Burgeoning businesses may reach a point where they have to decide between being an integrated conglomerate or operating as separate companies. Just which way is better depends on the reason for the growth, according to a study released January 11 by the Journal of Economics & Management Strategy.

The study found that when growth occurred because of new innovations, companies in the conglomerate format appeared to be traded at a premium. However, if expanding operations was the reason for the growth, conglomerates generally were discounted compared to similar stand-alone structures.

The study also showed that the stand-alone structure allows companies to receive better information about specific markets, which, in turn, allows for better investment decisions. However, integrated businesses provided better incentives to managers because of greater resources and internal competition.

The Journal of Economics & Management Strategy, a publication of Blackwell Publishing, looks at industrial organization and management theory.