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

adam smith or machiavelli political incentives for contracting out local public services why do some local governments deliver public services directly while others rely on providers from the private sector previous literature on local contracting out and on the privatization of state owned enterprises have offered two competing interpretations on why center right governments rely more on private providers some maintain that center right politicians contract out more because like adam smith they believe in market competition others claim that center right politicians use privatization in a machiavellian fashion it is used as a strategy to retain power by purchasing the electoral support of certain constituencies using a unique dataset which includes the political attitudes of over 8 000 swedish local politicians from 290 municipalities for a period of 10 years this paper tests these ideological predictions together with additional political economy factors which have been overlooked in previous studies such as the number of veto players results first indicate support for the machiavellian interpretation as contracting out increases with electoral competition second irrespective of ideological concerns municipalities with more veto players in the coalition government contract out fewer services

factors explaining local privatization a meta regression analysis this paper aims at explaining the differences in the results of empirical studies of motivations for local privatization by undertaking a meta regression our results suggest that fiscal constraints and interest groups were especially relevant in the early studies of the us which considered several services further studies that focus on one service capture the influence of scale economies more accurately finally our results show that small towns are more affected by fiscal and political factors while ideology plays a major role for european and large cities thus no clear conclusions emerge from this literature because the findings of each study are sensitive to its characteristics

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

the finance growth nexus evidence from bank branch deregulation this paper provides evidence that financial markets can directly affect economic growth by studying the relaxation of bank branch restrictions in the united states we find that the rates of real per capita growth in income and output increase significantly following intrastate branch reform we also argue that the observed changes in growth are the result of changes in the banking system improvements in the quality of bank lending not increased volume of bank lending appear to be responsible for faster growth

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

guest editor s introduction to the special issue the evolution of firm capabilities this special issue deals with the question of how it is that over time some firms manage to become successful using their capabilities while other firms do not the articles examine the ways in which firm capabilities emerge develop and change over time and the resulting effects on firm performance conceptual models and analyses based on empirical research deal with market entry and the evolution of firm capabilities adaptation and change in capabilities and heterogeneity of firm capabilities over time within these broad themes specific topics include the role of pre entry experience and initial conditions aspirations and learning dynamic capabilities technological change products and markets mergers and acquisitions and managerial cognition copyright 2000 john wiley sons ltd

does economic structure determine financial structure abstract in this paper we examine the relationship between the structure of the real economy and a country s financial system we consider whether the development of the real economic structure can predict the direction of evolution of a country s financial structure using data for 108 countries we find a significant relationship between real economic structure and financial structure next we exploit shocks to the economies in india finland and sweden and south korea and show that changes in the economic structure of a country influence the evolution of its financial system this suggests that financial institutions and capital markets change in response to the structure of industries

india trade policy review the review of india s trade policy by the wto the third of its kind is in three parts the report by the wto secretariat a statement by the government of india and minutes of the discussion of the report by the trade policy review board the review provides detailed information not only on india s trade and foreign investment policies but also an analytical review of india s export and economic performance the review notes that india has made considerable progress with the liberalisation of its trade and investment regime but it has a long way to go if it were to achieve a growth rate of eight to nine per cent the stated objective of the policy makers this paper drawing upon the material in the report analyses india s growth prospects and endorses the broad conclusions of the report

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

stock markets banks and growth panel evidence this paper investigates the impact of stock markets and banks on economic growth using a panel data set for the period 1976 98 and applying recent gmm techniques developed for dynamic panels on balance we find that stock markets and banks positively influence economic growth and these findings are not due to potential biases induced by simultaneity omitted variables or unobserved country specific effects

collective learning in global diffusion spreading quality standards in a developing country cluster this research analyzes how foreign organizational practices diffuse among indigenous enterprises in a developing economy it highlights the collective knowledge building process as central for understanding diffusion based on a longitudinal case study of a cluster of dairy producers in nicaragua a representative low income country it looks at cross border diffusion in conditions that differ significantly from advanced economies the current literature that highlights institutional pressures driving global spread of practices has limits for capturing a significant dynamic caused by increased integration of markets and production by focusing on production organization and practices in a late developing context this paper explains the intertwined process of spreading new standards and changing existing local practices by elaborating the relationship among building collective capabilities learning and standards diffusion this study enriches current views on institutional effects and adds to the practice based literature as well as to the work on developing economy firms in organizational research

