the nature of diversified business groups a research design and two case studies diversified business groups dominate the private sectors of most of the world s economies several of these economies have undergone sudden policy changes that significantly increase domestic competitive intensity the authors demonstrate how the changes in corporate scope that accompany such competitive shocks can be used to weigh the importance of different explanations for the existence of diversified business groups the authors illustrate their reasoning by studying the restructuring of two of india s largest business groups following a comprehensive post 1991 package of policy reforms the case studies also elucidate aspects of the restructuring process that should inform larger sample empirical analyses copyright 1998 by blackwell publishing ltd

you can t save alone commitment in rotating savings and credit associations in kenya abstract this article examines one reason why individuals develop and maintain local level financial savings organizations known as rotating savings and credit organizations or roscas economic theories suggest that individuals form roscas to finance the purchase of a lumpy durable good in response to intrahousehold conflict over savings or to provide themselves with insurance the article proposes an additional hypothesis for rosca participation saving requires discipline and some roscas may be formed to provide a collective mechanism for commitment in the presence of time inconsistent preferences data from 70 roscas located in western kenya indicate that the commitment hypothesis is plausible and broadly consistent with the design and patterns of participation in these roscas as many rosca participants put it you can t save alone

oligarchic family control social economic outcomes and the quality of government wealthy families as opposed to small public shareholders characterize ownership of the large corporate sectors of many countries around the world this paper shows that greater oligarchic family control over large corporations is associated with worse social economic outcomes it also correlates with more bureaucratic and more interventionist governments and less developed financial markets further tests show that red tape price controls and the lack of shareholder rights protection are the paramount factors relating to the extent of family control of large firms these results are broadly consistent with olson and others who argue that economically entrenched wealthy insiders pursue rent seeking activities to preserve the status quo and that this increases corruption and impedes growth

gender norms in financial markets evidence from kenya abstract the role of institutions rules and norms in markets is increasingly recognized in development discourse this paper considers the role of gender relations for rules and norms in financial markets using evidence from central kenya it develops a framework for establishing the influence of gender on the demand for and access to financial services so explaining the gender differentiated use of rotating savings and credit associations roscas it first analyzes intrahousehold norms related to income and expenditure flows and their management so identifying gendered patterns of demand second by conceptualizing financial intermediaries as operating within rules and norms it allows the influence of gender relations on access to financial services to be more systematically investigated

firms markets and the state institutional change and manufacturing sector profitability variances in india we assess absolute magnitudes relative importance and intertemporal differences in firm industry and business group effects in explaining the variance of indian manufacturing firms profitability over the 26 year period between 1980 1981 and 2005 2006 we stratify the data by institutional phases to place emphasis on the role of changing institutional factors in an emerging economy first as a regime of command and control transits to partial liberalization between 1985 and 1991 and then to an open competitive market economy after 1991 thereafter financial reforms occur followed by legal reforms we find that liberalization significantly affects and alters the relative importance of firm industry and group effects firm effects are always important whether in a command and control regime with benefits accruing from protectionism and political rent seeking or in liberalized periods where firm specific capabilities and dynamic efficiencies are valued industry effects are significant in the command and control regime when mandatory sector placement benefits firms in industries with superior profits and in the liberalized period when the choice of the industry segment in which to operate is open to firms thereafter industry effects dissipate business group effects matter in explaining profitability variances group effects magnitudes however do not change significantly over time

two faces effects of business groups on innovation in emerging economies this paper shows that business groups in emerging economies exert dual effects on innovation while groups facilitate innovation by providing institutional infrastructure groups also discourage innovation by creating entry barriers for nongroup firms and thereby inhibit the proliferation of new ideas this pattern reflects an evolutionary process in which the interplay of the availability of innovation infrastructure and variety of ideas influences the level of innovation in an industry we show that group market share has an inverted u impact on innovation in industrial sectors of both korea and taiwan during the 1981 1995 period institutional differences between korea and taiwan in terms of market structure and industrial policies lead to different innovation thresholds the point at which the marginal costs of increasing group share begin to dominate the marginal benefits in the two countries

organizational efficiency and monopoly power the case of french industrial groups abstract in this paper we examine the respective roles of efficiency and of market power considerations in explaining why industrial groups are the predominant form of organization in specific industries our econometric analysis of french industrial groups suggests that administrative and organizational efficiency is an adequate explanation for the existence of these groups and that rivalry between groups differently integrated and diversified is more likely to be the case than collusion

organizational choices for efficiency and market power abstract we examine the role of strategic consideration in the choice of organizational structures characterizing large corporations these considerations bridge the gap between the research on transaction costs and organizational forms and the research on strategic entry deterrence and threats an illustrative model is presented and we derive propositions which look promising for providing empirical benchmarks

international search behavior of business group affiliated firms scope of institutional changes and intragroup heterogeneity this paper investigates whether and when affiliation to business groups enables or constrains firms international search behavior during institutional transitions we theorize that given the unique structure and complex form of business group organizations the search behavior of affiliated firms is influenced by the degree of misalignment in outlook at the group and affiliate levels of management we identify the scope of institutional changes business group attributes and affiliate characteristics as sources of such misalignment the results from panel data on 298 firms from the indian pharmaceutical industry for the 1992 2007 period show that the constraining effects of business group affiliation are observed only when institutional changes are specific to the affiliates industry and not when broad institutional changes affect the business group as a whole moreover we observe heterogeneity in the search behavior of group affiliated firms first the degree of misalignment is greater in the case of affiliates belonging to older business groups and those that are more distant in terms of age and industry since the group s founding second by contrast and suggesting an alignment in outlook we find that affiliated firms that occupy a prominent position within a group or industry are able to bargain for and receive attention and support from the business group to undertake international search our findings have implications for research on the role of business groups in a changing institutional context and for the strategic adaptation of firms embedded in complex organizational and institutional settings

how much does country matter an analysis of firms growth options recent international strategy research emphasizes the importance of understanding the effects of geographic location on firms strategies and performance outcomes we contribute to this research by providing empirical evidence that the interplay of country and industry effects matters substantially in explaining the variation in the value of growth options of firms based in different countries our results show that country industry effects are the second largest source of variation following firm effects while industry and country effects are relatively small when considered in their own right that valuable growth options are tied to country and industry interactions has important implications for international strategy research and practice

