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Business groups in developing capital markets: Towards a complementarity perspective
Author(s) -
Chittoor Raveendra,
Kale Prashant,
Puranam Phanish
Publication year - 2015
Publication title -
strategic management journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 11.035
H-Index - 286
eISSN - 1097-0266
pISSN - 0143-2095
DOI - 10.1002/smj.2287
Subject(s) - complementarity (molecular biology) , scrutiny , developing country , capital market , perspective (graphical) , capital (architecture) , institution , economics , business , market economy , industrial organization , economic growth , finance , political science , genetics , biology , history , archaeology , artificial intelligence , computer science , law
Prior research suggests that business groups ( BG s) in developing economies have emerged as alternatives to poorly developed economic institutions in these countries. In this paper, we argue that this does not imply they are always substitutes. Specifically, we consider the case of capital markets, a key economic institution: while the absence of well‐developed capital markets may indeed have stimulated the emergence of business groups, we propose that BG affiliation and the scrutiny that maturing capital markets impose on firms that participate actively in them nevertheless can play a complementary role in influencing a firm's performance. We find support for our predictions in a novel longitudinal data set of Indian firms that contain both listed and unlisted BG affiliated as well as unaffiliated firms . Copyright © 2014 John Wiley & Sons, Ltd.