Abstract

Abstract A frequently stated motive for joint ventures, conglomerate mergers, and investments in new lines of business is a desire to diversify the firm and reduce the riskiness of its returns. According to this view, joint ventures spread the risk of major projects, while conglomerate diversification creates portfolio benefits by pooling uncorrelated returns. A similar logic may drive a corporate decision to pursue simultaneously a variety of different R&D strategies aimed at a common goal.

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