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

Abstract

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 perspectives. This yields a theoretical framework for understanding business groups that mobilizes concepts long-used to understand multinational enterprises: the economy's market and hierarchical transaction costs, openness, and their dynamic interactions. We then apply this framework to globalization and business group internationalization. This work leads to an overarching research agenda encompassing seemingly inconsistent prior work.

Promoting organizational diversity and preserving socioemotional wealth: can family businesses balance the two?

“…A business group (BG) is a distinct organizational setting, that is formed by a collection of legally independent firms interlinked with common insider ownership, with formal or informal economic and social ties (Aggarwal et al, 2019;Khanna and Palepu, 2000;Khanna and Rivkin, 2001;Popli and Sinha, 2014). These BGs may form horizontal, pyramidal or web of businesses structure with the affiliated companies (Dau et al, 2021). BGs typically possess the most productive combinations of local and foreign resources (technology, production and innovation) with which to expand abroad.…”

“…, 2019; Khanna and Palepu, 2000; Khanna and Rivkin, 2001; Popli and Sinha, 2014). These BGs may form horizontal, pyramidal or web of businesses structure with the affiliated companies (Dau et al. , 2021).…”

Cooperation and competition among subsidiaries in a business group: their impacts on innovation

“…Business groups are a widely-used form of organization in emerging markets, such as India and China, and they are attracting increasing scholarly attention (Dau et al , 2021; Khanna and Rivkin, 2001). Theoretically, most scholars apply institutional voids logic in explaining the existence and performance of business groups.…”

Investors’ Perception of Business Group Membership during An Economic Crisis: Evidence from the COVID-19 Pandemic

“…Business group is a form of business organization common in many regions around the world including both developed and emerging markets (Dau et al, 2021). Khanna and Yafeh (2007) define business groups as groups of "legally independent firms, operating in multiple (often unrelated) industries, which are bound together by persistent formal and informal ties" (p. 331).…”

“…Business groups are prevalent in many countries around the world (Dau et al, 2021) and South Korea (henceforth "Korea") presents interesting features for studying this type of business structure. Since the end of the Korean War, large business groups, commonly called chaebols, have dominated the Korean economy.…”