Business groups and the boundaries of the firm (original) (raw)

The Nature of the Business Group: Power, Relational Contracts and Scope

SSRN Electronic Journal, 2000

We propose a framework for understanding the business group, a hybrid organizational form that occupies the middle ground between Þrm and market and is a prominent feature of emerging economies. These organizations are characterized by varying levels of diversiÞcation and integration. We provide an explanation for the covariation, both positive and negative, in the scope, scale and strength of integration of business groups. This notion of integration embodies the degree of tightness in the ties that connect disparate subsidiary activities to the core of the business group, and is, we believe, novel to the theory of the Þrm. We also suggest the framework may be useful for understanding internal organizational hierarchy and multiproduct Þrms. 5 This seems appropriate given the importance of networks, connections and ties of kinship in surmounting informational problems. See, for example , Rachel Kranton (1996) and Raja Kali (1999). An example of a model that uses the 'distance' metaphor for coordination costs is by Alesina and Spolaore (1997).

Business Groups: An Integrated Model to Focus Future Research

Journal of Management Studies, 2007

Business groups are the primary form of managing large business organizations outside North America. This paper provides a systematic and integrative framework for understanding business groups. We argue that existing theoretical perspectives of business groups pay attention to four critical external contexts, each of which draws from a specific theoretical perspective: market conditions (transaction cost theory), social relationships (relational perspective), political factors ( political economy perspective), and external monitoring mechanisms (agency theory). Business groups adapt to these external forces by deploying various internal mechanisms along two key dimensions: one focuses on the distinctive roles of the group affiliates (horizontal connectedness) and the other focuses on coupling and order between the parent firm and its affiliates (vertical linkages). Based on these two dimensions, a typology of business group forms is developed: network (N-form), club (C-form), holding (H-form), and multidivisional (M-form). Utilizing this model we provide research questions which facilitate an improved future research agenda.

Control and the Partly Owned Corporation: A Preliminary Inquiry Into Shared Control

Fla. J. Int'l L., 1995

SHARED CONTROL shared. 4 Shared control is unknown except at the higher level of the shareholder-investors in the parent corporation, who may influence or determine the policies of the enterprise but are not an active participant in it. This traditional pattern of corporate groups organized in hierarchical form has never been exclusive and increasingly, is being supplemented by other enterprises organized in nonhierarchical fashion in which control is shared. Corporations are joining forces and conducting some aspects of their operations through joint ventures, strategic alliances, and corporate networks.' Hierarchical corporate structures are also dominant in European multinational groups. However, neither the hierarchical form nor the pattern of wholly owned subsidiaries has been as widely accepted in Europe. Thus, there are some major European groups with dual parent corporations, such as Royal Dutch-Shell and Agfa-Gevaert. Partly owned subsidiaries are much more common than in the United States. 6 In addition, strategic alliances and corporate networks have made an increasing appearance. 7 Finally, European groups linked by interlocking stock ownership in a holding company, in which control has been shared, have become increasingly important. 8 These are the so-called European holding groups. 9 European multinational structure is evidently more complex than in the United States, but notwithstanding these departures, European groups, like those in the United States, are typically hierarchical. Comparable developments in Japan in the form of the zaibatsu and keiretsu, and more recently the kigyoshodan, are well known. °S uch changing organizational patterns have introduced a new complexity 4. While two corporate groups may join in a corporate joint venture, the joint venture will conduct its own business, typically one that exists in an area of tangency between them. 5. JAMES & WEIDENBAUM, supra note 2, at 8-12. Strategic alliances and networks are essentially licenses or contractual understandings and arrangements on certain dealings between the parties. In contrast to the cases applying enterprise principles, they do not present a basis for recognition, at least for the purpose at hand, as having a separate juridical identity in any context. As will be seen, corporate joint ventures have been the only nonhierarchical undertakings that have received judicial scrutiny for these purposes. The courts have uniformly refused to depart from traditional corporate principles in determining the general legal consequences arising from the corporate joint venture structure. 6.

