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Product Market Uniqueness, Organizational Form and Stock Market Valuations

45 Pages Posted: 13 Oct 2012 Last revised: 1 Sep 2014

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)

Date Written: August 31, 2014

Abstract

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.

Keywords: stock market valuations, organizational form, conglomerate firms, uniqueness

JEL Classification: D23, G31, G32

Suggested Citation

Hoberg, Gerard and Phillips, Gordon M., Product Market Uniqueness, Organizational Form and Stock Market Valuations (August 31, 2014). Available at SSRN: https://ssrn.com/abstract=2160846 or http://dx.doi.org/10.2139/ssrn.2160846

Gerard Hoberg

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 (Contact Author)

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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