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Business Groups in Emerging Markets: Paragons or Parasites?

Author

Listed:
  • Khanna, Tarun
  • Yafeh, Yishay
Abstract
Diversified business (or corporate) groups, consisting of legally independent firms operating in multiple markets, are ubiquitous in emerging markets and even in some developed economies. The study of groups, a hybrid organizational form between firm and market, is of relevance to industrial organization, corporate finance, development, economic growth and other domains of economic inquiry. This survey begins with stylized facts on groups around the world, and proceeds to a critical review the existing literature, which has focused almost entirely on groups as diversified entities and on conflicts between controlling and minority shareholders. Other schools of thought on the political economy of corporate groups, on groups and monopoly power, and on groups as networks are discussed next. We then proceed to promising, yet virtually unexplored, alternative lenses for viewing groups, for example, as quasi venture-capitalists or as family-based structures. The analysis points out important biases in the literature including the avoidance of a serious discussion of the origins of business groups, and the unfounded assumption that rent-seeking is the only feasible political economy equilibrium in an interaction between groups and the government. We note that the empirical tendency to use recent data implies that the vast majority of studies exploit cross-sectional variation; the absence of (long) time-series data ensures that some conceptually important issues, such as how groups shape the environment in which they operate, receive relatively little attention. Lastly, we outline an agenda for future research.

Suggested Citation

  • Khanna, Tarun & Yafeh, Yishay, 2005. "Business Groups in Emerging Markets: Paragons or Parasites?," CEI Working Paper Series 2005-1, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    • Handle: RePEc:hit:hitcei:2005-1
    Note: This Draft: August 19, 2005
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    File URL: https://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/13482/wp2005-1a.pdf
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    References listed on IDEAS

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    Cited by:

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    2. Randall Morck & Bernard Yeung, 2010. "Agency Problems and the Fate of Capitalism," NBER Working Papers 16490, National Bureau of Economic Research, Inc.
    3. Bas Hooijmaaijers, 2021. "A comparative analysis of the role of the state in Chinese, Japanese, and Korean investment in the EU," Asia Europe Journal, Springer, vol. 19(4), pages 427-444, December.
    4. Christa Hainz, 2007. "Business Groups in Emerging Markets: Financial Control and Sequential Investments," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 163(2), pages 336-355, June.
    5. Járfás Zsuzsanna, 2018. "Internationalization of Japanese Business Groups – Literature Review," Marketing – from Information to Decision Journal, Sciendo, vol. 1(2), pages 27-41, December.
    6. Ayesha Shoukat, 2020. "Political Connection and Enterprise Development (A Case Study of Nishat Business Group)," Journal of Contemporary Research in Social Sciences, Michael Laurence, vol. 2(1), pages 8-25.
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    8. Alvaro Cuervo-Cazurra, 2006. "Business groups and their types," Asia Pacific Journal of Management, Springer, vol. 23(4), pages 419-437, December.
    9. Wendy L. Tate & Lydia Bals, 2018. "Achieving Shared Triple Bottom Line (TBL) Value Creation: Toward a Social Resource-Based View (SRBV) of the Firm," Journal of Business Ethics, Springer, vol. 152(3), pages 803-826, October.
    10. repec:zbw:bofitp:urn:nbn:fi:bof-201601071000 is not listed on IDEAS
    11. Christa Hainz, 2006. "Business Groups in Emerging Markets-Financial Control & Sequential Investment," William Davidson Institute Working Papers Series wp830, William Davidson Institute at the University of Michigan.
    12. Della Piana, Bice & Vecchi, Alessandra & Cacia, Claudia, 2012. "Towards a better understanding of Family Business Groups and their key dimensions," Journal of Family Business Strategy, Elsevier, vol. 3(3), pages 174-192.
    13. Klein, Paul-Olivier & Weill, Laurent, 2015. "Is it worth issuing bonds in China? Evidence from stock market reactions," BOFIT Discussion Papers 33/2015, Bank of Finland Institute for Emerging Economies (BOFIT).
    14. Cuervo-Cazurra, Alvaro, 2007. "Sequence of value-added activities in the multinationalization of developing country firms," Journal of International Management, Elsevier, vol. 13(3), pages 258-277, September.
    15. David Ficbauer & Mária Režňáková, 2014. "Holding Company and Its Performance," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 62(2), pages 329-337.
    16. ROMMENS, An & CUYVERS, Ludo & DELOOF, Marc, 2007. "Interlocking directorates and business groups: Belgian evidence," Working Papers 2007023, University of Antwerp, Faculty of Business and Economics.
    17. Randall Morck, 2009. "The Riddle of the Great Pyramids," NBER Working Papers 14858, National Bureau of Economic Research, Inc.
    18. Diego Cueto & Lorne Switzer, 2015. "Intraday market liquidity, corporate governance, and ownership structure in markets with weak shareholder protection: evidence from Brazil and Chile," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 19(2), pages 395-419, May.
    19. Estrin, Saul & Prevezer, Martha, 2010. "A survey on institutions and new firm entry: How and why do entry rates differ in emerging markets?," Economic Systems, Elsevier, vol. 34(3), pages 289-308, September.
    20. Cueto, Diego C., 2013. "Substitutability and complementarity of corporate governance mechanisms in Latin America," International Review of Economics & Finance, Elsevier, vol. 25(C), pages 310-325.
    21. Grazia D Santangelo & Tamara Stucchi, 2018. "Internationalization through exaptation: The role of domestic geographical dispersion in the internationalization process," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 49(6), pages 753-760, August.
    22. repec:bof:bofitp:urn:nbn:fi:bof-201601071000 is not listed on IDEAS
    23. Klein, Paul-Olivier & Weill, Laurent, 2015. "Is it worth issuing bonds in China? Evidence from stock market reactions," BOFIT Discussion Papers 33/2015, Bank of Finland, Institute for Economies in Transition.

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