Technological specialization and the decline of diversified firms

Fernando Anjos, Cesare Fracassi

Research output: Contribution to journalArticlepeer-review

3 Citations (Scopus)
13 Downloads (Pure)


We document a strong decline in corporate-diversification activity since the late 1970s, and we develop a dynamic model that explains this pattern, both qualitatively and quantitatively. The key feature of the model is that synergies endogenously decline with technological specialization, leading to fewer diversified firms in equilibrium. The model further predicts that segments inside a conglomerate should become more related over time, which is consistent with the data. Finally, the calibrated model also matches other empirical magnitudes well: output growth rate, market-to-book ratios, diversification discount, frequency and returns of diversifying mergers, and frequency of refocusing activity.

Original languageEnglish
Pages (from-to)1581-1614
Number of pages34
JournalJournal of Financial and Quantitative Analysis
Issue number4
Publication statusPublished - 1 Aug 2018


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