Mapping a sector's scope transformation and the value of following the evolving core

A surprisingly neglected facet of sector evolution is the evolutionary analysis firms', and thus a sector's, scope. Defining as group firms that can change their scope over time, we study transformation U.S. banking firms. We undertake sectoral, population‐wide business‐scope transformation, with particular focus on which segments banks expand into. As financial intermediation evolved, continuously shifting set activities became associated “core banking,” changing relatedness itself (measured through coincidence) evolving sector's history. Banks while staying close to this core attain net performance benefits. Identification tests show benefits following are robust endogeneity.