Interdependence and Performance: A Natural Experiment in Firm Scope

38 Pages Posted: 20 Mar 2011 Last revised: 29 May 2015

See all articles by Gabriel Natividad

Gabriel Natividad

Universidad de Piura

Evan Rawley

University of Minnesota - Twin Cities - Carlson School of Management

Date Written: March 22, 2015

Abstract

This paper shows how interdependencies influence performance following a reduction in firm scope. We test the predictions of the theory using detailed micro-data on every Peruvian fishing firm before and after a regulatory ban on mackerel fishing, finding that a reduction in the scope of activities causes the productivity of firms’ legacy anchovy operations to fall sharply, before recovering in the long run. The results are most pronounced for firms with the strongest interdependencies between activities. Moreover, we find evidence that the persistence of the productivity decline is explicitly tied to a failure to adapt quickly following the ban. Consistent with our conceptual characterization, the evidence suggests that interdependencies between activities simultaneously create benefits as well as costs, but that costs are more persistent when the firm reduces its scope of activities.

Suggested Citation

Natividad, Gabriel and Rawley, Evan, Interdependence and Performance: A Natural Experiment in Firm Scope (March 22, 2015). Available at SSRN: https://ssrn.com/abstract=1786864 or http://dx.doi.org/10.2139/ssrn.1786864

Gabriel Natividad (Contact Author)

Universidad de Piura ( email )

Calle Martir Olaya 162
Lima, Lima L18
Peru

Evan Rawley

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
98
Abstract Views
1,332
Rank
485,733
PlumX Metrics