RT info:eu-repo/semantics/article
T1 Diversification, relatedness and growth options value: Beyond a linear relationship
A1 Andrés Alonso, Pablo de
A1 Fuente Herrero, Gabriel de la
A1 Velasco González, María Del Pilar
K1 Empresas-Finanzas
K1 diversification
K1 relatedness
K1 real options
K1 GMM system estimator
AB This paper investigates how corporate diversification interacts with a firm’s growth options value. We adopt an options-based perspective, from which diversification is seen as both a materialization of current growth options exercise and a source of future options to expand. We focus on two dimensions of this strategy: degree of diversification and relatedness between segments. We posit that at low levels of diversification, the option exercising effect prevails, whereas the option creation effect dominates at higher diversification levels. Relatedness sparks interaction effects among growth options, which may make the value of the portfolio non-additive. This effect of relatedness may be moderated by diversification scope, which sets out the relative importance of synergies versus coordination costs. Using a panel sample of U.S. firms from 1998-2010 and accounting for endogeneity, we confirm a U-relationship between diversification and growth options. Results also reveal an inverse U-linkage between relatedness and the firm’s growth options value, which is less pronounced in high diversifiers than in low ones. This study extends the applicability of the real options approach to strategy, and suggests the relevance of a multidimensional and contingent view in the diversification debate.
PB Elsevier
SN 0024-6301
YR 2017
FD 2017
LK http://uvadoc.uva.es/handle/10324/27517
UL http://uvadoc.uva.es/handle/10324/27517
LA eng
NO Long Range Planning, diciembre 2017, Vol. 50, n. 6, p. 840-861
NO Producción Científica
DS UVaDOC
RD 28-abr-2024