Specify the two conditions that a corporate diversification strategy must meet in order to create ...

 In order for corporate diversification to be economically valuable, two conditions must hold. First, there must be some valuable economy of scope among the multiple businesses in which a firm is operating. Second, it must be less costly for managers in a firm to realize these economies of scope than for outside equity holders on their own. If outside investors could realize the value of a particular economy of scope on their own, and at low cost, then they would have few incentives to "hire" managers to realize this economy of scope for them.