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This paper examines the impact of coordination costs and organizational rigidity on the returns to diversification. The central thesis is that coordination costs offset economies of scope, while organizational rigidity increases coordination costs and constrains economies of scope. The empirical tests of this proposition identify the effects of coordination and organizational rigidity costs on business-unit and firm productivity, using novel data from the Economic Census on taxi and limousinedoi:10.2139/ssrn.1019053 fatcat:qahviexl5jgzrbckcj5ziy7jha