Deregulation, Firm Capabilities and Diversifying Entry Decisions: The Case of Financial Services

Hilary Ingham and Steve Thompson

The Review of Economics and Statistics, 1995, vol. 77, issue 1, 177-83

Abstract: The resource-based view of the firm as a historically-determined bundle of specific assets and capabilities predicts that diversification patterns will reflect attempts to utilize these attributes more intensively and so enjoy economies of scope. Furthermore, it suggests that such diversification moves will not be restricted to wholly-owned activities but will include joint ventures where contracting costs permit. This note uses the opportunity created by structural deregulation in U.K. financial services to examine entry decisions-wholly-owned and collaborative-across an unusually homogeneous set of firms. It is found that diversifying entry broadly follows firm-specific and product-specific characteristics, providing support for the resource-based theory in the service sector. However, as in manufacturing it appears that firm size is important, whilst the residual regulatory and ownership arrangements also exercise a significant effect. Copyright 1995 by MIT Press.

Date: 1995
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