antecedents and performance implications of channel integration in foreign markets this study enhances our understanding of channel integration in foreign markets on two fronts first the eclectic approach to foreign entry mode proposed by hill hwang and kim 1990 and kim and hwang 1992 is used to examine transaction specific organizational capability and strategic factors that influence channel choices in foreign markets empirical results based on survey of u s firms support the combined relevance of these factors in predicting the degree of channel integration second the study empirically examines the performance consequences of channel integration the results suggest that although the degree of channel integration does not have a direct influence on channel performance a contingency model based on the fit between the contextual factors and the actual channel choice is significantly related to performance in foreign markets

toward resource independence why state owned entities become multinationals an empirical study of india s public r d laboratories in this paper we build on the standard resource dependence theory rdt and its departure suggested by vernon to offer a novel explanation for why state owned entities soes might seek a global footprint and global cash flows to achieve resource independence from other state actors in the context of soes the power use hypothesis of standard rdt can be used to analyze the dependence of soes on other state actors such as government ministries and government agencies that have ownership and control rights in the soe building on vernon we argue that the soe can break free from this power imbalance and establish resource independence from other state actors by becoming a multinational firm and or by generating global cash flows we leverage a natural experiment in india and outline both quantitative and qualitative evidence from 42 indian state owned laboratories to support this argument

the determinants of the choice between public and private production of a publicly funded service the public choice literature contains little formal analysis of the bureaucratic choice of production modes public or private of publicly funded services an important question to be addressed is why some governmental bodies choose to provide a publicly funded service with publicly owned and operated production units whereas other governmental bodies contract with private firms to provide the same publicly funded service this paper is the first formal attempt to remedy this gap in the literature we develop a theoretical explanation of the government decision maker s choice between public and private production modes based on utility maximizing behavior we then examine empirically this choice employing logit analysis the empirical results which include several tests for robustness confirm our theoretical explanation the results are significant and suggest that non monetary constraints are an important factor affecting this choice of production modes and that monetary constraints are less influential

the eclectic paradigm of international production a restatement and some possible extensions this article reviews some of the criticisms directed towards the eclectic paradigm of international production over the past decade and restates its main tenets the second part of the article considers a number of possible extensions of the paradigm and concludes by asserting that it remains a robust general framework for explaining and analysing not only the economic rationale of economic production but many organisational and impact issues in relation to mne activity as well

international expansion of emerging market enterprises a springboard perspective in this article we present a springboard perspective to describe the internationalization of emerging market multinational corporations em mnes em mnes use international expansion as a springboard to acquire strategic resources and reduce their institutional and market constraints at home in so doing they overcome their latecomer disadvantage in the global stage via a series of aggressive risk taking measures by aggressively acquiring or buying critical assets from mature mnes to compensate for their competitive weaknesses we discuss unique traits that characterize the international expansion of em mnes and the unique motivations that steer them toward internationalization we further delineate peculiar strategies and activities undertaken by these firms in pursuit of international expansion as well as internal and external forces that might compel or facilitate their propulsion into the global scene we finally explain the risks and remedies associated with this international springboarding strategy and highlight major issues meriting further investigation

do international acquisitions by emerging economy firms create shareholder value the case of indian firms while overseas acquisitions by emerging economy firms are gaining increased attention from the business press our understanding of whether and why this inorganic mode of international expansion creates value to acquirer firms is limited we argue that international acquisitions facilitate internalization of tangible and intangible resources that are both difficult to trade through market transactions and take time to develop internally thus constituting an important strategic lever of value creation for emerging economy firms furthermore the magnitude of value created will be higher when the target firms are located in advanced economic and institutional environments country markets that carry the promise of higher quality of resources and therefore stronger complementarity to the existing capabilities of emerging economy firms an event study of 425 cross border acquisitions by indian firms during 2000 2007 supports our predictions

