Shopping for Information? Diversification and the Network of Industries

Fernando Anjos () and Cesare Fracassi ()
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Cesare Fracassi: McCombs School of Business, University of Texas at Austin, Austin, Texas 78712

Management Science, 2015, vol. 61, issue 1, 161-183

Abstract: We propose and test a view of corporate diversification as a strategy that exploits internal information markets, by bringing together information that is scattered across the economy. First, we construct an interindustry network using input-output data, to proxy for the economy’s information structure. Second, we introduce a new measure of conglomerate informational advantage, named “excess centrality,” which captures how much more central conglomerates are relative to specialized firms operating in the same industries. We find that high-excess-centrality conglomerates have greater value, and produce more and better patents. Consistent with the internal-information-markets view, we also show that excess centrality has a greater effect in industries covered by fewer analysts and in industries where soft information is important. This paper was accepted by Gustavo Manso, finance.

Keywords: corporate diversification; networks; innovation; input-output tables (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:61:y:2015:i:1:p:161-183

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