This book examines product-line diversification of large manufacturing firms. It introduces and applies methodology that discerns groups of manufacturing industries related by complementarities in production, marketing, distribution, and research and development activities. Manufacturing firms intentionally vary production to exploit these complementarities, and Professor Scott uses evidence from U.S. manaufacturing to explore hypotheses about such purposive diversification and ensuing economic performance, including product diversification's effects on both static efficiency and the optimality of R&D investment. This study yields new perspectives on the policy debate about cooperation versus competition among firms: will industrial performance be better if leading firms cooperate on research, production, and marketing? Professor Scott shows that the answers depend on circumstances that vary with different industrial environments. His analysis offers insights about business strategy and public policy toward business combinations in conglomerate, vertical, and horizontal mergers and in cooperative R&D ventures.

Introduction: An overview; Part I. Static Efficiency and the Diversified Firm: 1. The multimarket firm; 2. Theories linking multimarket contact and market power; 3. Diversifying mergers and strategic congruence; 4. Multimarket contact and resource allocation; 5. The market power of diversifed oligopolists; Part II. Firm and Industry Effects Versus Traditional Models: 6. Profitability effects; 7. R & D intensity effects; Part III. Dynamic Efficiency and the Diversified Firm: 8. Theories linking diversification and the R & D investment; 9. Diversification of R & D and productivity; 10. Multimarket rivalry and R & D intensity; 11. Research diversity induced by rivalry; Part IV. Industrial Policy: 12. Diversification versus cooperation in R & D; 13. From cooperative research to cooperative production; 14. Damoclean taxation and innovation; Afterword: perspectives through time and across countries; Notes; References; Index.