We use and extend resource-dependence theory by analyzing how loosely-coupled organizational structures facilitate the management of political ties by business groups in emerging economies. This topic is particularly salient because business groups are a prevalent organizational form in these countries where they face both a high dependence on governments to secure key resources and a unique set of risks associated with political ties. We identify and analyze four buffering mechanisms that enable loosely-coupled business groups to protect themselves against the adverse effects of such ties. We ground and contextualize these mechanisms by relying on a longitudinal case study of the Salim Group -a very large and well-connected Indonesian business group under the Suharto regime. This study is particularly relevant in the context of the renewed interest in the study of firms' organizational structure.

We investigate whether large family groups in emerging economies can proactively change their environment. We use a coevolutionary approach, which accounts for the influence of context on the entrepreneur and for the freedom of the latter to modify it. We find that entrepreneurs can shape institutions to their advantage, illustrated by the Salim Group, which achieved growth by aligning with and influencing politicians, eventually 'morphing into an institution'. We unravel unique coevolutionary patterns, which we use to extend existing theories. Our first contribution is to initiate a new line of inquiry in coevolution theory, focusing on individual companies coevolving with institutions. Secondly, we document factors that increase and decrease strategic choice for family groups in emerging economies. Thirdly, we find that the Salim Group became part of the crony Suharto regime. The group became both an institutional entrepreneur and an entrepreneurial institution, demonstrating that companies and institutions are not necessarily mutually exclusive. Copyright (c) Blackwell Publishing Ltd 2008.

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