Welcome to the InfoSci Platform
Microeconomic Theory of Spinoff Decisions

Microeconomic Theory of Spinoff Decisions

T. V. S. Ramamohan Rao
Copyright: © 2013 |Volume: 2 |Issue: 4 |Pages: 16
ISSN: 2160-9802|EISSN: 2160-9810|EISBN13: 9781466635760|DOI: 10.4018/ijabe.2013100103
Cite Article Cite Article

MLA

Rao, T. V. S. Ramamohan. "Microeconomic Theory of Spinoff Decisions." IJABE vol.2, no.4 2013: pp.36-51. http://doi.org/10.4018/ijabe.2013100103

APA

Rao, T. V. (2013). Microeconomic Theory of Spinoff Decisions. International Journal of Applied Behavioral Economics (IJABE), 2(4), 36-51. http://doi.org/10.4018/ijabe.2013100103

Chicago

Rao, T. V. S. Ramamohan. "Microeconomic Theory of Spinoff Decisions," International Journal of Applied Behavioral Economics (IJABE) 2, no.4: 36-51. http://doi.org/10.4018/ijabe.2013100103

Export Reference

Mendeley
Favorite Full-Issue Download

Abstract

The present study demonstrates that the product line choice of a firm depends on the elasticity of substitution between products (and the organizational and coordination requirements that it implies), the bargaining power of managers of different product divisions, and marketing prospects of each of the products. A new product idea, put forward by an employee, will be integrated if a combination of these features obtains. A spinoff will result if any one, or more, of these conditions is not satisfied. In general, it is shown that a new product, which has a high elasticity of substitution with the existing products, will experience a spinoff due to lack of organizational capabilities to integrate it while a product with a low elasticity will spinoff only due to the incumbent management’s perception of low market potential and/or the strategic bargaining power of the incumbent management with respect to the existing product line.

Request Access

You do not own this content. Please login to recommend this title to your institution's librarian or purchase it from the IGI Global bookstore.