Peter Bogetoft, 1996. "DEA on Relaxed Convexity Assumptions," Management Science, INFORMS, vol. 42(3), pages 457-465, March.
    18. Camanho, A.S. & Dyson, R.G., 2008. "A generalisation of the Farrell cost efficiency measure applicable to non-fully competitive settings," Omega, Elsevier, vol. 36(1), pages 147-162, February.
    19. Panzar, John C & Willig, Robert D, 1981. "Economies of Scope," American Economic Review, American Economic Association, vol. 71(2), pages 268-272, May.
    20. Jean‐Paul Chavas & Salvatore Di Falco, 2012. "On the Role of Risk Versus Economies of Scope in Farm Diversification With an Application to Ethiopian Farms," Journal of Agricultural Economics, Wiley Blackwell, vol. 63(1), pages 25-55, February.
    21. R H Green & W D Cook, 2004. "A free coordination hull approach to efficiency measurement," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 55(10), pages 1059-1063, October.
    22. Laurens Cherchye & Thierry Post, 2003. "Methodological Advances in DEA: A survey and an application for the Dutch electricity sector," Statistica Neerlandica, Netherlands Society for Statistics and Operations Research, vol. 57(4), pages 410-438, November.
    23. J. Fernandez-Cornejo & C. M. Gempesaw II & J. G. Elterich & S. E. Stefanou, 1992. "Dynamic Measures of Scope and Scale Economies: An Application to German Agriculture," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 74(2), pages 329-342.
    24. Maindiratta, Ajay, 1990. "Largest size-efficient scale and size efficiencies of decision-making units in data envelopment analysis," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 57-72.
    25. Carvalho, Pedro & Marques, Rui Cunha, 2014. "Computing economies of vertical integration, economies of scope and economies of scale using partial frontier nonparametric methods," European Journal of Operational Research, Elsevier, vol. 234(1), pages 292-307.
    26. Podinovski, Victor V. & Kuosmanen, Timo, 2011. "Modelling weak disposability in data envelopment analysis under relaxed convexity assumptions," European Journal of Operational Research, Elsevier, vol. 211(3), pages 577-585, June.
    27. Rolf Färe & Shawna Grosskopf & Hyunok Lee, 1990. "A Nonparametric Approach to Expenditure-Constrained Profit Maximization," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(3), pages 574-581.
    28. Subhash Ray, 2007. "Are some Indian banks too large? An examination of size efficiency in Indian banking," Journal of Productivity Analysis, Springer, vol. 27(1), pages 41-56, February.
    29. Sahoo, Biresh K. & Tone, Kaoru, 2013. "Non-parametric measurement of economies of scale and scope in non-competitive environment with price uncertainty," Omega, Elsevier, vol. 41(1), pages 97-111.
    30. Paul, Catherine J. Morrison & Nehring, Richard, 2005. "Product diversification, production systems, and economic performance in U.S. agricultural production," Journal of Econometrics, Elsevier, vol. 126(2), pages 525-548, June.
    31. Subhash Ray & Xiaowen Hu, 1997. "On the Technically Efficient Organization of an Industry: A Study of U.S. Airlines," Journal of Productivity Analysis, Springer, vol. 8(1), pages 5-18, March.
    32. Chavas, Jean-Paul & Aliber, Michael, 1993. "An Analysis Of Economic Efficiency In Agriculture: A Nonparametric Approach," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 18(1), pages 1-16, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Contreras, I. & Lozano, S., 2022. "Size efficiency, splits and merger gains, and centralized resource reallocation of Spanish public universities," Socio-Economic Planning Sciences, Elsevier, vol. 81(C).
    2. Zhiyang Shen & Vivian Valdmanis, 2022. "Assessing total factor productivity across Africa: an empirical investigation," Journal of Productivity Analysis, Springer, vol. 58(2), pages 239-253, December.
    3. Kao, Chiang & Pang, Rui-Zhi & Liu, Shiang-Tai & Bai, Xue-Jie, 2021. "Optimal expansion paths for hospitals of different types: Viewpoint of scope economies and evidence from Chinese hospitals," European Journal of Operational Research, Elsevier, vol. 289(2), pages 628-638.
    4. Sebastián Lozano & Belarmino Adenso-Díaz, 2021. "A DEA approach for merging dairy farms," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 67(6), pages 209-219.
    5. Subhash C. Ray & Shilpa Sethia, 2022. "Nonparametric measurement of potential gains from mergers: an additive decomposition and application to Indian bank mergers," Journal of Productivity Analysis, Springer, vol. 57(2), pages 115-130, April.
    6. Hongyun Han & Hui Lin, 2021. "Patterns of Agricultural Diversification in China and Its Policy Implications for Agricultural Modernization," IJERPH, MDPI, vol. 18(9), pages 1-22, May.