comparing virtue consequentialist and deontological ethics based corporate social responsibility mitigating microfinance risk in institutional voids due to the nature of lending practices and support services offered to the poor in developing countries portfolio risk is a growing concern for the microfinance industry though previous research highlights the importance of risk for microfinance organizations not much is known about how microfinance organizations can mitigate risks incurred from providing loans to the poor in developing countries further though many microfinance organizations practice corporate social responsibility csr to help create economic and social wealth in developing countries the impact of such csr practices remains an underdeveloped area of inquiry we use a normative ethics lens to develop an ethics based csr theory that differentiates between three forms of ethics based csr virtue consequentialist and deontological we argue that while all three forms can help mitigate risk virtue ethics based csr is potentially the most useful form of csr toward mitigating microfinance portfolio risk we test our hypotheses using a sample of microfinance organizations from across the world our findings suggest that virtue ethics based csr is not just an important philosophical paradigm it can actually help mitigate microfinance portfolio risk when implemented in practice

rotating savings and credit associations credit markets and efficiency this paper examines the allocative performance of rotating savings and credit associations roscas a financial institution which is observed world wide we develop a model in which individuals save for an indivisible good and study roscas which distribute funds using random allocation and bidding the allocations achieved by the two types of rosca are compared with that achieved by a credit market and with efficient allocations more generally we find that neither type of rosca is efficient and that individuals are better off with a credit market than a bidding rosca nonetheless a random rosca may sometimes yield a higher level of ex ante expected utility to prospective participants than would a credit market i introduction rotating savings and credit associations roscas are a widely observed institution for financial intermediation they are found all over the world particularly in developing countries and have heretofore received scant attention from economists this paper and its companion piece besley coate and loury 1993 constitute a first attempt to analyse their economic role and performance roscas come in two main forms the first type allocates funds randomly in a random rosca members commit to putting a fixed sum of money into a pot for each period of the rosca s life lots are drawn and the pot is randomly allocated to one of the members in the next period the process repeats itself with each previous winner excluded from the draw the process continues until each rosca member has received the pot once at this point the rosca is either disbanded or begins over again individuals may also form a bidding rosca in which the pot is allocated via a bidding procedure the individual who

business group affiliation and firm search behavior in india responsiveness and focus of attention this paper investigates the effects of organizational form on problemistic search we contrast how indian firms affiliated with business groups and unaffiliated firms evaluate performance and react by adjusting their internal technology search and external market search we propose that compared with unaffiliated firms business group affiliated bg affiliated firms are more externally oriented in setting aspiration levels and more likely to respond to low performance in the market domain we find support for an external orientation of bg affiliated firms and find that group affiliation determines the responsiveness to performance feedback in different search domains the findings suggest a need to add considerations of organizational form and governance to the theory of organizational search

on the launching of a new currency this paper studies the appropriate way of launching a new fiat currency within a dual currency search theoretic framework we demonstrate that legal tender laws may not be sufficient to guarantee the acceptability of the new currency and that the old currency may continue to circulate if the enforcement power of legal tender laws is weak and the fraction of individuals endowed with the new currency is too low the possibility of converting the old currency into the new one can ease the transition to the new currency only if it is combined with strict legal tender laws finally a network externality may generate inefficiencies in the decision to switch to the new currency

the governance structure of the japanese financial keiretsu abstract we rationalize the cross holdings of debt and equity within the japanese keiretsu as a contingent governance mechanism through which internal discipline is sustained over time the reciprocal allocation of control rights supports cooperation and mutual monitoring among managers through a coalition enforced threat of removal from control in financial distress this threat is less effective and the governance mode shifts to hierarchical enforcement under main bank leadership the model is consistent with the capital structure the distribution of claims the extent of intragroup trading and patterns of investor intervention within the groups

does corporate strategy matter a revisionist view that corporate strategy does not matter has gained considerable influence in recent years this view largely stems from empirical results of early variance decomposition studies that found negligible corporate effects associated with profitability differences between businesses our analysis of the variance decomposition literature shows this view to be incorrect not only do the studies as a group show that factors at the corporate level of organizations contribute to profitability differences but also evidence suggests that factors specifically associated with corporate strategy contribute to corporate effects corporate strategy in fact does matter copyright 2001 john wiley sons ltd

state capitalism and performance persistence of business group affiliated firms a comparative study of china and india business groups emerged in developing economies through direct or indirect support from the state in order to overcome a variety of institutional voids and or to further state objectives of economic growth however the efficacy of this organizational form and its associated governance structures have been debated given the dual possibility of business groups to allocate resources among its affiliates for cross subsidization or winner picking we argue that elements of the institutional environment comprising of the state s approach to organizations and the political context of these interactions vary across countries thereby influencing business groups resource allocation strategies and affecting the persistence of affiliated firms superior performance contrasting the types of state capitalism in china and india we develop and test our hypotheses we find that the effect of business group affiliation on firms superior performance persistence is stronger in a state led system of state capitalism e g china than in a co governed system e g india and that this divergence of the business group effect is weakened as affiliated firms internationalize our findings have implications for understanding business groups across institutional contexts and the influence of diversity in the types of state capitalism on organizational strategies

the susan b anthony dollar and the theory of coin note substitutions this paper analyzes governments attempts to replace circulating notes with coins it argues that because of network externalities in currency systems a government cannot simply offer a new coin such as the susan b anthony dollar to the public and expect it to circulate even when the coin note substitution would benefit the economy for such a substitution to succeed a government may need to force the adoption of the coin by withdrawing the competing bill from circulation copyright 1994 by ohio state university press

credit markets in northern nigeria credit as insurance in a rural economy this article addresses the issues of imcomplete markets and imperfect information in the context of credit markets in rural northern nigeria in much recent theoretical literature the problems of moral hazard and adverse selection are assumed to be decisive for the organization of agrarian institutions in contrast it is found that in the four villages surveyed credit transactions take advantage of the free flow of information within rural communities information asymmetries between borrower and lender are unimportant and their institutional consequences the use of collateral and interlinked contracts are absent credit transactions play a direct role in pooling risk between households through the use of contracts in which the repayment owed by the borrower depends on the realization of random production shocks by both the borrower and the lender

