Edited by Masaaki Kotabe and Preet S. Aulakh
Chapter 9: Business Groups and Economic Development: A Resource-based View
9. Business groups and economic development: a resource-based view* Mauro F. Guillén This chapter provides a resource-based explanation of why the importance of diversiﬁed business groups in emerging economies differs across countries and over time. Business groups result when entrepreneurs and ﬁrms accumulate the capability to combine the necessary domestic and foreign resources for repeated industry entry. Such a capability, however, can be developed and maintained as a valuable, rare, and inimitable skill only as long as asymmetric foreign trade and investment conditions prevail. Cross-sectional and longitudinal data on a variety of emerging economies are used to test this hypothesis simultaneously with three other competing explanations drawn from the existing literature. The importance of business groups is found to grow with foreign trade and investment asymmetries. The managerial problems and opportunities surrounding the rise and decline of business groups are discussed especially in the context of the current turmoil in emerging economies. WHY DIVERSIFIED BUSINESS GROUPS? The rise of large, diversiﬁed business groups in newly industrialized countries has captured the imagination of academics, journalists, and policy makers. Students of organization and management have long been fascinated by the questions of why ﬁrms diversify into new product lines, and what forms of control are best suited to manage such diversiﬁed businesses (Hoskisson and Hitt 1990; Ramanujam and Varadarajan 1989). Historically, the rise of the large modern corporation in the United States and Western Europe followed a pattern of specialization in a core technology family and subsequent related...
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