Common ownership and corporate strategy uniqueness

Abstract

This study examines whether common institutional ownership influences firms' strategy uniqueness. Specifically, we investigate whether common ownership leads firms to adopt strategies that are more similar to those of their industry peers. Using a large sample of US publicly traded firms, we measure strategy uniqueness based on firms' business segment sales and capital expenditure allocations relative to industry peers. We estimate panel regressions with firm and year fixed effects and perform extensive robustness analyses using alternative measures of common ownership and strategy uniqueness, different industry classifications, and a difference-in-differences design based on financial institution mergers to strengthen causal inference. We find that firms with higher levels of common institutional ownership adopt strategies that are more similar to those of their industry peers, suggesting that common owners internalize competitive externalities across portfolio firms and prefer softened rivalry over aggressive differentiation. This effect is more pronounced in highly competitive industries, among firms with greater idiosyncratic volatility, and among firms with higher ownership by long-term and activist institutional investors. The results are robust across alternative specifications and measures. This study extends the literature on common institutional ownership by examining its impact on firms' strategic positioning rather than conventional financial or competitive outcomes. By demonstrating that common ownership promotes strategic convergence within industries, it provides new evidence on how institutional investors influence firms' long-term strategic decisions and competitive behavior.