Innovation,Industry Specialization,and Shareholder Wealth

The survivorship principle is discussed in many areas of economic analysis. It holds that survival is the result of efficiency. See the discussion and references in Watts Ross L. Zimmerman Jerold L. , Positive Accounting Theory (Englewood Cliffs, NJ: Prentice-Hall, 1986).

Rumelt Richard P. , Strategy, Structure and Economic Performance (Boston, MA: Harvard Business School Press, 1974).

Ibid., pp. 91–92.

In addition to the references already provided, we find examples in Amit Raphael Livnat Joshua , “Diversification and the Risk-Return Trade-off,” Academy of Management Journal, 31/1 (1988): 154–166; Amit Raphael Livnat Joshua , “Diversification Strategies, Business Cycles and Economic Performance,” Strategic Management Journal, 9 (1988): 99–110; Amit Raphael Livnat Joshua , “Efficient Corporate Diversification: Methods and Implications,” Management Science, 35/7 (1989): 879–897; Barton Sidney L. , “Corporate Strategy and Capital Structure,” Strategic Management Journal, 9 (1988): 623–632; Barton Sidney L. , “Diversification Strategy and Systematic Risk: Another Look,” Academy of Management Journal, 31/1 (1988): 166–175; Capon Neil , “Corporate Diversity and Economic Performance: The Impact of Market Specialization,” Strategic Management Journal, 9 (1988): 61–74; Porter Michael E. , Competitive Advantage (New York, NY: The Free Press, 1985).

Hitt Michael A. Ireland Duane R. , “Relationships Among Corporate Level Distinctive Competencies, Diversification Strategy, Corporate Structure and Performance,” Journal of Management Studies, 23/4 (1986): 401–416.

Jensen Michael C. Meckling William H. , “Divisional Performance Measurement,” Working Paper, The University of Rochester, 1986.

This subject is reviewed definitively in Watts Ross L. Zimmerman Jerold L. , Positive Accounting Theory (Englewood Cliffs, NJ: Prentice-Hall, 1986).

Acar William Gartrell Ken Bhatnagar Pankash , “Toward a Measure of Specialization Calibrated for the ‘Distribution Effect,”’ Working Paper, Kent State University, 1989.

Jensen Michael C. , “Eclipse of the Public Corporation,” Harvard Business Review (September/October 1989), pp. 61–75.

Montgomery Cynthia A. , “Product-Market Diversification and Market Power,” Academy of Management Journal, 28/4 (1985): 789–798.

The findings from this survey are subjective, but the managers of publicly traded companies are legally responsible for policy statements in annual reports. Officers and directors must sign Securities and Exchange Commission filings. Under penalty of law, they warrant the policy statements made in the documents are fair representations. Due diligence is reinforced by the reputation of outside auditors who review statements of policy to assure fair presentation of facts ascertained in audit examinations.