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The mode of corporate diversification: Internal ventures versus acquisitions
Author(s) -
Amit Raphael,
Livnat Joshua,
Zarowin Paul
Publication year - 1989
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.4090100202
Subject(s) - diversification (marketing strategy) , transaction cost , database transaction , business , economics , microeconomics , empirical research , empirical evidence , capital structure , industrial organization , monetary economics , financial economics , finance , marketing , philosophy , epistemology , computer science , programming language , debt
This study investigates empirically the underlying motives for selecting the mode of corporate diversification and attempts to match the form of capital investments with a corresponding theoretical rationale for diversification. The empirical results seem to support both the transaction‐costs rationale for diversification and the motive that arises from a firm's prior experience with each form of capital investment. However, the empirical findings are inconsistent with the explanation that is based on the owner‐manager conflict of interest.