The Industry Life Cycle and Acquisitions and Investment: Does Firm Organization Matter?Vojislav Maksimovic and Gordon Phillips Working Papers from U.S. Census Bureau, Center for Economic Studies Abstract: We examine the effect of financial dependence on the acquisition and investment of single segment and conglomerate firms for different long-run changes in industry conditions. Conglomerates and single-segment firms differ in the investments they make. The main differences are in the investment in acquisitions rather than in the level of capital expenditure. Financial dependence, a deficit in a segment�s internal financing, decreases the likelihood of acquisitions and opening new plants, especially for single-segment firms. These effects are mitigated for conglomerates in growth industries and also for firms that are publicly traded. In declining industries, plants of segments that are financially dependent are less likely to be closed by conglomerate firms. These findings persist after controlling for firm size and segment productivity. We also find that plants acquired by conglomerate firms in growth industries increase in productivity post-acquisition. The results are consistent with the comparative advantages of different firm organizations differing across long-run industry conditions. Pages: 44 pages Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:cen:wpaper:05-29 Access Statistics for this paper More papers in Working Papers from U.S. Census Bureau, Center for Economic Studies Contact information at EDIRC. |
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