Business Groups in Emerging Markets: Paragons or Parasites? (original) (raw)
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American Review of Political Economy
Business Groups and their ubiquitous presence in emerging economies affect the broad patterns of economic performance. The study of such hybrid organizational form has been relevant to various domains such as industrial organization, corporate finance, strategic management, economics and sociology etc. This paper is an attempt to first understand the reason for their dominant presence in emerging markets and then proceeds to review the literature based on the dominant research perspectives of the existing scholarly work.
Business groups in Emerging Economies: Introduction to the Special Issue
Review of Economics and Institutions, 2015
The existence, ubiquity and remarkable dynamics of business groups in emerging markets has stimulated a large amount of research, which has investigated the reasons for the emergence of groups, their ownership structure, their differentiation and vertical integration patterns, and their economic performance. However, there is still more limited evidence about business groups' strategies, i.e. how groups organize their business activities and what makes them more (or less) successful than independent enterprises. This Special Issue collects new research on economic groups network and internationalization strategies.
Diversified Business Groups in Emerging Economies
Diversified business groups dominate the organizational landscape of many emerging and transition economies. Are these diversified groups good or bad for these economies? How can we explain their emergence and persistence? Why are they so visible and dominant in developing countries but not in developed ones? How should regulatory authorities view them? In this paper we review recent theoretical and empirical research on this subject to throw some light on these questions.
How do Business Groups Function and Evolve in Emerging Markets? The Case of Turkish Business Groups
Advances in International Marketing, 2006
Business groups have become a significant phenomenon in the evolution and functioning of emerging markets. They also provide important partnership opportunities to foreign firms when they enter these markets. Yet, business groups have not received sufficient attention in the international marketing literature. In this paper, we provide an overview of the theories that explain how business groups function and evolve in emerging markets and generate propositions from that theory. We also present evidence on business group evolution from one emerging market, Turkey. Our work should inspire research questions for future study.
The role and functioning of business groups in east Asia and Chile
2000
We compare group affiliation in seven East Asian countries and Chile, using data for more than 1,000 publicly traded firms. We document that 75% of listed firms are associated with groups in East Asia, but only 40% in Chile. We find evidence that group structures are used to diversify risks internally as firms' market risk is influenced not only by own characteristicssuch as size, price/book ratiobut also by group characteristics, especially in Chile. There are costs to groups, however. For East Asian countries, we find that group structures are used by controlling owners to expropriate other shareholders. On balance, it appears that business groups are not beneficial to shareholders.
Business groups and entrepreneurship in developing countries after reforms
Journal of Business Research, 2015
Drawing from the literature on markets and market development we develop hypotheses on the startup and growth of formal business by business groups relative to independent entrepreneurs after reforms. We then test the hypotheses in a large sample of firms that were started up after reforms in one large developing country-India. Findings show that (a) the likelihood of formal business startup by business groups, relative to independent entrepreneurs, declines with market development following reforms, (b) the likelihood of formal business startup by business groups, relative to independent entrepreneurs, is greater in industries privatized by reforms and in industries with greater foreign firm presence, and (c) formal businesses started by business groups experience greater growth than formal businesses started by independent entrepreneurs.
Journal of Management Studies, 2005
The prevalent organizational form in most emerging markets is business groups. These groups have typically been viewed through a transaction cost economics perspective where they are perceived as responses to inefficiencies in the market. However, the evidence to date on what generates a positive business groupperformance relationship in such environments is not well understood. This study expands the understanding of business groups by employing the resource-based and institutional theoretical perspectives to examine how groups acquire resources and capabilities to prosper. The empirical evidence is based on over 224 business groups in the emerging economy context of China and shows that most of the endowed government resources do not help business groups to create a competitive edge. Instead, those business groups with strategic actions to develop a unique portfolio of market-oriented resources and capabilities are most likely to prosper. The results provide critical insights on the relationship between the initiation of institutional transformation and the desired outcome to be realized by organizational transformation, thus enriching our understanding of institutions and strategic choices facilitated or constrained by organizational resources in emerging economies.
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...
The 'Invisible Role' of Business Groups is Made Evident
Business Groups collect and coordinate legally autonomous firms spanning both within and across national borders. They represent a lion's share of value added generation on a world scale, and yet they received little attention in economics literature, probably due to a lack of detailed data. In Altomonte and Rungi (2013) we exploited a unique own-built dataset of proprietary linkages to find that: a) Business Groups are present in both developing and developed countries, adapting their organization according to the peculiarities of the hosting environment; b) within Business Groups, choices of integration of production activities are not independent from choices of management coordination; c) eventually, choices of management coordination reveal to be important drivers of productivity and dominate on choices of vertical integration. More in general, here we argue, data are telling us that the adoption of different organizational structures at the firm level can in part explain t...