globalization and convergence in corporate governance evidence from infosys and the indian software industry in contrast to the much studied role of capital markets in fostering convergence in corporate governance practices worldwide we argue that the globalization of product and talent markets has affected corporate governance of firms in the indian software industry we model several possible reasons why a particular firm infosys has emerged as the exemplar of good corporate governance in india traditionally a backwater of corporate governance practices we further analyze the manner in which infosys has attempted to shape corporate governance practices in india more generally and why these attempts have had limited effects thus far

business groups financing constraints and investment the case of india we examine the effect of business group affiliation on corporate investment behaviour in india more specifically we test whether group affiliation reduces financing constraints for the affiliated firms we use a data set containing 694 listed indian companies for the 1989 97 period we estimate a simple investment equation and find evidence that the investment cash flow sensitivity is much lower for group affiliates this suggests that business group affiliates have better access to external funds than stand alone firms

bringing institutions into performance persistence research exploring the impact of product financial and labor market institutions this study challenges the implicit assumption of homogeneity in national institutional environments made in past studies of firm performance persistence we propose that home country institutions matter we focus on the impact of formal institutions in the product financial and labor markets arguing that they affect the size of pools of exchange partners and the types of exchanges allowed and condoned ultimately these restrictions affect competitive intensity among firms and firm performance persistence using data for over 10 000 firms from 33 countries over a 10 year time frame we show that antitrust law strength a product market institution designed to prevent collusion among firms is associated with decreases in performance persistence unskilled labor market flexibility a labor market institution that reduces legal constraints imposed on residual claimants managers and owners to take necessary actions to maintain or enhance profitability is associated with increases in performance persistence product liability law effectiveness another product market institution and corporate control market development a financial market institution are positively associated with performance persistence only in the case of mnes the two remaining financial and labor market institutions public equity market development respectively skilled labor market availability have a positive respectively negative impact for domestic firms only

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

measuring the degree of internationalization of a firm a comment sullivan s 1994 suggestion that an index measure of the internationalization construct is superior to single variable measures is critiqued on psychometric content validity criterion validity reliability and utilitarian grounds we argue that internationalization is more complex than envisioned by this index and suggest that further refinement of the construct is necessary before constructing indices

financial development structure and dynamics this paper analyzes the bright and dark sides of the financial development process through the lenses of the four fundamental frictions to which agents are exposed information asymmetry enforcement collective action and collective cognition financial development is shaped by the efforts of market participants to grind down or circumvent these frictions a process further spurred by financial innovation and scale and network effects the analysis leads to broad predictions regarding the sequencing and convexity of the dynamic paths for a battery of financial development indicators the method used also yields a robust way to benchmark the financial development paths followed by individual countries or regions the paper explores the reasons for path deviations and gaps relative to the benchmark demand related effects past output growth financial crashes and supply related effects the quality of the enabling environment all play an important role informational frictions are easier to overcome than contractual frictions not least because of the transferability of financial innovation across borders

more on the choice between public and private production of a publicly funded service overall the empirical findings we reported in our 1987 article are strongly suggestive of the importance of nonmonetary considerations in the production mode choice nonetheless professor pack is quite correct to note that our conclusion 1987 225 226 overstates the evidence we presented for the primacy of nonmonetary factors in the production mode choice when her full model is considered regarding the full model despite the statistically significant findings for some demographic variables a formal theoretical model of their effects on the production mode choice is lacking notwithstanding pack s comments concerning scale economies we are persuaded that the theoretic void regarding the effects of demographic variables on the production mode choice still exists

