Policy shocks, market intermediaries, and corporate strategy
Subtitle: the evolution of business groups in Chile and India
By: Tarun Khanna, Krishna Palepu
Contributors: Palepu, Krishna G., 1954-; Harvard Business School. Division of Research
Edition: Rev.
Series: Working paper / Division of Research, Harvard Business School -- 98-100; Working paper (Harvard Business School. Division of Research) -- 98-100
Publisher: Division of Research, Harvard Business School
Published: 1998
Place of publication: Boston]
Language: eng
Number of pages: 39
Description: Numerous countries have undergone rapid transitions in their economic environments. Yet, little is known about firm responses to such transitions. We use field-collected data to study the evolution of eighteen large and diversified business groups in Chile (1987-1997) and India (1990-1997). The chosen time periods correspond to significant deregulation in the primary markets in both countries. Conventional wisdom suggests that the intermediation roles played by business groups ought to decrease during these time periods. However, we find an increase in group scope, an increase in the strength of the social and economic ties that bind together group firms, an increase in self-reported intermediation attempts by the groups, and some evidence that these actions are associated with improvements in profitability of the group affiliates. We suggest that the slow development of market intermediaries, in a manner suggested by institutional economics, and the attendant lack of reduction in the transaction costs in primary markets can explain these findings.
Notes: "Revised 12/98."

Includes bibliographical references (p. 31-34).