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Title

The strategic impact of resource flexibility in business groups

AuthorsCestone, Giacinta; Fumagalli, C.
Issue Date2005
PublisherRand Corporation
CitationRAND Journal of Economics 36(1): 193-214 (2005)
AbstractWe 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. Copyright © 2005, RAND.
URIhttp://hdl.handle.net/10261/58485
Identifiersissn: 0741-6261
e-issn: 1756-2171
Appears in Collections:(IAE) Artículos
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