Abstract
This paper tests hypotheses on the sources of scope economies in a large sample of U.S. manufacturing firms. Federal Trade Commission Line of Business data are used to construct a new measure of scope economies that is appropriate for cross-section data. The measure and the LB data are capable of distinguishing between production and distribution economies of scope. In general, the results indicate that sharing assets is not important and that some sources of production scope economies may also be sources of diseconomies in multiproduct promotion, and vice versa. Implications for merger policy are briefly discussed.
Similar content being viewed by others
References
Bailey, Elizabeth E. and Ann Friedlaender. "Market Structure and Multiproduct Industries,"Journal of Economic Literature, 20 (September 1982): 1024–48.
Baumol, William J. "Contestable Markets: An Uprising in the Theory of Industry Structure,"American Economic Review, 72 (March 1982): 1–15.
——, John C. Panzar, and Robert W. Willig.Contestable Markets and the Theory of Industry Structure, New York: Harcourt, Brace, and Jovanivich, 1982.
Benston, George J. "The Validity of Profits-Structure with Particular Reference to the FTC's Line of Business Data,"American Economic Review, 75 (March 1985): 37–67.
Berry, Charles H. "Corporate Growth and Diversification,"Journal of Law and Economics, 14 (October 1971): 371–83.
Gollop, Frank M. and James L. Monahan. "From Homogeneity to Heterogeneity: A Proper Index of Diversification,"U.S. Department of Commerce, Bureau of the Census Technical Note (September 1984).
Federal Trade Commission,Statistical Report: Annual Line of Business Report, 1976. Washington: GPO, 1982.
Friedlaender, Ann F., C. Winston, and K. Wang. "Costs, Technology and Productivity in the U.S. Automobile Industry,"Bell Journal of Economics, 14 (Spring 1983): 1–20.
Long, William F., et al.Volume 1: Staff Analysis of the Benefits and Costs of the Federal Trade Commission's Line of Business Report. Washington: Federal Trade Commission (1982).
Mayo, John W. "The Technological Determinants of the U.S. Energy Industry Structure,"Review of Economics and Statistics, 66 (February 1984): 51–58.
Mueller, Dennis C. "The Effects of Conglomerate Mergers,"Journal of Banking and Finance (1977): 315–47.
Ravenscraft, David J. "Structure-Performance Relationships at the Line of Business and Industry Level,"Review of Economics and Statistics, 65 (September 1983): 22–31.
Scherer, F.M., and David J. Ravenscraft. "Growth by Diversification: Entrepreneurial Behavior in Large-Scale United States Enterprises,"Zeitschrift fur Nationalokonomie (Supp. #4, 1984): 199–218.
Shepherd, William G. "Contestability vs. Competition,"American Economic Review, 74 (September 1984): 572–587.
Teece, David J. "Economies of Scope and the Scope of the Enterprise,"Journal of Economic Behavior and Organization, 1 (September 1980): 223–47.
Watts, Ross and Jerold Zimmerman. "Towards a Positive Theory of the Determination of Accounting Standards,"Accounting Review, 53 (January 1978): 112–34.
Weiss, Leonard W. "The Extent and Effects of Aggregate Concentration,"Journal of Law and Economics, 31 (June 1983): 429–55.
Williamson, O.E. "The Vertical Integration of Production: Market Failure Considerations,"American Economic Review, 61 (May 1971): 112–123.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Nichols, L.M. On the sources of scope economies in U.S. manufacturing firms. Rev Ind Organ 4, 1–22 (1989). https://doi.org/10.1007/BF02284659
Issue Date:
DOI: https://doi.org/10.1007/BF02284659