Corporate Leverage and Product Differentiation Strategy
This article develops a model of the interplay between corporate leverage and product differentiation strategy. Leverage improves managerial discipline, but it can also raise customer concerns about a vendor's long-term viability. We argue that customer concerns about firm viability will be particularly pronounced when products are highly differentiated from competitors' products. In this context, optimal product differentiation strategies solve a trade-off between softening price competition and reducing customers' total cost of ownership. Our analysis is consistent with empirical evidence suggesting a negative correlation between corporate leverage and product uniqueness.
Year of publication: |
2006
|
---|---|
Authors: | Arping, Stefan ; Lóránth, Gyöngyi |
Published in: |
The Journal of Business. - University of Chicago Press. - Vol. 79.2006, 6, p. 3175-3208
|
Publisher: |
University of Chicago Press |
Saved in:
Online Resource
Saved in favorites
Similar items by person
-
Public Initiatives to Support Entrepreneurs: Credit Guarantees versus Co-Funding
Arping, Stefan, (2009)
-
Public Initiatives to Support Entrepreneurs: Credit Guarantees versus Co-Funding
Arping, Stefan, (2009)
-
Public initiatives to support entrepreneurs: Credit guarantees versus co-funding
Arping, Stefan, (2010)
- More ...