
Contents
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15.1 Introduction 15.1 Introduction
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15.2 Definition and Characteristics of US Business Groups 15.2 Definition and Characteristics of US Business Groups
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15.3 Prevalence and Performance of Unrelated Diversification in the US 15.3 Prevalence and Performance of Unrelated Diversification in the US
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15.3.1 Prevalence of Diversified Business Groups 15.3.1 Prevalence of Diversified Business Groups
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15.3.1.1 Degree of Diversification 15.3.1.1 Degree of Diversification
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15.3.1.2 Conglomerates 15.3.1.2 Conglomerates
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15.3.1.3 Private Equity 15.3.1.3 Private Equity
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15.3.2 Performance of Diversified Business Groups 15.3.2 Performance of Diversified Business Groups
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15.3.2.1 Private Equity 15.3.2.1 Private Equity
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15.3.2.2 Conglomerates 15.3.2.2 Conglomerates
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15.3.3 Explaining the Performance of Unrelated Diversifiers 15.3.3 Explaining the Performance of Unrelated Diversifiers
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15.4 Rationale for, and Evolution of, Business Groups in the us 15.4 Rationale for, and Evolution of, Business Groups in the us
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15.4.1 Conglomerates in the US, circa 1960–80 15.4.1 Conglomerates in the US, circa 1960–80
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15.4.2 Private Equity Firms (and their Predecessors—Leveraged Buyout Firms), 1980 to Today 15.4.2 Private Equity Firms (and their Predecessors—Leveraged Buyout Firms), 1980 to Today
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15.4.3 Conglomerates, 1980 to Today 15.4.3 Conglomerates, 1980 to Today
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15.5 Conclusion 15.5 Conclusion
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15 The United States in Contemporary Perspectives: Evolving Forms, Strategy, and Performance
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Published:February 2018
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Abstract
While classic business groups are not common in the US today, the phenomenon of unrelated diversification remains prevalent, accounting for about 15 percent of corporate assets. Given the presumed efficiency of markets and the absence of institutional voids in the US, the continuing presence of this organizational form is perhaps a surprise. We document that although certain types of diversified entities—notably, the conglomerate—have declined in importance over time in the US, they have given way to different organizational forms—particularly private equity. We establish that there exists considerable systematic heterogeneity in returns across both types of unrelated diversified firms, which can be masked when focusing only on the average performance of diversified firms. We offer a simple theoretical framework to explain the first two facts: why unrelated diversification continues to persist in the US, and how certain unrelated diversifiers continue to create economic value even as market efficiency improves.
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