    7. Chang, Tsung-Sheng & Lin, Ji-Gang & Ouenniche, Jamal, 2023. "DEA-based Nash bargaining approach to merger target selection," European Journal of Operational Research, Elsevier, vol. 305(2), pages 930-945.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. S Blancard & J-P Boussemart & H Leleu, 2011. "Measuring potential gains from specialization under non-convex technologies," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 62(10), pages 1871-1880, October.
    2. Kwansoo Kim & Donghwan An, 2015. "Nonparametric Evaluation of Economies of Scope in the Context of Technical Efficiency: The Case of Rice and Vegetable Farms in Korea," Asian Economic Journal, East Asian Economic Association, vol. 29(3), pages 285-301, September.
    3. Laurens Cherchye & Bram De Rock & Veerle Hennebel, 2017. "Coordination efficiency in multi-output settings: a DEA approach," Annals of Operations Research, Springer, vol. 250(1), pages 205-233, March.
    4. Cesaroni, Giovanni, 2020. "Technically and cost-efficient centralized allocations in data envelopment analysis," Socio-Economic Planning Sciences, Elsevier, vol. 70(C).
    5. Wimmer, Stefan G. & Sauer, Johannes, 2017. "The Economic Benefits of Farm Diversification: An Empirical Analysis of Economies of Scope Using the Dual Approach," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258465, Agricultural and Applied Economics Association.
    6. Wimmer, Stefan G & Sauer, Johannes, 2016. "Diversification Versus Specialization: Empirical Evidence On The Optimal Structure Of European Dairy Farms," 56th Annual Conference, Bonn, Germany, September 28-30, 2016 244882, German Association of Agricultural Economists (GEWISOLA).
    7. Cesaroni, Giovanni, 2018. "Industry cost efficiency in data envelopment analysis," Socio-Economic Planning Sciences, Elsevier, vol. 61(C), pages 37-43.
    8. Nguyen, Huy, 2014. "Crop diversification, economic performance and household’s behaviours Evidence from Vietnam," MPRA Paper 59090, University Library of Munich, Germany.
    9. Mydland, Ørjan & Kumbhakar, Subal C. & Lien, Gudbrand & Amundsveen, Roar & Kvile, Hilde Marit, 2020. "Economies of scope and scale in the Norwegian electricity industry," Economic Modelling, Elsevier, vol. 88(C), pages 39-46.
    10. Hennebel, Veerle & Simper, Richard & Verschelde, Marijn, 2017. "Is there a prison size dilemma? An empirical analysis of output-specific economies of scale," European Journal of Operational Research, Elsevier, vol. 262(1), pages 306-321.
    11. Chavas, Jean-Paul, 2008. "On the economics of agricultural production," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 54(4), pages 1-16.
    12. Weiying Liu & Sriram Shankar & Lihua Li, 2021. "Is specialization a strategy to improve farm efficiency in northwest China?," Review of Development Economics, Wiley Blackwell, vol. 25(3), pages 1695-1710, August.
    13. Peyrache, Antonio, 2013. "Industry structural inefficiency and potential gains from mergers and break-ups: A comprehensive approach," European Journal of Operational Research, Elsevier, vol. 230(2), pages 422-430.
    14. Contreras, I. & Lozano, S., 2022. "Size efficiency, splits and merger gains, and centralized resource reallocation of Spanish public universities," Socio-Economic Planning Sciences, Elsevier, vol. 81(C).
    15. Valentin Zelenyuk, 2018. "Some Mathematical and Historical Clarifications on Aggregation in Efficiency and Productivity Analysis and Connection to Economic Theory," CEPA Working Papers Series WP032018, School of Economics, University of Queensland, Australia.
    16. Subhash C. Ray & Shilpa Sethia, 2023. "A State-Level Resource Allocation Model for Emission Reduction and Efficiency Improvement in Thermal Power Plants," Working papers 2023-08, University of Connecticut, Department of Economics.
    17. Ying Li & Yung-Ho Chiu & Tai-Yu Lin & Tzu-Han Chang, 2020. "Pre-Evaluating the Technical Efficiency Gains from Potential Mergers and Acquisitions in the IC Design Industry," International Journal of Information Technology & Decision Making (IJITDM), World Scientific Publishing Co. Pte. Ltd., vol. 19(02), pages 525-559, April.
    18. Ane Elixabete Ripoll-Zarraga & Sebastián Lozano, 2020. "A centralised DEA approach to resource reallocation in Spanish airports," Annals of Operations Research, Springer, vol. 288(2), pages 701-732, May.
    19. Barnabé Walheer, 2019. "Disaggregation for efficiency analysis," Journal of Productivity Analysis, Springer, vol. 51(2), pages 137-151, June.
    20. Jean-Paul Chavas & Kwansoo Kim, 2015. "Nonparametric analysis of technology and productivity under non-convexity: a neighborhood-based approach," Journal of Productivity Analysis, Springer, vol. 43(1), pages 59-74, February.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jomega:v:63:y:2016:i:c:p:60-68. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/375/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.