is tourism firm competitiveness driven by different internal or external specific factors new empirical evidence from spain abstract the quest to understand the multilevel antecedents of competitiveness has led to a separation of approaches on one side of the question are the environment theories that analyze the structural characteristics of the general and competitive environment on the other side are the resource based view and its extensions that highlight firm specific resources and capabilities as the main basis of firms competitiveness however in recent years the nature of competition and shifting economic conditions have given rise to new theoretical approaches that complement the assumptions underlying both environmental and firm theories specifically this study contributes by examining the regional environment effect the district effect and the strategic group effect through a study of 364 spanish tourism firms this research explores the relative importance of distinct external forces such as the general environment or country effect the regional effect the competitive environment or industry effect the district effect and internal factors such as the firm s tangible resources capabilities and strategy selection the results demonstrate that firms capabilities are more important than environment effects and tangible resources

filling or abusing the institutional void ownership and management control of public family businesses in an emerging market despite increased attention given to family firms in the theory of organization and management the value of family governance in emerging markets is not clearly understood we draw insights from agency and institutional economics perspectives to address the debate on whether family governance fills or abuses the void left by weaker market and legal institutions we propose a dual focus on the pattern of family control and weak institutions to reconcile these opposed assessments we analyze how various combinations of family control over ownership strategy and operations yield different benefits and costs for the operational performance of firms in the absence of strong market and legal institutions the uneven development of market institutions across industries and the impact of independent directors reinforce the importance of separating different patterns of family control we find support for our hypotheses when tested on a data set consisting of all publicly listed firms in taiwan between 1996 and 2005 our study contributes to a deeper understanding of family businesses in emerging markets highlights the importance of weak institutions in shaping relative agency costs and illuminates the differential effects of independent directors

capital markets and firm organization how financial development shapes european corporate groups we investigate the effect of financial development on the formation of european corporate groups because cross country regressions are hard to interpret in a causal sense we exploit exogenous industry measures to investigate a specific channel through which financial development may affect group affiliation internal capital markets using a comprehensive firm level data set on european corporate groups in 15 countries we find that countries with less developed financial markets have a higher percentage of group affiliates in more capital intensive industries this relationship is more pronounced for young and small firms and for affiliates of large and diversified groups our findings are consistent with the view that internal capital markets may under some conditions be more efficient than prevailing external markets and that this may drive group affiliation even in developed economies this paper was accepted by bruno cassiman business strategy

toward an economic model of the japanese firm i owe a great deal to professor moses abramovitz who suggested that i write this article i appreciate his constant encouragement and guidance which aided me throughout its preparation i am also indebted to three anonymous referees of the journal and to professors ryutaro komiya and michael riordan for their critical comments and helpful suggestions needless to say i am solely responsible for the views expressed in this paper

planning in ambiguous contexts the dilemma of meeting needs for commitment and demands for legitimacy this paper argues that ambiguity of context manifested in pressures for legitimacy and commitment affect planning processes ambiguity arises from multiple conflicting constituencies and the lack of direct control over resources using nonprofit and entrepreneurial organizations as examples of organizations facing ambiguous contexts we examine their planning practices to develop an understanding of the relationship between commitment legitimacy and planning from this analysis we articulate a managerial dilemma the need to use informality and vagueness to gain commitment from diverse interests and the need to demonstrate formalization of managerial practices to acquire legitimacy from critical resource suppliers using elements of this dilemma we present a new planning framework for organizations in ambiguous contexts that recognizes planning as a strategy for resource acquisition rather than a strategy for resource allocation

the determinants of credit access and its impacts on micro and small enterprises the case of garment producers in kenya abstract there are diverse sources of credit for micro and small manufacturing enterprises mses in developing countries ranging from relatives and friends rotating savings and credit associations roscas micro finance institutions and commercial banks using a unique set of data on mses in garment clusters in nairobi this study attempts to identify the determinants of access to different credit sources and their impacts on firm profitability and growth the results of the regression analysis demonstrate that factors determining access to credit are often different from those affecting enterprise performance indicating limited impacts of credit access on enterprise performance

markets vs management what drives profitability this study addresses the issue of the relative degree of variance in roa accounted for by industry corporate and sbu effects while controlling for the business cycle and the interaction between the business cycle and industry two key articles schmalensee 1985 and rumelt 1991 are discussed in detail research results on a recent data base compustat using variance components analysis varcomp are presented that not only confirm most of the rumelt 1991 findings but also suggest the existence of a corporate effect heretofore undetected

what does a small corporate effect mean a variance components simulation of corporate and business effects in a widely cited paper rumelt 1991 presents estimates of the relative influence of corporate business unit and other influences on business unit profitability and finds the corporation explains almost none of the variability in business unit profitability using a monte carlo simulation we examine the relation of variance component magnitudes to other indicators of the importance of a particular effect our results demonstrate that variance components can be an extremely nonlinear indicator of importance we also question whether rumelt s corporate effect represents the possible contributions of corporate strategy to business unit performance this addresses a puzzle raised by rumelt 1991 concerning the small effect of corporations in explaining performance and suggests that rumelt s findings should not be seen as demonstrating the insignificance of corporate strategy 1997 john wiley sons ltd

the signaling effect of corporate social responsibility in emerging economies what signals do firms in emerging economies send to stakeholders when they adopt corporate social responsibility csr practices we argue that in emerging economies firms that adopt csr practices positively signal investors that their firms have superior capabilities for filling institutional voids from an institution based view we hypothesize that the institutional environment moderates the signaling effect of csr on a firm s financial performance based on a sample of firms from ten asian emerging economies we find a positive relationship between csr practices and financial performance this positive relationship is stronger in the less developed capital market than in the more developed one the financial benefits of csr practices are also more salient in the low information diffusion market than in the high one we emphasize that signaling theory and the institution based view can jointly contribute to the csr literature

social capital geography and survival gujarati immigrant entrepreneurs in the u s lodging industry immigrant entrepreneurs often rely on their groups local social capital in their new home market to establish and maintain their businesses in particular immigrant entrepreneurs with few resources of their own receive help from those possessing more resources supporting these arguments using the empirical setting of gujarati immigrant entrepreneurs in the lodging industry we find that the likelihood of survival of an immigrant entrepreneurs hotel increases when surrounded by higher counts of branded hotels representing high resource establishments owned by individuals from their ethnic group but is unaffected by unbranded motels representing low resource establishments owned by members of their ethnic group or by branded hotels owned by individuals from other ethnic groups these results isolate and reinforce the importance of social capital not only for immigrant entrepreneurs but also more generally for any entrepreneurs belonging to ethnic professional religious or social groups

