Industry Choice and Product Language

Hoberg, Gerard; Phillips, Gordon M.

doi:10.2139/ssrn.1858007

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Industry Choice and Product Language

45 Pages Posted: 5 Jun 2011 Last revised: 1 Apr 2015

See all articles by Gerard Hoberg

Gerard Hoberg

University of Southern California - Marshall School of Business - Finance and Business Economics Department

Gordon M. Phillips

Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER)

There are 2 versions of this paper

Date Written: March 31, 2015

Abstract

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.

Keywords: Conglomerates, Firm Organization, Industrial Organization, Product Market Competition, Conglomerate Valuation

JEL Classification: L21, L22, G31, G34

Suggested Citation: Suggested Citation

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