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Why Focus? A Study Of Intra‐Industry Focus Effects
Author(s) -
Siggelkow Nicolaj
Publication year - 2003
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/1467-6451.00195
Subject(s) - profitability index , focus (optics) , business , product (mathematics) , mutual fund , externality , marketing , finance , industrial organization , economics , microeconomics , physics , geometry , mathematics , optics
In an intra‐industry setting, firm‐focus is found to be positively correlated with the ability of firms to produce high‐value products, while the overall effect of focus on firm performance is negative due to missed demand externalities generated by a broad product offering. In particular, it is shown that U.S. mutual funds that belong to more focused fund providers outperform similar funds offered by more diversified providers. An explanation based on alignment among a provider's activities is consistent with this result. Cash inflows into fund providers—a measure related to fund provider profitability—is, however, negatively correlated with focus in fund offerings.