probing theoretically into central and eastern europe transactions resources and institutions since the 1990s central and eastern europe cee has provided unique societal quasi experiments which represent opportunities to test the applicability of existing theories in international business and management studies and to develop new ones specifically three lines of theorising have been advanced 1 organisational economics theories 2 resource based theories and 3 institutional theories for each of these theories we discuss how they contribute to the understanding of key issues such as entry strategies of foreign investors restructuring strategies of local incumbents and entry and growth strategies of entrepreneurs on this basis we assess how cee research has influenced the overall trajectories of theory development cee research has in particular highlighted the importance of contextual influences such as institutions thus scholars have aimed at incorporating institutions into theories such as organisational economics theories and resource based theories and advancing an institution based view of business strategy as a complementary perspective we outline how future research in cee and other emerging economies may advance this research agenda further

rotating saving and credit associations in rural east africa abstract theoretical arguments suggest that rotating savings and credit associations roscas improve welfare by reducing the utility cost of saving for a consumer durable data from two communities in east africa reveal major differences in the incidence of roscas participation arising conjecturally from differences in the relative depths of market penetration and perceptions about the efficacy of alternative strategies for compensating for failures in the financial markets participation in roscas in these communities is partly driven by the need to raise school fees meet medical expenses and buy food roscas funds are also used to start or promote small businesses and acquire assets including livestock households owning smaller landholdings and those enjoying higher expenditures are more likely to participate in roscas the number of schemes in which a household participates is closely related to the main uses of roscas funds while contributions and value of receipts are determined by total expenditures and frequency of turns respectively

rosca composition and repayment evidence from taiwanese bidding roscas abstractrotating savings and credit associations roscas are widespread and remain a key financial management tool for poor individuals we analyse data from taiwanese bidding roscas and focus on how social relationships within the group influence contribution behaviour and rosca failure we find that less socially connected participants were more likely to receive the pot early in the cycle which increases their incentive to default yet contrary to accepted wisdom groups including more outsiders were not more likely to experience repayment problems our results highlights how bidding roscas can be a versatile device that provide profitable savings while allowing for emergency credit

business groups in a market economy abstract the purpose of this paper is to examine the nature and significance of the interfirm relationship called the business group first the nature of the japanese business group is discussed it is then pointed out that the business group is not a phenomenon unique to japan and an effort is made to explain the significance of the business group in the context of a market economy using the williamsonian approach to questions of internal organization and the market finally the relationship between the input output relationship of the firms and their group affiliation is tested

does group affiliation improve firm performance the case of chinese state owned firms this paper analyses the performance of state owned business groups in china group affiliation can be important for economic policy evaluation since the chinese government promotes the formation of business groups as a first step in the process of reforming state enterprises into modern corporations the analysis applies a range of econometric techniques to a sample of 657 chinese state owned firms in 2005 and shows that group affiliation has a robust positive effect on performance group affiliation may in this respect provide a successful alternative to large scale privatisation

directly unproductive profit seeking dup activities this paper propses directly unproductive profit seeking dup activities as a general concept that embraces a wide range of recently analyzed economic activities including the subset of rent seeking activities considered by krueger it then proceeds to provide a synthesis and generalization of the welfare theoretic analysis of such activities by developing a fourfold categorization of cases depending on the levels of distortions before and after the dup activity thus a unification and overview of the subject are achieved

internalization advantage and subsidiary performance the role of business group affiliation and host country characteristics we extend internalization theory by examining the contingencies associated with market internalization and its impact on foreign subsidiary survival based on a sample of 6170 subsidiary year observations in 63 countries belonging to 292 mncs from korea during 1995 2013 we find that greater product and labor market internalization have weaker impacts on the survival of subsidiaries operating in countries with more developed institutional environments but stronger for subsidiaries of mncs affiliated with business groups the impact of business group affiliation is further dependent on host country institutional development and the diversification and size of the business group

capital market information and industrial performance the role of west german banks in orthodox theory external capital markets play a dual role supplying various forms of investment finance and disciplining firms which are inefficient or fail to pursue profit goals an extensive literature speaks of the efficiency of external capital markets meaning that firms can make production investment decisions and investors can choose among the securities that represent ownership of firms activities under the assumption that security prices at any time fully reflect all available information fama i970 1 however this concept of efficiency is purely technical it depends critically on what information is available and we know there are problems of appropriability and failure in information markets deriving ultimately from certain peculiarities of information as a commodity arrow i962 thus another growing literature focusses on problems of achieving equilibrium in markets where agents are imperfectly or asymmetrically informed amongst other things this literature shows that informational failures of the kind in question can lead to capital rationing in loan and credit markets and the use of strict collateral requirements as screening devices jaffee and russell i976 stiglitz and weiss i98i cable and turner i983 these may then be expected to affect the efficiency of individual firms and the system as a whole capital shortage implies that some profitable investment opportunities are foregone and production choices may also be distorted by the need to satisfy additional financial constraints contrived to elicit signals of creditworthiness of the firms undertaking them similarly the disciplining role of external capital markets can be impaired by information impactedness williamson i975 and the costs of mobilising and giving effect to shareholders preferences thus in the principal agent framework developed by jensen and meckling i976 and fama i980 the degree of constraint on managerial pursuit of non profit goals as posited by managerial theorists depends on the transactions costs of stock owner intervention the result is an optimal degree of departure from cost minimising profit maximising behaviour determined by the level of transactions costs institutional factors which affect the way information is distributed amongst agents can therefore have an important bearing on allocative and technical efficiency and the west german system of industrial finance provides an in

tobin s q and the importance of focus in firm performance using tobin s q as a measure of performance we seek to estimate the relative importance of industry focus and share effects in determining firm performance our methods are analogous to those of richard schmalensee and like him we find that industry effects account for the majority of the explained variance however we also find that firm effects exist in the form of focus effects that is narrowly diversified firms do better than widely diversified firms we interpret this finding as consistent with profit maximization by firms with different factor endowments

institutional voids or organizational resilience business groups innovation and market development in latin america summary the paper compares the innovativeness of group affiliated firms gafs and standalone firms safs and it investigates how country specific institutional factors affect the group innovation relationship the paper analyzes the contrasting predictions of two competing views the institutional voids and the organizational resilience theses the empirical analysis focuses on a large sample of firms in latin america in line with the organizational resilience thesis the results point out that the superior innovation performance of gafs is stronger for national economies with more efficient financial legal and labor market institutions

