skip to content

Faculty of Economics

Journal Cover

Chen, J., Elliott, M. and Koh, A.

Capability Accumulation and Conglomeratization in the Information Age

Journal of Economic Theory

Vol. 210 (2023)

Abstract: The past twenty years have witnessed the emergence of internet conglomerates fueled by acquisitions. We build a simple model of network formation to study this. Following the resource-based view of competitive advantage from the management literature we endow firms with scarce capabilities which drive their competitiveness across markets. Firms can merge to combine their capabilities, spin-off new firms by partitioning their capabilities, or procure unassigned capabilities. We study stable industry structures (stable networks) in which none of these deviations are profitable. We find an upper and lower bound on the size of the largest firm, and show that as markets value more of the same capabilities abrupt increases in these bounds occur.

Keywords: Firm Strategy, Market Performance, Market Structure, Network Formation and Analysis, Theory

JEL Codes: D85, L10, L11

Author links: Matthew Elliott  

Publisher's Link: https://doi.org/10.1016/j.jet.2023.105647



Cambridge Working Paper in Economics Version of Paper: Capability Accumulation and Conglomeratization in the Information Age, Chen, J., Elliott, M. and Koh, A. , (2020)

Papers and Publications



Recent Publications


Huffman, D., Raymond, C. and Shvets, J. Persistent Overconfidence and Biased Memory: Evidence from Managers American Economic Review [2022]

Merrick Li, Z. and Linton, O. A ReMeDI for Microstructure Noise Econometrica [2022]

Bhattacharya, D. and Komarova, T. Incorporating Social Welfare in Program-Evaluation and Treatment Choice Review of Economics and Statistics, accepted [2023]

Ding, Y. A Simple Joint Model for Returns, Volatility and Volatility of Volatility Journal of Econometrics [2023]