This paper undertakes an in-depth analysis of the tire industry over the period 1970-1990. It attempts to uncover the causes and consequences of the acquisition activity in the industry in the 1980’s, which resulted in all but one large U.S. tire manufacturer being sold to foreign companies....

There is a widespread belief that free markets do not benefit the common person, let alone the poor: they are only an instrument for the rich to get richer. Not only is this belief false, but in fact the opposite is true. Free markets are the single most important tools to eliminate poverty and...

We model the distortions that internal power struggles can generate in the allocation of resources between divisions of a diversified firm. The model predicts that if divisions are similar in the level of their resources and opportunities, funds will be transferred from divisions with poor...

Conventional wisdom has long held that, in relationship-based economies such as Japan and Germany, corporations are able to borrow more than U.S. companies, which in turn reduces their cost of capital and gives them a competitive edge. But such folklore does not stand up to scrutiny. In Japan...

In a simple model of capital budgeting in a diversified firm where headquarters has limited power, we show that funds are allocated towards the most inefficient divisions. The distortion is greater the more diverse are the investment opportunities of the firm's divisions. We test these...