The Measurement of Relatedness: An Application to Corporate Diversification

Joseph P H Fan and Larry Lang

The Journal of Business, 2000, vol. 73, issue 4, 629-60

Abstract: Employing commodity flow data from input-output (IO) tables, we construct two IO-based measures to capture interindustry and intersegment vertical relatedness and complementarity. At the industry level, we demonstrate that the new IO-based measures outperform traditional measures based on Standard Industry Classification (SIC) codes. At the firm level, we report that firms increase their degree of vertical relatedness and complementarity over time. The increasing pattern is robust; it is not sensitive to accounting changes in segment definition, different weighting methods, and different IO data employed. As an application, we examine the valuation effects of relatedness in the context of corporate diversification. Copyright 2000 by University of Chicago Press.

Date: 2000
References: Add references at CitEc
Citations: View citations in EconPapers (188)

Downloads: (external link)
http://dx.doi.org/10.1086/209657 full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucp:jnlbus:v:73:y:2000:i:4:p:629-60

Access Statistics for this article

More articles in The Journal of Business from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().