The boundaries of the firm revisited

The Journal of Economic Perspectives, 1998

Journal of Economic Perspectives-Volume 12, Number 4-Fall 1998-Pages 73-94 ... W ^ thy do firms exist? What is their function, and what determines their scope? These remain the central questions in the economics of organi- zation. They ...

Evolution of the Boundaries of the Firm

SSRN Electronic Journal, 2011

The firm of today differs from the firm even some twenty years ago. Shift in industrial organization is prompted by technological advances, pertaining in particular to advances in information and communication technologies, that enable previously non-existent means of intra-and inter-firm interactions. The adoption of the latter derails the previously operable regulation approaches, and the need for redefining the firm emerges. This paper is focused on portraying the industrial dynamics through delineation of the evolution of the way the boundaries of the firm are being defined.

The Nature of the Business Group: A Social Network Perspective

Organization, 2006

This article takes as its point of departure the ambiguous and inconsistent way in which the concept of the 'business group' and other associated concepts has been used in the literature to describe and label different types of interfirm relationships. To remedy this state of affairs, a preliminary conception of the business group is presented and elaborated upon, in which the business group is conceptualized as comprising three analytically separable elements: network(s) of interrelated firms, the institutionalized logic of reciprocity, and the intersubjective interpretation of actors inside as well as outside the group. Further, a social network perspective on organizations is suggested for the analysis of business groups.

Toward a Typology of Business Groups: A Qualitative Content Analysis

2024

By facilitating wider communication networks and improving the performance of their affiliated businesses in complex environments, businesses can increase their competitiveness. Understanding the characteristics and diversity of business groups is necessary for developing and implementing them. In this study, we examined the question of how business groups can be classified. What criteria can be used to separate them? We conducted a qualitative analysis of the content of 48 scientific journals published between 1999 and 2020 and selected 215 articles based on purposive sampling during two stages of screening. As a result of the content analysis, three main themes were identified: "origins of group control and ownership", "groups' institutional origins", and "intergroup relations". Also, at the first subtheme level, six categories were identified: group control level, group ownership type, diversity of group relations, dependence and cooperation level, relationship structure, and institutional contexts. There are 12 subcategories included in the second-level subthemes. "origin of corporate governance", "type of group ownership", "type of institutional contexts", "intra-group diversification", "extra-group diversification", "internal cooperation", "formalization ratio", "length of relations", "external cooperation", "geographical area", "depth of cooperation", "group maturity level". Lastly, axis factors related to the diversity of business groups were used to develop a set of typologies.

Business groups and the study of international business: A Coasean synthesis and extension

Journal of International Business Studies

This paper harmonizes the business group literature in international business and across relevant fields within a unified theoretical framework. Business groups (firms under common control but with different, if overlapping, owners) are economically important in much of the world. Business groups’ economic significance co-evolves with their economies' institutions and market environments, patterns of particular interest to international business scholars. The vast literature on business groups raises discordant perspectives. This paper first proposes a unifying definition and provides a list of stylized historical observations on business groups across different parts of the world. It then develops a Coasean framework to harmonize seemingly disparate views from the literature by building on recent surveys and the stylized historical patterns of business groups. We enlist two concepts – fallacies of composition/decomposition and time inconsistency – to harmonize these perspective...

Corporate Governance versus Business Group Governance, Part 1

2021

Every firm in a high-income market economy relies on the mere existence of countless other firms to keep prices competitive throughout densely interconnected supply chains. Without this network externality, no firm forms; and without many firms, no network forms. Escaping this low-income trap is a primary problem in launching rapid catch-up development. Business group governance supersedes corporate governance in catch-up development, today and historically. Business groups can roll out new firms and expand existing firms in the interests of the group as a whole, and are thus a uniquely advantageous governance structure for rapid catch-up economic development