Abstract

http://ssrn.com/abstract=1728525
 
 

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Shopping for Information? Diversification and the Network of Industries


Fernando Anjos


University of Texas at Austin

Cesare Fracassi


University of Texas at Austin

August 20, 2014

Management Science, Forthcoming

Abstract:     
We propose and test a view of corporate diversification as a strategy that exploits internal information markets, by bringing together information that is scattered across the economy. First, we construct an inter-industry network using input-output data, to proxy for the economy's information structure. Second, we introduce a new measure of conglomerate informational advantage, named "excess centrality", which captures how much more central conglomerates are relative to specialized firms operating in the same industries. We find that high-excess-centrality conglomerates have greater value, and produce more and better patents. Consistent with the internal-information-markets view, we also show that excess centrality has a greater effect in industries covered by fewer analysts and in industries where soft information is important.

Number of Pages in PDF File: 57

Keywords: corporate diversification, networks, innovation, input-output tables

JEL Classification: D2, D57, L14, L25, G34, Z13

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Date posted: December 19, 2010 ; Last revised: August 21, 2014

Suggested Citation

Anjos, Fernando and Fracassi, Cesare, Shopping for Information? Diversification and the Network of Industries (August 20, 2014). Management Science, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1728525 or http://dx.doi.org/10.2139/ssrn.1728525

Contact Information

Fernando Anjos
University of Texas at Austin ( email )
Austin, TX 78712
United States
5122326825 (Phone)
HOME PAGE: http://sites.google.com/site/fernandoanjossite/home
Cesare Fracassi (Contact Author)
University of Texas at Austin ( email )
Red McCombs School of Business
1 University Station B660
Austin, TX 78712
United States
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