Abstract

http://ssrn.com/abstract=1921073
 
 

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Technological Specialization and Corporate Diversification


Fernando Anjos


University of Texas at Austin

Cesare Fracassi


University of Texas at Austin

December 21, 2013


Abstract:     
We develop a dynamic model of diversifying mergers, with three key features: (i) synergies from combining complementary technologies are affected by an exogenous level of technological specialization; (ii) conglomerates incur a marginal cost associated with organizational complexity; (iii) mergers are modeled as a search-and-matching process. A calibrated version of the model simultaneously matches three corporate-diversification magnitudes: the proportion of assets allocated to conglomerates; the diversification discount; and a positive association between conglomerate value and segment distance, an industry-network measure of technological complementarity. The calibrated model also shows how an increase in technological specialization can account for empirical corporate-diversification trends.

Number of Pages in PDF File: 51

Keywords: corporate diversification, mergers, input-output tables, specialization

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

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Date posted: September 3, 2011 ; Last revised: December 27, 2013

Suggested Citation

Anjos, Fernando and Fracassi, Cesare, Technological Specialization and Corporate Diversification (December 21, 2013). Available at SSRN: http://ssrn.com/abstract=1921073 or http://dx.doi.org/10.2139/ssrn.1921073

Contact Information

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