nationalization privatization and the allocation of financial property rights in this paper i have shown that a purely economic theory of nationalization and privatization is conceivable on the basis of an analysis of government as a rationally discriminating operator acting as the agent of pressure groups competing for redistribution variations in cost of capital differentials between private investors and the state essentially due to the existence of taxation explain alternate policies of taking over privately owned corporations and divesting from state enterprises soes some initial empirical results are encouraging consequently i cannot reject the hypothesis that through nationalization and privatization episodes politicians after all do behave according to economic rationality

does market oriented institutional change in an emerging economy make business group affiliated multinationals perform better an institution based view viewing market oriented institutional change as a two staged process we propose that the effects of market oriented institutional change on two organizational forms business group affiliated and independent firms are different depending on the stage of institutional change specifically we examine how the two distinct periods of market oriented institutional change that is institutional friction and institutional convergence affect business group affiliated firms and independent firms in their abilities to profit from international diversification using data on 140 korean manufacturing multinational firms from 1993 to 2003 we find that emerging economy firms face an international diversification discount a negative relationship between international diversification and firm performance we also find that business group affiliation affects the international diversification discount differently during the two periods of market oriented institutional change particularly when firm performance is measured by the market to book value mbv the moderating effect of business group affiliation on the relationship between international diversification and mbv is negative during the institutional frictions period but becomes positive during the institutional convergence period in the later stage of institutional change our findings warn against viewing market oriented institutional change as a discrete event highlighting the importance of recognizing the qualitatively distinctive nature of different periods of market oriented institutional change in future research

an empirical examination of the form of the relationship between multinationality and performance this paper reports findings from a study that systematically evaluated the form of the relationship between multinationality and performance in contrast to most of the prior conceptualizations that rely on linear monotonic models of the linkage this study examined a curvilinear model that addresses both the costs and benefits associated with multinationality it used time series techniques to capture both the static and dynamic components of the relationship results show that increasing levels of multinationality bring significant performance benefits up to a certain optimum level beyond which benefits begin to decelerate while costs accelerate

third world copycats to emerging multinationals institutional changes and organizational transformation in the indian pharmaceutical industry this article investigates how indian pharmaceutical firms facing discontinuous institutional changes in their domestic environment due to economic liberalization and intellectual property reforms have undertaken organizational transformation internationalization of resources and product markets constitutes an important component of organizational transformation for local firms in emerging economies using longitudinal data on 206 indian pharmaceutical firms from 1995 2004 we find that firms access to international technological and financial resources enables product market internationalization furthermore we theorize and find support for our predictions that the association between international resources and markets is conditioned by time and business group affiliation and product market internationalization affects financial performance several implications thus emerge for theory and practice associated with the sources of competitiveness in emerging economy firms and their transformation into globally competitive multinational firms

liberalization outward orientation and in house r d activity of multinational and local firms a quantitative exploration for indian manufacturing abstract in an increasingly globalizing and knowledge based world economy the declining importance of r d activity in india is a matter of concern this paper analyzes the determinants of r d behaviour of indian enterprises over the 1990s in the context of the reforms of 1991 and their impact on the r d behaviour of mne affiliates and local enterprises the analysis suggests that although average levels of spending have fallen increased competition due to liberalization seems to have pushed local firms to rationalize their r d activity and make it more efficient also r d spending seems to rise more than proportionally with firm size after a certain threshold level has been reached the analysis brings out differences in the nature of r d activity of mne affiliates and local firms local firms direct their r d activity primarily towards the assimilation of imported technology and to providing a backup to their outward expansion via exports and fdi mne affiliates on the other hand focus on exploiting the advantages of india as an r d platform for their parents the paper is concluded with some policy implications of the findings

