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Why Investors Sometimes Value Size and Diversification: The Internalization Theory of Synergy

Author

Listed:
  • Morck, R.
  • Yeung, B.

Abstract

For most firms, size and diversification are correlated with lower value. However, for firms possessing substantial information-based asset, geographical diversification, line of business diversification, and growth in general, add value. This is consistent with information-based assets being a critical prerequisite for synergy, as postulated in internalization theories of synergy.

Suggested Citation

  • Morck, R. & Yeung, B., 1997. "Why Investors Sometimes Value Size and Diversification: The Internalization Theory of Synergy," Working Papers 411, Research Seminar in International Economics, University of Michigan.
  • Handle: RePEc:mie:wpaper:411
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    More about this item

    Keywords

    ENTERPRISES ; SYNERGY ; INVESTMENTS;

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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