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Industry Choice and Product Language

Gerard Hoberg

University of Southern California - Marshall School of Business

Gordon M. Phillips

Tuck School of Business at Dartmouth; 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

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Date posted: June 5, 2011 ; Last revised: April 1, 2015

Suggested Citation

Hoberg, Gerard and Phillips, Gordon M., Industry Choice and Product Language (March 31, 2015). Available at SSRN: http://ssrn.com/abstract=1858007 or http://dx.doi.org/10.2139/ssrn.1858007

Contact Information

Gerard Hoberg (Contact Author)
University of Southern California - Marshall School of Business ( email )
Marshall School of Business
Los Angeles, CA 90089
United States
HOME PAGE: http://www-bcf.usc.edu/~hoberg/
Gordon M. Phillips
Tuck School of Business at Dartmouth ( email )
Hanover, NH 03755
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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References:  33
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