When a firm simultaneously practices operational relatedness and corporate relatedness,
A) it is difficult for investors to observe the value created by the firm.
B) the firm is likely to be overvalued by investors.
C) the firm will suffer from diseconomies of scope which outweigh cost savings generated.
D) the firm is seeking to create value through financial economies.

Question

Quizplus · Accepted Answer

When a firm simultaneously practices operational relatedness and corporate relatedness, it can be difficult for investors to observe the value created by the firm because the effects are not easily distinguishable. This can lead to undervaluation or overvaluation of the firm. However, it does not necessarily lead to diseconomies of scope or seeking to create value through financial economies.

When a Firm Simultaneously Practices Operational Relatedness and Corporate Relatedness