Your example doesn't apply because my point applies to different businesses, not just "investments" in general. A hotelier buying or building another hotel is just expanding, not investing in different businesses. A hotelier that is making 10% RoI in the hotel industry would be ill-advised to take on a car rental business that makes 3% RoI, because that car rental business won't be free, and they should be investing that money where they can make 10% RoI.
Google, paradoxically, by having such a good RoI on ads has a hard time taking on other businesses. This is a big part of why they spun so much stuff off; if they stay within Google, business forces would tend to starve them despite the abundance of resources that at first glance seem to be available. It's why you see companies so often cut product lines that are profitable, but not as profitable as something else... or, to put that another way, this isn't something I'm hypothesizing about how it might happen because of the theory, it's a thing that happens all the time. I've seen at least two major passes of it at the company I work at.
Ok so if a business a) has limited management bandwidth and many promising options or b) has a particularly cyclical/risky business model that results in a high cost of borrowing then you're right.
These are somewhat linked to profitability as you say, but a safe slow-growth company generating massive profits (eg Coca-Cola) doesn't face this.
Google, paradoxically, by having such a good RoI on ads has a hard time taking on other businesses. This is a big part of why they spun so much stuff off; if they stay within Google, business forces would tend to starve them despite the abundance of resources that at first glance seem to be available. It's why you see companies so often cut product lines that are profitable, but not as profitable as something else... or, to put that another way, this isn't something I'm hypothesizing about how it might happen because of the theory, it's a thing that happens all the time. I've seen at least two major passes of it at the company I work at.