Scale, Scope, Ownership Changes, and Performance

50 Pages Posted: 20 Sep 2011

See all articles by Renáta Kosová

Renáta Kosová

Cornell University - School of Hotel Administration

Francine Lafontaine

University of Michigan at Ann Arbor - Stephen M. Ross School of Business; University of Michigan at Ann Arbor - Department of Economics

Bo Zhao

University of Hong Kong - Faculty of Business and Economics; Asian Development Bank - Economic Research and Regional Cooperation Department (ERCD)

Date Written: September 20, 2011

Abstract

Estimating how scale and scope affect the performance of multi-product firms has been a challenge. We argue that because franchised chains are fundamentally single-product entities, we can use data on franchised chains and their parents to clearly distinguish scale and scope, and assess their effects, and those of ownership changes, on chain performance. Controlling for chain fixed effects and other factors; we find positive scale effects within chains. For parent company scope (the number of other chains of the parent) we find a negative rather than positive effect. We also find a reduction in the chain’s number of outlets, but no change in sales per outlet, after a chain is acquired by a new parent. Overall, our results suggest that acquisitions are disruptive, as multi-chain parents try to reduce competition among their chains/products.

Keywords: multi-product firms, production organization, franchising, services, acquisitions, market power

JEL Classification: L1, L2, L8, M21

Suggested Citation

Kosova, Renata and Lafontaine, Francine and Zhao, Bo, Scale, Scope, Ownership Changes, and Performance (September 20, 2011). Available at SSRN: https://ssrn.com/abstract=1931021 or http://dx.doi.org/10.2139/ssrn.1931021

Renata Kosova (Contact Author)

Cornell University - School of Hotel Administration ( email )

School of Hotel Admin.
545B Statler Hall
Ithaca, NY 14853
United States
606-254-3383 (Phone)
607-255-1355 (Fax)

HOME PAGE: http://www.hotelschool.cornell.edu/research/facultybios/faculty.html?id=204

Francine Lafontaine

University of Michigan at Ann Arbor - Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109-1234
United States
734-647-4915 (Phone)
734-936-0279 (Fax)

University of Michigan at Ann Arbor - Department of Economics ( email )

611 Tappan Street
Ann Arbor, MI 48109-1220
United States

Bo Zhao

University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong

Asian Development Bank - Economic Research and Regional Cooperation Department (ERCD) ( email )

Philippines

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