Scope, Scale, and Concentration: The 21st century firm
Speaker(s)
Discussant(s)
Scope, Scale, and Concentration: The 21st century firm
Authors
Gerard Hoberg
University of Southern California - Marshall School of Business - Finance and Business Economics Department
Gordon M. Phillips
Dartmouth College - Tuck School of Business and NBER
Abstract
We provide evidence that over the past 30 years, U.S. firms have expanded theirscope 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. Our findings point to a new type of firm that increases scope through related expansion, which is highly valued by the market.