Business Groups in Emerging Markets: A Survey and Analysis

ABSTRACT

Research in the economics, finance, and management literature has sought to describe the predominance of business groups using an economic lens for decades. Yet, theory still falls short of explaining the role of business groups as a substitute for external markets as their influence only increases as countries develop. This article synthesizes the literature and posits that three main problems hinder its explanatory power; the difficulty of defining and identifying business groups, the focus on social welfare implications, and that the embeddedness of the central theories in a decidedly Anglo-American, developed economy perspective. Finally, suggestions for addressing these issues, along with accompanying hypotheses, are presented to further future research.

KEY WORDS:

• business groups
• corporate governance
• emerging markets

Notes

1. I adopt the criteria for emerging markets used by Standard & Poor’s emerging market database, which is modeled after the original model for emerging markets introduced by the International Finance Corporation (IFC) in 1981. The term is issued based on a number of parameters that attempt to assess a stock market’s relative level of development and/or an economy’s level of development.

2. “Not applicable” refers to those articles that hypothesize about the performance effect of affiliation, but do not measure it directly. For instance, some of these articles instead find empirical evidence that performance impacts exist from changes in other outcome variables such as investment.

3. One notable exception is Chang 2008 which discusses how the economic resilience of business groups during financial crisis may be beneficial to society.

4. More details regarding how such a survey should be implemented while important, are beyond the scope of this exercise.