The strategic impact of resource flexibility in business groups

• 成果类型: Article
• 署名作者: Cestone, G; Fumagalli, C
• 署名单位: University of Salerno; Bocconi University; Centre for Economic Policy Research - UK
• 刊物名称: RAND JOURNAL OF ECONOMICS
• ISSN/ISSBN: 0741-6261
• 发表日期: 2005
• 页码: 193-214
• 关键词: internal capital-markets; financial intermediation; inefficient investment; corporate resources; COMPETITION; oligopoly; BEHAVIOR; entry; side; firm

摘要

We show that in business groups with efficient internal capital markets, resources may be channelled to either more- or less-profitable units. Depending on the amount of internal resources, a group may exit a market in response to increased competition, or channel funds to the subsidiary operating in that market. This has important implications for the strategic impact of group membership. Affiliation to a monopolistic subsidiary can make a cash-rich (poor) firm more (less) vulnerable to entry deterrence. Also, resource flexibility within a group makes subsidiaries' reaction functions flatter, thus discouraging rivals' strategic commitments when entry is accommodated.