The Industry Life Cycle, Acquisitions and Investment: Does Firm Organization Matter?
Article first published online: 1 APR 2008
2008 by The American Finance Association
The Journal of Finance
Volume 63, Issue 2, pages 673–708, April 2008
How to Cite
MAKSIMOVIC, V. and PHILLIPS, G. (2008), The Industry Life Cycle, Acquisitions and Investment: Does Firm Organization Matter?. The Journal of Finance, 63: 673–708. doi: 10.1111/j.1540-6261.2008.01328.x
- Issue published online: 1 APR 2008
- Article first published online: 1 APR 2008
We examine the effect of industry life-cycle stages on within-industry acquisitions and capital expenditures by conglomerates and single-segment firms controlling for endogeneity of organizational form. We find greater differences in acquisitions than in capital expenditures, which are similar across organizational types. In particular, 36% of the growth recorded by conglomerate segments in growth industries comes from acquisitions, versus 9% for single-segment firms. In growth industries, the effect of financial dependence on acquisitions and plant openings is mitigated for conglomerate firms. Plants acquired by conglomerate firms increase in productivity. The results suggest that organizational forms' comparative advantages differ across industry conditions.