capital market development and firm restructuring during an economic shock we conceptualize capital markets in terms of resource access and governance and argue that more developed capital markets facilitate firm restructuring through more effective provision of capital and governance of transactions we then develop a contingency model that specifies that the effects of capital market development on restructuring vary by 1 types of restructuring 2 the nature of the economic environments and 3 firms access to resources we evaluate a broad range of restructuring actions among independent firms and business group affiliates in singapore and south korea before and during the economic shock of 1998 1999 results support our predictions of the impact of capital market development and of contingencies and highlight the value of incorporating an external capital markets perspective to complement internally focused theoretical explanations for firm restructuring

risk capital financing and the separation of ownership and control in business groups abstract this paper analyses business groups composed of legally independent firms connected through a network of cross shareholdings a model which allows to calculate the value of the firms of a group and the integrated ownership shares held by an outside stockholder is described a taxonomy for the collection of risk capital generalizing the one which applies for a single firm is proposed the connection between the process of raising risk capital and the separation of ownership from control in business groups is demonstrated and given a formal mathematical description empirical evidence relating to the amount of risk capital collected by italian business groups in the 80s and to the extent of the divorce between ownership and control is also provided

corruption and development a review of issues in this paper we start with a discussion of some of the different denotations of the problem of corruption we then consider the ways in which the damaging consequences of corruption operate in a developing economy while not ignoring its possible redeeming features in some cases we pursue the question of why corruption is perceptibly so different in different societies and also persistent finally we examine the feasible policy issues that arise in this context

new frontiers in international strategy this paper studies a new frontier in the understanding of international strategy is to explore it we propose the analogy of the ecology of firms and places as a way to emphasize that the real problem is the colocation of different places with different types of firms locations are in fact the distinctive content of international business strategy we deal with this problem with four different perspectives first differences across countries must be addressed with integrative frameworks able to represent the multidimensionality of semiglobalization or intermediate states between total localization and total integration second differences in the development of intermediary markets in a particular place influence firm positioning and industry structure in that place but their impact also crosses different places and it is endogenous to the ecology of places and firms in a systemic integrative way that makes simplifications extremely risky in the design of competitive strategy in an international context third places firms and strategies form a complex ecology that can be studied with a framework focused in understanding the geography strategy link that incorporates different levels of analysis new economic actors and a set of primitives finally firms around the ecology of places face the challenge of developing strategies and business models to serve the majority of humanity today excluded from world trade it is a fundamentally different way to think about the ecology of places and firms overall we present an intriguing new frontier with the capacity to impact both research and practice in the field of international strategy based in understanding the interplay among firms and places

the suppression of state banknotes a reconsideration george selgin it is generally believed that congress in imposing a prohibitive 10 tax on state banknotes in 1865 made the public better off by doing away with inferior brands of currency while simultaneously helping finance the civil war by stimulating bond sales to national banks in truth the tax served neither purpose the true purpose of the 10 tax was not to enhance bond sales or to improve the quality of the currency but to offset the inflationary effects of greenbacks and national banknotes in the long run the public might have been better off had state banks retained their right to issue currency jel g21 n21 let us have a bank currency that will be recognized in the next town a currency that will be recognized in new york philadelphia boston new orleans chicago or any other part of the united states representative john f farnsworth illinois april 28 1864 congressional globe 38th congress 1st session 1934 i f the national banks with the great advantages which they enjoy cannot compete successfully with the state banks it simply shows that the latter subserve better the interests of the business community and should not be destroyed representative francis kernan new york february 16 1865 congressional globe 38th congress 2d session 833 i introduction during the civil war a 10 tax was placed on any issuance of notes of state chartered or incorporated banks deliberately forcing state banks out of the paper currency business and making the regulation and issuance of currency a prerogative of the federal government and of federally chartered national banks this paper reexamines the congressional decision to suppress state banknotes american monetary historians have conventionally viewed the decision as reflecting 1 the public s intolerable disgust with an unregulated currency hammond 1957 11 compare dunbar 1922 220 and 2 the government s desire to boost the demand for national bank charters so as to expand the market for its debt e g hughes and cain 1998 373 74 dowd 1992 230 i plan to argue that neither view accounts adequately for the 10 tax the first view in particular begs important questions that have gone unaddressed if state banknotes were clearly inferior to national banknotes why was a prohibitive tax needed to drive them out of circulation just how were consumers supposed to benefit from having their choices restricted i explore several responses to these questions and ultimately conclude that consumers considered some state banknotes to be just as desirable as their national bank counterparts i argue that the 10 tax served not to overcome any banknote market failure but to force the withdrawal of relatively high quality state banknotes i then proceed to show that the tax was not needed to secure adequate bond sales to national banks proponents of the tax were striving not to increase the number of applications for national bank charters but to limit growth in the aggregate money stock i conclude by suggesting that because state banks of issue could have accommodated market demands that national banks failed to satisfy consumers might have been better served had state banknotes been allowed to survive ii the chase plan when the first shots of the american civil war were fired at fort sumter the paper currency of the united states consisted of over 200 million in banknotes issued by nearly 1 500 state chartered banks the quality of these banknotes varied according to their issuers management and regulatory environment 1 some banknotes circulated at par only near their source and at fluctuating discounts elsewhere so that persons carrying notes from state to state risked incurring currency exchange losses of the sort borne by international travelers today a few were subject to especially heavy discounts or were refused altogether because their issuers solvency was in question

estimating the performance effects of business groups in emerging markets business groups confederations of legally independent firms are ubiquitous in emerging economies yet very little is known about their effects on the performance of affiliated firms we conceive of business groups as responses to market failures and high transaction costs in doing so we develop hypotheses about the effects of group affiliation on firm profitability affiliation could either boost or depress firm profitability and members of a group are likely to earn rates of return similar to other members of the same group using a unique data set compiled largely from local sources we test for these effects in 14 emerging markets argentina brazil chile india indonesia israel mexico peru the philippines south africa south korea taiwan thailand and turkey we find evidence that business groups indeed affect the broad patterns of economic performance in 12 of the markets we examine group affiliation appears to have as profound an effect on profitability as does industry membership yet strategy scholars have a much clearer grasp of industries than of groups moreover membership in a group raises the profitability of the average group member in several of the markets we examine this runs contrary to the wisdom conventional in advanced economies that unrelated diversification depresses profitability overall our findings suggest that the roots of sustained differences in profitability may vary across institutional contexts conclusions drawn in one context may well not apply to another copyright 2001 john wiley sons ltd

