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Using the universe of patient transitions from inpatient hospital care to skilled nursing facilities and home health care in 2005, we show how integration eliminates task misallocation problems between organizations. We find that vertical integration allows hospitals to shift patient recovery tasks downstream to lower-cost organizations by discharging(More)
We develop a simple model that links the adoption of a productivity-enhancing technology to increased vertical integration and a less skilled workforce. We test the model's key prediction using novel micro data on vehicle ownership patterns from the Economic Census during a period when computerized dispatching systems were first adopted by taxicab firms.(More)
This paper studies inherited agglomeration effects, which we define as human capital that managers acquire while working in an industry hub that may be transferred to a spinoff. We test for inherited agglomeration effects in the hedge fund industry and find that hedge fund managers who previously worked in New York and London outperform their peers by about(More)
We propose that higher skilled firms diversify in equilibrium even though managers exploit idiosyncratic performance shocks to time diversification moves. We formalize this intuition in a mistake-free equilibrium and test our predictions using a large panel dataset on the hedge fund industry 1977-2006. The results show that returns fall following new fund(More)
This paper studies how firms reorganize following diversification, proposing that firms use outsourcing, or vertical disintegration , to manage diseconomies of scope. We also consider the origins of scope diseconomies, showing how different underlying mechanisms generate contrasting predictions about the link between within-firm task heterogeneity and the(More)
We use exogenous incentive variation to separate how convex incentives influence performance and risk-taking. In a hedge fund setting, we show that when managers fall below a threshold beyond which they earn performance fees, risk-taking increases and performance drops. Using predictions of non-monotonic risk-taking, we disentangle the shirking and(More)
Entrepreneurs often have prior experience at incumbent firms. We present a new mechanism by which prior employment can influence transitions into entrepreneurship. We propose that some employees divert effort toward unproductive activities to learn about their own fitness for alternative employment. Based on the results of this costly learning experience,(More)
This paper studies inherited agglomeration effects, how human capital that accrues to managers while working at a parent firm in an industry hub can be subsequently transferred to a spinoff. We test for inherited agglomeration effects in the context of the hedge fund industry and find that hedge fund managers who previously worked in New York and London(More)
We present a general framework for understanding why firms are slow to make major strategic changes in a wide range of empirical settings. We then apply this framework to investigate, more specifically, the relationship between firm age and scope in hedge funds. Our empirical analyses demonstrate that younger hedge funds outperform older hedge funds both(More)