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APJOM_-_Indian_Business_Groups - Asia Pacific J Manage(2006...

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REVIEWS Indian business groups: Evolution and transformation Ben L. Kedia & Debmalya Mukherjee & Somnath Lahiri Published online: 12 December 2006 # Springer Science + Business Media, LLC 2006 Abstract Business groups are an important constituent of many emerging economies. In this paper, we focus on the evolution and transformation of Indian business groups (IBGs) over two economic eras pre-reform era (pre 1991) and reform era (post 1991). To this end, we analyze IBG behavior during these periods, and explain the implications of such behavior on IBG value creation. Our conceptualization of IBG dynamics utilizes the perspectives of product relatedness and institutional relatedness , and undertakes a broad review of the extant literature. Keywords Indian business groups . Behavior . Relatedness . Value creation Business groups (BGs) constitute a central feature of the competitive landscape in most emerging economies. A BG is a set of firms which, though legally independent, are bound together by a constellation of formal and informal ties and are accustomed to taking coordinated action (Khanna & Rivkin, 2001 : 47). Given the ubiquitous nature of BGs, scholars have presented various theoretical perspectives in attempting to explain the evolution and persistence of such groups (e.g., Ghemawat & Khanna, 1998 ; Granovetter, 1994 ; Guillen, 2000 ; Khanna & Palepu, 1997 , 1999a ). Collectively, these works suggest that BGs tend to fill up the institutional voids created by imperfect capital, labor, and Asia Pacific J Manage (2006) 23:559 577 DOI 10.1007/s10490-006-9020-5 We are grateful to the two anonymous reviewers for their helpful comments. Our sincere thanks are due to Andrew Delios, Ajai Gaur, Mike Carney, and especially Mike Peng for their valuable suggestions. We also thank the Asia Academy of Management, NUS Business School, and Memphis CIBER for providing financial support to attend APJM special issue conference. B. L. Kedia ( * ) : D. Mukherjee : S. Lahiri Robert Wang Center for International Business Education and Research, The University of Memphis, Memphis, TN 38152, USA e-mail: [email protected] D. Mukherjee e-mail: [email protected] S. Lahiri e-mail: [email protected]
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product markets. Scholars also observe that group ties enable the affiliated members to reap distinct benefits that are normally not possible by similar non-group firms (Bertrand, Mehta, & Mullainathan, 2002 ; Kali & Sarkar, 2005 ; Khanna & Palepu, 2000a , 2000b ). Two notable features that characterize most emerging economies are (1) speedy development facilitated by government policies favoring liberalization and (2) movement towards free-market system (Arnold & Quelch, 1998 ). India provides an ardent example of an economy that has traditionally been associated with inefficient markets. But more recently, India has been known to pursue rapid development and economic transformation in favor of a free-market system (Kedia, Dibrell, & Harveston, 1998 ). A substantial number of BGs have continued to exist and contribute to Indian economic growth for decades. Not surprisingly, behavioral and performance patterns exhibited by these groups have been influenced by the changes in the national institutional framework.
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