strategy structure and performance of korean business groups a transactions cost approach the authors use the transactions cost approach to analyze the diversification strategy and the resulting structure chosen by korean business groups to overcome market imperfections prevalent in developing countries business groups that have multidivisional struc ture are thought to show superior economic performance because such s tructure reduces transactions costs arising from organizational failure also major korean business groups have a relational structure showing both vertical integration and the characteristics of the conglomerate the authors modify the model of r e caves and m uekusa 1976 used for japan to obtain the empirical result tha t group affiliated firms show superior economic performance copyright 1988 by blackwell publishing ltd

the debt wish rent seeking by business groups and the structure of corporate borrowing in india business groups play an important role in emerging economies the transactions cost perspective which has dominated our understanding of such groups argues that the emergence of business groups is a natural response to market failures in developing countries in this paper we propose an alternate theoretical perspective the rent seeking view that takes these groups as engaging in coordinated lobbying for the capture of rents created by governments we develop and implement an empirical strategy to test for the rent seeking view drawing from the property rights theory of corporate finance we find strong empirical support for the rent seeking view using a large cross sectional data set of firms in india

the persistence and implications of japanese keiretsu organization this paper examines two important research questions 1 to what extent have recent economic and regulatory changes influenced the japanese inter corporate network 2 have the patterns of firm performance fostered by the japanese inter corporate system remained stable or has there been an evolution to more north american performance profiles using hierarchical regressions to compare patterns of networking and firm performance with data from the periods 1987 to 1991 and 1992 to 1997 we find little evidence to support the existence of significant changes in the patterns and implications of japanese industrial organization we conclude that the keiretsu system remained strongly in place throughout the first half of the 1990s nevertheless we suggest that the continued move toward globalization of capital markets in japan and ongoing regulatory change may potentially impact networking and performance implications in the 21st century

historical origins of firm ownership structure the persistent effects of the african slave trade this paper uses evidence from the historical african slave trade to extend prior theory linking modern firm ownership structure to institutions and social capital we argue that institutions and so

the economics of rotating savings and credit associations supported by the center for energy policy studies m i t and the japanese corporate associates program at the kennedy school of government

imperfect information screening and the costs of informal lending a study of a rural credit market in pakistan many governments have perceived the rural moneylender as usurious this article takes a first step toward directly testing the validity of this view in a study of services costs and charges of fourteen informal market moneylenders and their clients in chambar pakistan the article examines whether the high implicit interest rates charged reflect the actual costs of operating in that market estimates of the resource costs incurred by informal lenders for screening pursuing delinquent loans overhead and cost of capital including unrecoverable loans suggest that lenders charges are equal to their average cost of lending but exceed their marginal cost this finding is consistent with the view that the informal credit market is characterized by excess capacity and monopolistic competition in the presence of imperfect information

anonymous market and group ties in international trade abstract history provides many examples of cohesive groups dispersed over several countries who exploit the ties between their members to gain entry into foreign markets the phenomenon is well established empirically and noteworthy because it suggests the importance of informational barriers in international transactions we present a simple model where output is produced through a joint venture and agents have complete information domestically but are unable to judge the quality of their match abroad a minority of individuals otherwise identical to all others can exploit complete information in international matches between group members if they so choose group ties increase aggregate trade and income but hurt the anonymous market because they deprive it disproportionately of the group s more productive members

japanese firms and the decision to invest abroad business groups and regional core networks the determinants of the decision by japanese firms to set up manufacturing plants in southeast asia europe and north america are analyzed using micro data on the behavior of firms in the electronics industry while firm specific intangible assets based on r d and marketing efforts are positively related to the decision to invest in europe and north america investment in southeast asia is mainly related to human resources and driven by interfirm ties within horizontal and vertical business groups the empirical results suggest that membership of horizontal keiretsu relaxes liquidity constraints while the manufacturing networks of horizontal and vertical keiretsu in southeast asia facilitate the establishment of manufacturing plants by member firms copyright 1996 by mit press

a multilevel analysis of the performance implications of excess control in business groups a central premise of business groups is that controlling shareholders seize disproportionate control in excess of their ownership as a means of becoming and remaining competitive we reexamine this axiom by exploring the relationship between excess control rights and performance outcomes in business groups using a sample of 106 taiwanese business groups we confirm that the effects of excess control in business groups are double edged such that group level excess control exhibits an inverted u shaped relationship with group performance at the same time results show that when group level excess control is high there is a stronger negative relationship between firm level excess control and firm performance moreover the study indicates that the detrimental effect of excess control is less pronounced in business groups that are governed by family members or by professional managers findings offer a far deeper view than previously proposed on the excess control phenomenon in business groups and the ne

payment transactions instruments and systems a survey the payments literature ranges from theoretical general equilibrium models to practical payment issues related to the day to day operation of various national networks for the transfer of money it is an area where economic theory and institutional structure are often closely intertwined and it is currently undergoing significant change shifting from costly paper based systems to technologically advanced electronic payments the extant literature is surveyed here with the aim of integrating the various strands of payment research which have been largely pursued separately in addition we present newly available data to illustrate and investigate a number of underdeveloped areas in this literature 1998 elsevier science b v all rights reserved

the thai rural credit system public subsidies private information and segmented markets thailand has sought to increase farmers access to credit by government intervention in 1966 it created a government agricultural bank to lend solely to farm households and beginning in the late 1970s it required commercial banks to lend heavily in the rural sector either directly or by making deposits in the agricultural bank the result was an enormous expansion of credit in the rural sector but because formal lenders were either unable or unwilling to solve the information problems involved in the broad range of rural credit transactions the informal credit sector wbich charged interest rates many times higher than the formal sector continued to thrive using household surveys and surveys of moneylenders this article provides a detailed analysis of the ways in which lenders in the informal sector have solved the information problems of providing credit the authors argue that the informal sector is competitive and that high interest rates reflect high information costs not the scarcity of funds this article reports on a set of investigations of the impact of thai government policies to expand bank lending in the rural sector their purpose was to increase farmers access to capital and reduce their dependence on informal lenders fifteen years after the principal government measures were introduced we hope to be able to answer several questions how has the expansion of formal sector lending affected the informal sector did the increase in the supply of formal credit reduce the business of informal lenders and lower interest rates in the informal market what has been the performance of the formal credit system in terms of coverage efficiency and incidence lacking time series data on the informal sector we cannot give a direct answer to these questions but we can with confidence say that the informal lenders are still very much alive by examining the behavior of the rural credit market at the present time we can throw an indirect light on what transpired over the last fifteen years our main findings are the following on the basis of our 1984 85 survey of households and moneylenders