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

a theory of competition among pressure groups for political influence this paper presents a theory of competition among pressure groups for political influence political equilibrium depends on the efficiency of each group in producing pressure the effect of additional pressure on their influence the number of persons in different groups and the deadweight cost of taxes and subsidies an increase in deadweight costs discourages pressure by subsidized groups and encourages pressure by taxpayers this analysis unifies the view that governments correct market failures with the view that they favor the politically powerful both are produced by the competition for political favors

public versus private economic activity a new look at school bus transportation thomas borcherding 1977 in commenting on the public versus private literature offered the generalization that removal of an activity from the private to the public sector will double its unit costs of production the results of this paper obviously are not consistent with borcherding s rule of two generalization at the same time however the 12 cost per mile differential in favor of private ownership indicated by the results for the overall sample is not a trivial sum in absolute terms the cost per mile differences in favor of private buses contained in the five trip groups are not trivial either nor is the direct evidence from the 82 joint systems in attempting to assess the results much depends on the perspective against which they are judged

global delivery models the role of talent speed and time zones in the global outsourcing industry global delivery models gdms are transforming the global it and business process outsourcing industry gdms are a new form of client specific investment promoting service integration with clients by combining client proximity with time zone spread for 24 7 service operations we investigate antecedents and contingencies of setting up gdm structures based on comprehensive data we show that providers are likely to establish gdm location configurations when clients value access to globally distributed talent and speed of service delivery in particular when services are highly commoditized findings imply that coordination across time zones increasingly affects international operations in business to business and born global industries

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

building capabilities for international operations through networks a study of indian firms in this study we seek to explain how firms from emerging markets build capabilities to operate in international markets through learning from parental networks the building of these capabilities is of particular interest as firms from emerging markets may not necessarily possess the monopolistic advantages commonly referred to in ib literature which allow a firm to succeed in international markets using lagged cross sectional regression models on a sample of 794 indian firms we found that firms draw on the international experience of their parental and foreign networks to build such capabilities findings also indicate that network scope is beneficial for increasing exposure to international markets only in the case of networks that are either small or medium sized additionally we found that firms lacking market power in their home market benefit through foreign partnerships when internationalizing operations

international diversification and firm performance the s curve hypothesis a proposed theoretical framework for the study of multinationality and performance includes both benefits and costs of geographic expansion over different phases of internationalization data on 1 489 japanese firms over 12 years show a consistent horizontal x s shaped x relationship between multinationality and performance further firms investing more heavily in intangible assets such as technology and advertising achieved greater profitability gains from growth in foreign direct investment our framework and findings highlight complexity and temporal dynamics

liability of foreignness natural disasters and corporate philanthropy this study examines how philanthropy can mitigate liability of foreignness lof in the aftermath of a national disaster a major disaster restructures the social landscape creating an avenue for corporate contributions to play a role in recovery and relief efforts this social restructuring offers a valuable opportunity for multinational enterprises mnes to establish strong local ties in turn mne contributions at such times have a stronger impact on their local acceptance thus mnes can use these events to strengthen their position in the community and mitigate lof using the context of a national disaster in india i test these arguments with a sample of 190 mnes and 660 domestic firms i found that in the aftermath of the disaster the increase in mne contributions was much larger and less strongly tied to promotional activities than the increase in contributions from domestic firms and this difference persisted over time moreover the performance implication of post disaster philanthropy was stronger for mnes than for domestic firms these findings suggest that philanthropy plays a more strategic role for mnes in the aftermath of a disaster and it has a pronounced effect on mitigating lof

theoretical foundations of emerging economy business research in probing theoretically into central and eastern europe transactions resources and institutions we outlined the contributions of research in central and eastern europe cee to theoretical debates in business research in this retrospective we reflect upon the evolution of the field over the past decade with the fading impact of cee s distinct shared history we suggest that cee best be analyzed as emerging economies rather than as a distinct geographic entity emerging economy business research is converging on common themes and shared theoretical ideas while identifying critical variations that constrain generalizations among and beyond emerging economies this research thus highlights the need to develop a better understanding of the boundary conditions of scholarly theories of business knowledge over the past decade the institution based view has emerged from distinct intellectual traditions in institutional economics organizational theory and the analysis of business government bargaining research in these converging lines of theorizing places contextual variations at the center of explanations of business phenomena around the world we suggest that the institution based view is evolving toward a paradigm and offer suggestions on how to advance this research agenda further in particular by exploring how firms engage with different sets of potentially conflicting institutions at multiple levels and locations