Researchers from University of Michigan Report Details of New Studies and Findings in the Area of Insurance (The Dynamics of Related Diversification: Evidence From the Health Insurance Industry Following the Affordable Care Act): Insurance

Health Policy and Law Daily

2022 DEC 22 (NewsRx) -- By a News Reporter-Staff News Editor at Health Policy and Law Daily -- Data detailed on Insurance have been presented. According to news originating from Ann Arbor, Michigan, by NewsRx correspondents, research stated, “Research Summary: We provide a theory of when relatedness will encourage both diversifying entry and post-entry exit. Our formal model reveals two channels through which resource sharing in combination with firm capabilities affects diversifying entry and post-entry exit.”

Our news journalists obtained a quote from the research from the University of Michigan, “Facing business opportunities in a new segment, low capability firms from a more related segment expect to benefit from more synergies and are therefore more likely to enter than firms with similar capability but from less related segments. Post entry, unfavorable shocks in the new segment tighten the survival criteria and drive some more related but low capability firms out. These predictions are supported using data on U.S. health insurance firms’ entry into and exit from the Affordable Care Act market from 2013 to 2017. Managerial Summary: When would factors that favor related diversifiers’ entry into a new business segment also encourage their exit post-entry? Using data on U.S. health insurance firms’ entry into and exit from the Affordable Care Act (ACA) market from 2013 to 2017, we find that more related diversifiers (i.e., insurers offering Medicaid), especially the low capability ones, are more likely to enter ACA. However, facing cost shocks in the new segment, more related diversifiers, especially the low capability ones, are more likely to exit than less related diversifiers (i.e., insurers offering no Medicaid).”

According to the news editors, the research concluded: “This is consistent with our formal model that predicts a selection at entry that favors related diversifiers due to expected synergies and an adverse selection post-entry against low capability related diversifiers.”

This research has been peer-reviewed.

For more information on this research see: The Dynamics of Related Diversification: Evidence From the Health Insurance Industry Following the Affordable Care Act. Strategic Management Journal, 2022. Strategic Management Journal can be contacted at: Wiley, 111 River St, Hoboken 07030-5774, NJ, USA. (Wiley-Blackwell - http://www.wiley.com/; Strategic Management Journal - http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1097-0266)

The news correspondents report that additional information may be obtained from Yue Maggie Zhou, University of Michigan, Ross School of Business, Ann Arbor, MI, United States. Additional authors for this research include Weikun Yang and Sendil Ethiraj.

The direct object identifier (DOI) for that additional information is: https://doi.org/10.1002/smj.3472. This DOI is a link to an online electronic document that is either free or for purchase, and can be your direct source for a journal article and its citation.