business groups and social welfare in emerging markets existing evidence and unanswered questions abstract this paper reviews existing studies of the role of emerging market business groups a ubiquitous but poorly understood organizational form i first suggest that understanding the definition of business groups is itself an interesting albeit under studied research issue i then argue that the existing evidence suggests that the performance effects of group affiliation are large and generally positive there is substantial evidence that part of this is due to welfare enhancing functions originating in the idea that groups substitute for missing outside institutions but that part is also due to welfare reducing minority shareholder exploitation evidence is lacking on the extent to which groups facilitate rent seeking or the exercise of market power evidence is also lacking on the extent to which groups hamper the future development of markets the paper identifies areas where research is needed before current competition policy experiments in countries like china india and korea can be evaluated

the validity of profits structure studies with particular reference to the ftc s line of business data the simple proposition that consumerdamaging collusion is more likely to occur when there are fewer competitors has given rise not only to legal restrictions of economic activity thought to restrict output but also to an enormous amount of empirical work attempting to relate market concentration to the exercise of monopoly power most such studies measured market structure by an index of concentration for example four firm concentration or herfindahl and performance by accounting profit for example net profit divided by assets or price cost margins sales less direct costs divided by sales from the positive statistically significant correlations often found between greater concentration and profit with other factors presumably accounted for some researchers conclude that increases in concentration are anticompetitive and that concentration therefore is bad the concentration profits studies have been criticized essentially on two grounds one is that the positive relationship is not indicative of collusive behavior in particular oliver williamson 1968 john mcgee 1971 harold demsetz 1973 1974 and sam peltzman 1977 point out that higher profits could result from efficiencies experienced by large firms which resulted both in greater market shares and high levels of concentration analytical arguments show that higher profits logically follow as much from lower costs that are associated with higher levels of concentration as from collusion determined higher prices some empirical evidence that supports this belief is presented by demsetz peltzman and bradley gale and ben branch 1982 however their findings have been contested on the grounds that the data used are biased or inadequate or that the researchers have not demonstrated that the observed higher profits greater concentration relationship was caused by lower costs 2 the second criticism is that available data provide an inadequate basis for such conclusions the concentration numbers are based usually on industries defined by the commerce department s standard industrial classifications sic the sic definitions tend to be supply production rather than demand determined include nonhomogeneous products and exclude sales of similar products that are included in different sic groups or are imported the profit data are taken from accounting reports that provide poor measures of economic values weiss 1974 describes many of these problems however he does not believe that these shortcomings invalidate the studies as weiss 1979 concludes

engineering growth business group structure and firm performance in china s transition economy business groups have received increasing attention from academics interested in interorganizational relations and their impact on firms as part of industrial reform the chinese government began in the mid 1980s to encourage firms to form business groups with structural characteristics that promised to enhance financial performance and productivity using 1988 90 panel data on china s 40 largest business groups and their 535 member firms the study finds that the presence and predominance of interlocking directorates and finance companies in business groups improved the financial performance and productivity of the groups member firms in addition firms in groups with nonhierarchical organizational structures performed better than firms in hierarchical groups suggesting that complete integration into a hierarchical organization is not an optimal strategy

corporate structure liquidity and investment evidence from japanese industrial groups this paper presents evidence suggesting that information and incentive problems in the capital market affect investment we come to this conclusion by examining two sets of japanese firms the first set has close financial ties to large japanese banks that serve as their primary source of external finance and are likely to be well informed about the firm the second set of firms has weaker links to a main bank and presumably faces greater problems raising capital investment is more sensitive to liquidity for the second set of firms than for the first set the analysis also highlights the role of financial intermediaries in the investment process

managerialism revisited in the light of bargaining game theory abstract this lecture proposes to view the modern firm as a coalition of shareholders employees and business partners rather than to identify it with a single maximizer such as an entrepreneur this view may be thought of as a revival of the original thought of managerialism but tries to go further by analyzing implications of the interactions of those agents on the behavior of the firm in a bargaining game theoretic framework the lecture reviews the literature on game theoretic approaches to the theory of the firm and discusses a few important theoretical and institutional issues

springboard internationalization by emerging market firms speed of first cross border acquisition according to the springboard perspective emerging market multinationals seek strategic assets aggressively from the outset in this paper we investigate the role of firms institutional embeddedness in terms of age and affiliation to business group on their aggressive internationalization pursuits an issue which has remained less explored in international business scholarship this study based on 8163 indian listed firms over 18 years identifies a trend that younger firms founded in the liberalized era post 1991 and unaffiliated firms are more likely to pursue aggressive internationalization by conducting their first cross border acquisition cba faster among affiliated firms younger ones are relatively faster in conducting their first cba furthermore the evidence signals a moderating impact of inter group heterogeneity in terms of group level assets and foreign investments on the relationship between firm age and aggressive internationalization

local governments as industrial firms an organizational analysis of china s transitional economy despite widespread skepticism about government ownership in transitional economies china s rapid industrial growth has been led by public enterprises kornai s theory of soft budbet constraints born of the failure of earlier hungarian reforms fosters such skepticism but it assumes as fixed organizational characteristics that in fact vary widely across government jurisdictions local governments with smaller industrial bases have clearer financial incentives and constraints fewer nonfinancial interests in enterprises and a greater capacity to monitor them in china s vast public sector the fastest growth in output and productivity has occurred where government ownership rights are clearest and most easily enforced which enables officials to manage public industry as a diversified market oriented firm

