A longitudinal study of the cause and consequences of changes in diversification in the U.S. pharmaceutical industry 1977-1986
Article Abstract:
The diversification of pharmaceutical firms was investigated by analyzing data from the period 1977 to 1986 and by testing four models. The models included a model of changes in diversification, diversification and profitability, risk-adjusted mean returns, and risk effects. The hypotheses were that the main reason for diversification was to reduce the risks related to dependency on a technologically dynamic environment, and that economic performance would decline. The results supported the hypotheses. The findings suggested that firms should diversify only if compelling efficiency reasons exist. Firms should avoid using diversification as a method of reducing dependence on a high-risk environment.
Publication Name: Strategic Management Journal
Subject: Business
ISSN: 0143-2095
Year: 1991
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External control, corporate strategy, and firm performance in research-intensive industries
Article Abstract:
The difference in opinion between managers and stockholders has implications for company direction, future planning, and potential profitability. Stockholders support strategies which improve their earnings, while managers prefer strategies which improve their importance by maximizing their utility. It is suggested that in research-intensive industries, when managers dominate the company strategy will move toward diversification. When stockholders' attitudes prevail, the strategy moves toward innovation. The theory is tested on 94 research-intensive Fortune 500 firms, and notes that innovation is associated with higher profitability than diversification.
Publication Name: Strategic Management Journal
Subject: Business
ISSN: 0143-2095
Year: 1988
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Are institutional investors myopic? A time-series study of four technology-driven industries
Article Abstract:
A time series study of four technology-drive industries was conducted to analyze the popular belief that short-term shareholding by institutional investors has had a negative impact on the R&D expenditures of large corporations. Two theoretical frameworks are analyzed, the myopic institutions theory, and the efficient market theory. The research empirically analyzed 129 firms in R&D-intensive industries for R&D spending and institutional ownership. Research results reveal that contrary to popular belief, high levels of institutional ownership are correlated with higher R&D expenditures.
Publication Name: Strategic Management Journal
Subject: Business
ISSN: 0143-2095
Year: 1991
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