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The dynamics of related diversification: Evidence from the health insurance industry following the Affordable Care Act
dc.contributor.authorZhou, Yue Maggie
dc.contributor.authorYang, Weikun
dc.contributor.authorEthiraj, Sendil
dc.date.accessioned2023-07-14T13:58:16Z
dc.date.available2024-08-14 09:58:14en
dc.date.available2023-07-14T13:58:16Z
dc.date.issued2023-07
dc.identifier.citationZhou, Yue Maggie; Yang, Weikun; Ethiraj, Sendil (2023). "The dynamics of related diversification: Evidence from the health insurance industry following the Affordable Care Act." Strategic Management Journal 44(7): 1753-1779.
dc.identifier.issn0143-2095
dc.identifier.issn1097-0266
dc.identifier.urihttps://hdl.handle.net/2027.42/177289
dc.description.abstractResearch SummaryWe provide a theory of when relatedness will encourage both diversifying entry and post-entry exit. Our formal model reveals two channels through which resource sharing in combination with firm capabilities affects diversifying entry and post-entry exit. Facing business opportunities in a new segment, low capability firms from a more related segment expect to benefit from more synergies and are therefore more likely to enter than firms with similar capability but from less related segments. Post entry, unfavorable shocks in the new segment tighten the survival criteria and drive some more related but low capability firms out. These predictions are supported using data on U.S. health insurance firms’ entry into and exit from the Affordable Care Act market from 2013 to 2017.Managerial SummaryWhen would factors that favor related diversifiers’ entry into a new business segment also encourage their exit post-entry? Using data on U.S. health insurance firms’ entry into and exit from the Affordable Care Act (ACA) market from 2013 to 2017, we find that more related diversifiers (i.e., insurers offering Medicaid), especially the low capability ones, are more likely to enter ACA. However, facing cost shocks in the new segment, more related diversifiers, especially the low capability ones, are more likely to exit than less related diversifiers (i.e., insurers offering no Medicaid). This is consistent with our formal model that predicts a selection at entry that favors related diversifiers due to expected synergies and an adverse selection post-entry against low capability related diversifiers.
dc.publisherJohn Wiley & Sons, Ltd.
dc.subject.otherdiversifying entry
dc.subject.othercapability
dc.subject.otherexit
dc.subject.otherhealthcare
dc.subject.otherresources
dc.titleThe dynamics of related diversification: Evidence from the health insurance industry following the Affordable Care Act
dc.typeArticle
dc.rights.robotsIndexNoFollow
dc.subject.hlbsecondlevelBusiness (General)
dc.subject.hlbsecondlevelEconomics
dc.subject.hlbsecondlevelFilm and Video Studies
dc.subject.hlbsecondlevelManagement
dc.subject.hlbsecondlevelUrban Planning
dc.subject.hlbtoplevelBusiness and Economics
dc.subject.hlbtoplevelArts
dc.subject.hlbtoplevelSocial Sciences
dc.description.peerreviewedPeer Reviewed
dc.description.bitstreamurlhttp://deepblue.lib.umich.edu/bitstream/2027.42/177289/1/smj3472.pdf
dc.description.bitstreamurlhttp://deepblue.lib.umich.edu/bitstream/2027.42/177289/2/smj3472_am.pdf
dc.identifier.doi10.1002/smj.3472
dc.identifier.sourceStrategic Management Journal
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dc.owningcollnameInterdisciplinary and Peer-Reviewed


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