Industry Choice and Product Language
University of Southern California - Marshall School of Business
Gordon M. Phillips
University of Southern California; National Bureau of Economic Research (NBER)
March 31, 2015
We analyze the words that firms use to describe their products to examine multiple-industry firm operations. Our central finding is that multiple-industry firms operate across industries with higher product language overlap. Multiple-industry firms also avoid industries with more distinct language boundaries and those with more specialized within-industry language. We also find evidence linking these results to specific synergies such as potential entry into new markets, and realized synergies in the form of higher 10-K product description growth. These findings are consistent with multiple-product firms primarily operating in industries that lack language specialization. Firms that do operate across multiple industries choose industries with high language overlap and potential synergies. Our findings support the Cremer, Garicano, and Prat (2007) theory of firm organization and organizational language.
Number of Pages in PDF File: 45
Keywords: Conglomerates, Firm Organization, Industrial Organization, Product Market Competition, Conglomerate Valuation
JEL Classification: L21, L22, G31, G34
Date posted: June 5, 2011 ; Last revised: April 1, 2015
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