Praveen R. Nayyar

Performance Effects of Information Asymmetry and Economies of Scope in Diversified Service Firms

This study examined the performance effects of information asymmetry and economies of scope in diversified service firms. Tests using both accounting- and stock-market-based measures of performance revealed that information asymmetry improved performance more than economies of scope. As hypothesized, the benefits of information asymmetry were greater for firms offering services whose quality cannot be determined until after their purchase (experience services), and the benefits of economies of scope were greater for firms offering services whose quality can be determined prior to purchase (search services). However, without considering the interactive effects of service characteristics, economies of scope were negatively associated with performance for diversified service firms overall.

On the Measurement of Competitive Strategy: Evidence From a Large Multiproduct U.S. Firm

Measures of strategy made at the product and business level were compared using data from a large multiproduct U.S. firm. The business-level results were not found to be good indicators of product-...

Performance Effects of Three Foci in Service Firms

Service businesses are often urged to focus because otherwise they will falter. In effect, the “focus or falter” argument suggests that focus by service firms is likely to result in superior perfor...

Creating Value in Financial Services

Financial services firms everywhere have undergone major changes over the last several decades. These firms include retail commercial banks, investment banks, insurance companies, mutual fund companies, securities brokers, and credit card companies. The decade of the nineties has witnessed a significant number of mergers among these firms worldwide. Some mergers were intended to achieve economies of scale from greater size and geographic diversity, e.g., the merger of Chase and Chemical. Some mergers were intended to establish a bridge between different financial services in the hope of creating synergies e.g., the merger of Travelers Group with Citicorp.

Out of the Fog: Creating Value by Assembling and Managing a Portfolio of Services

As I write this chapter, I look out of my window and see a dense early-spring fog obscuring the rolling green landscape that I know lies not far from my home. I know that this fog will clear when the sun rises higher and the wind sets in Engulfed in a fog, many scholars and most managers commit a trilogy of errors plus one. First, they do not consider important differences between cost-reduction and revenue-enhancing strategies when analyzing and planning diversification strategies. Second, they ignore important differences among services — leading to erroneous beliefs about expected benefits from different diversification strategies. Third, they do not account for implementation hurdles that reduce the benefits that a firm can expect from different diversification strategies. The plus one error is that they tend to “see” synergies in diversified firms when there can be none.