Business groups in emerging markets: Paragons or parasites?

Tarun Khanna*, Yishay Yafeh

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

868 Scopus citations

Abstract

Diversified business groups, consisting of legally independent firms operating across diverse industries, are ubiquitous in emerging markets. Groups around the world share certain attributes but also vary substantially in structure, ownership, and other dimensions. This paper proposes a business group taxonomy, which is used to formulate hypotheses and present evidence about the reasons for the formation, prevalence, and evolution of groups in different environments. In interpreting the evidence, the authors pay particular attention to two aspects neglected in much of the literature: the circumstances under which groups emerge and the historical evidence on some of the questions addressed by recent studies. They argue that business groups are responses to different economic conditions and that, from a welfare standpoint, they can sometimes be "paragons" and, at other times, "parasites." The authors conclude with an agenda for future research.

Original languageAmerican English
Pages (from-to)331-372
Number of pages42
JournalJournal of Economic Literature
Volume45
Issue number2
DOIs
StatePublished - Jun 2007

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