Scope, Scale and Competition: The 21st Century Firm

69 Pages Posted: 19 Feb 2021

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)

Date Written: January 14, 2021

Abstract

We provide evidence that over the past 30 years, U.S. firms have expanded their scope of operations. Increases in scope and scale were achieved largely without increasing traditional operating segments. Scope expansion significantly increases valuation and is primarily realized through acquisitions and investment in R&D, but not through capital expenditures. We show that traditional concentration ratios do not capture this expansion of scope and are upward biased. After accounting for scope, we do not find evidence that industry concentration is increasing. Our findings point to a new type of firm that increases scope through related expansion, which is highly valued by the market.

Keywords: firm scope, economies of scope, products, concentration, firm size, scale

JEL Classification: O31, O34, D43, F13

Suggested Citation

Hoberg, Gerard and Phillips, Gordon M., Scope, Scale and Competition: The 21st Century Firm (January 14, 2021). Available at SSRN: https://ssrn.com/abstract=3746660 or http://dx.doi.org/10.2139/ssrn.3746660

Gerard Hoberg

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

Marshall School of Business
Los Angeles, CA 90089
United States

HOME PAGE: http://www-bcf.usc.edu/~hoberg/

Gordon M. Phillips (Contact Author)

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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