- 17 Oct 2018
Contagion Effects in Portfolios of Diversified Firms: the Distinct Role of Non-scale vs. Scale-free Resources
17 Oct 2018 -17:00 - 18:30
Abstract: This article analyzes the correlation structure among the sales growth rates of product niches in portfolios of diversified companies. Distinguishing product niches linked by scale-free versus non–scale-free resources, this study predicts that when a firm diversifies with a scale-free resource, positive correlations among product niches prevail. The more a firm diversifies with non–scale-free resources though, the more it generates negative correlations across product niches. An augmenting moderator of this latter effect is the value of the resource. Different micro-correlation structures have implications for the variance and growth of the firm portfolio as a whole. These theoretical intuitions are consistent with data from 2008–2013, reflecting firm sales growth rates in five “shelf-space industries” that span 45 product niches in the largest seven EU countries2018-10-07and the United Kingdom.
Technical University of Munich
TUM School of Management