We document a trend towards fewer and more-focused conglomerates, and develop a model that explains these patterns based on increasing technological specialization. In the model, diversification adds value by allowing efficient within-firm resource reallocation. However, synergies decrease with technological specialization, leading to fewer diversified firms over time. Also, the optimal level o...

We analyze several hundred firms that expand via acquisition and0or increase their number of business segments. The combined market reaction to acquisition announcements is positive but acquiring firm excess values decline after the diversifying event. Much of the excess value reduction occurs because our sample firms acquire already discounted business units, and not because diversifying destr...

Using a database of more than 8,000 companies from 35 countries, we find that the value of corporate diversification is related to the level of capital market development, international integration, and legal systems. Our results suggest that the financial, legal, and regulatory environments each have an important influence on the value of diversification. Moreover, the optimal organizational s...

This paper analyzes the diversification-value puzzle from the Real Options (RO) approach. Our proposal conceives corporate diversification as a process which involves both the sequential replacement of prior acquired investment opportunities by assets-in-place and the generation of new valuable growth options. We argue that this conceptual framework allows to explain both documented diversifica...

The idea that corporate structure should be carefully selected to match corporate strategy has been acknowledged since Chandler (1962). Scholars highlighted the degree of centralization of resource allocation decisions and the type of incentives used to motivate business unit managers as two important features of corporate structure. The development of the theory about the effect those features...

This paper examines the effect of geographic and industrial diversification on firm value for a sample of 1,914 corporations from 18 countries. Our results indicate that both geographic and product diversification destroy value at high levels of diversification, suggesting that agency and influence costs arising from the increased complexity outweigh the benefits of diversification at high degr...

This article sets out a framework for the analysis of corporate governance and international business. We take a broad perspective on corporate governance mechanisms and consider possible synergies between corporate governance and international business (IB) research. We summarize the papers included in this Focused Issue, and draw out their main contributions to the literature. We compare and ...