behavioural and material determinants of production relations in agriculture in this essay we develop a framework for analysing the major institutions governing the production and exchange of output and the primary factors of production in rural areas the analysis incorporates general considerations of risk and information constraints jointly with the principal material attributes of agriculture and of agricultural production factors the framework is used to analyse barriers to the existence of the major intertemporal and factor markets it is applied specifically to land scarce environments for which it provides an internally consistent explanation for many of the well documented institutional features of such settings in addition the analysis provides new implications for among other phenomena the inter relationships among ownership holdings operational scale family size and factor productivity for the scarcity of animal rental markets and use of animals as collateral for the renting out of land by small landowners and for the existence of plantations for certain crops

do markets differ much this essay reports the results of a crosssection study of differences in accounting profitability that sheds light on some basic controversies in industrial economics most previous cross section studies in this field have been concerned with testing hypotheses about structural coefficients in models meant to apply to essentially all markets as we have learned more about the difficulties of constructing such general models and of performing tests on their structural parameters properly structural cross section analysis has fallen out of fashion in contrast to most of the cross section literature the analysis reported here is fundamentally descriptive it does not attempt directly to estimate or to test hypotheses about structural parameters i hope to show by example that one can perform illuminating analysis of cross section data without a host of controversial maintained hypotheses cross section data can yield interesting stylized facts to guide both general theorizing and empirical analysis of specific industries even if they cannot easily support full blown structural estimation one can view the sort of search for stylized facts conducted here as either a replacement for or an input to interindustry structural estimation depending on one s feeling about the long run potential of that research approach this study also departs from much of the cross section literature by being fundamentally concerned with the importance of various effects not just with coefficient signs and t statistics in particular this essay provides estimates of the relative importance of firm market and market share differences in the determination of business unit divisional profitability in u s manufacturing using 1975 data from the line of business program of the u s federal trade commission ftc i find support neither for the existence of firm effects nor for the importance of market share effects moreover while industry effects apparently exist and are important they appear to be negatively correlated with seller concentration in these data section i relates firm market and share effects to current issues and controversies in industrial economics and thus supplies the motivation for our empirical analysis the remainder of the essay treats the data and

filling the institutional void the social behavior and performance of family vs non family technology firms in emerging markets family businesses fbs are said to treat their employees with unusual consideration to form a cohesive internal community they are also claimed to develop deeper more extensive connections or relationships with outside stakeholders both behaviors may increase the viability of a business intended to support an owning family and its later generations such social linkages we believe may compensate for the lack of capital product and labor institutional infrastructures in dynamic emerging economies this survey study of a most challenging emerging market sector namely korean hightechnology businesses argues three major points 1 relationships of community and connection will be more common in fbs than in non fbs 2 these relationships will enhance performance in emerging market hightechnology sectors which because of their competitive complex and everchanging nature rely on significant expert knowledge and social capital within and outside the organizational community 3 the performance of fbs will benefit more from these community and connection relationships than the performance of non fbs because in these personally intimate settings employees and external partners will be especially likely to return the generosity of a visibly active owning family or to penalize its selfishness significant empirical support was found for most of these hypotheses

hierarchies and markets abstract whereas previous empirical studies have found performance gains from the adoption of multidivisional organization in u s and u k companies this paper reports a reduction in profitability for german m form firms for several years following reorganization with no sign of an eventual positive gain these results emerge from a cross section analysis of 48 among the top 100 german companies we suggest the constrasting results may flow from certain legal and institutional features not present in the u s and u k attenuating potential gains and enlarging short run transactions costs these include the role of the banks the relative concentration of shareholdings and the dual system of company boards

the role of market orientation in advertising spending during economic collapse the case of turkey in 2001 the authors investigate the role of market orientation in advertising spending during economic contraction they use the 2001 economic collapse in turkey as the empirical context in which to test hypotheses regarding why some firms increase their advertising spending in a contraction period while the majority of firms cut back analyzing market orientation at the level of its intelligence and responsiveness facets they find the responsiveness facet to be positively associated with increases in advertising spending but observe the intelligence facet to be negatively associated with advertising spending importantly positive shifts in advertising spending during the economic contraction predict better subsequent business performance the opposing roles of the intelligence and responsiveness facets disappear in a subsequent economic expansion period these findings have managerial and theoretical implications firms that nurture the responsiveness facet of market orientation during economic contractions go

growth diversification and business group formation in entrepreneurial firms recent empirical research has demonstrated that the growth process of entrepreneurial firms is frequently achieved through the formation of business groups i e a set of companies run by the same entrepreneur or entrepreneurial team this has been hypothesised as result of a growth process by diversification of the original activity this entrepreneurial growth process offers an alternative explanation for the formation of business groups than that arising from managerial efficiency and expediency the main aim of the article is to explore group formation through entrepreneurial diversification using a sample of high growth entrepreneurial firms the analysis demonstrates that the running of a group of companies by the same entrepreneur is not only induced by the geographical extension of their operation and by diversification but also by the differentiation policy aimed at serving different market segments within the same sector this seems to contrast with the diversification policy and organisational setting of large managerial firms

financial market fragmentation and reforms in ghana malawi nigeria and tanzania this article reports the findings from surveys of formal and informal institutions and their clients in ghana malawi nigeria and tanzania it investigates the hypothesis that reforming financially repressive policies would not be sufficient to overcome fragmentation of financial markets because of structural and institutional barriers to interactions across different market segments the four countries have substantially fragmented financial markets with weak linkages between formal and informal segments and interest rate differentials that cannot be adequately explained by differences in costs and risks nevertheless the relatively low transaction costs and loan losses of informal institutions indicate that they provide a reasonably efficient solution to information transaction cost and enforcement problems that exclude their clients from access to formal banking services the findings imply that financial liberalization and bank restructuring in the african context should be accompanied by complementary measures to address institutional and structural problems such as contract enforcement and information availability and to improve the integration of informal and formal financial markets

interactions between institutional and informal credit agencies in rural india in an attempt to expand rural credit and displace the village moneylender india created a system of rural cooperatives in the 1950s and expanded branch banking into rural areas in the 1970s this article examines how these measures affected the rural market it begins with the question of how large the expansion of institutional credit has been and the extent to which it has dislodged the village and nonresident moneylenders a detailed comparison of three major surveys of the indian rural credit market suggests that in various guises the moneylender is still a major source of loans the article also examines the weak evidence on intermediation between the formal and informal sectors a formal model of the interaction between the informal moneylender and institutional lender is constructed under a variety of assumptions about the exclusivity of loan contracts and the competitive structure of the informal sector the conclusions are drawn together in the form of five proposals for public policy