Product Market Uniqueness, Organizational Form and Stock Market Valuations
University of Southern California - Marshall School of Business
Gordon M. Phillips
Tuck School of Business at Dartmouth; National Bureau of Economic Research (NBER)
August 31, 2014
We introduce a new framework for forming peer firm portfolios that can account for firm uniqueness and organizational form. Our new vocabulary-based peer firm portfolios explain much cross sectional dispersion in firm valuations and generate a direct measure of firm product market uniqueness. We find that firms have higher stock market valuations than their peers when their products are more unique. This result holds for conglomerate and focused single-segment organizational forms. Increased success in patenting, increased branding, and less venture capital financed entry into the firm's product space all contribute to the long-term maintenance of uniqueness and thus higher valuations.
Number of Pages in PDF File: 45
Keywords: stock market valuations, organizational form, conglomerate firms, uniqueness
JEL Classification: D23, G31, G32
Date posted: October 13, 2012 ; Last revised: September 1, 2014
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