Business group

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Business group
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Business group or corporate group"is a coalition of companies that are legally separate but bound together by a controlling firm either directly or indirectly through economic or social connections (Granovetter, 1995; Fan et al., 2016). Many prior studies (e.g., Keister, 1998, 2009; Carney et al., 2009; Guest and Sutherland, 2010; He et al., 2013) have investigated the effect of business groups on their member firms' financial performance, but the impact of groups on member firms' performance in corporate social responsibility (CSR) has remained unexplored.” [1]

It is a set of enterprises acting in a given sector that implement a similar competitive strategy. This similar strategy can be determined by key success factors common for a given industry (such as specialization, brand, distribution channels, product quality, technical leadership, vertical integration, services, price, etc.), although they occur in individual companies in a different form. The characteristics of closer and further competitors allow them to be qualified as business group. However, business groups are not stable entity, in time competition for dominance on the market is constantly going on and new actors can enter the business group of leave them. Main factors considered during business group identification are:

  • resources and skills possessed by the members of the group
  • risk attitude and business goals
  • barriers of mobility
  • structural changes in the sector

They are the most common in emerging markets (such as Brazil, India, Indonesia, Thailand and Korea) and also in some developed one, for example Italy and Sweden. Groups may be different according to form. They can be horizontally-linked or vertically-controlled (“pyramids”). “Group firms can be related to each other through family and social ties, a common sense of identity, trade relations, and other dimensions.” In some countries they may be politically important also. [2]

Interaction with government[edit]

“Governments have enough power to influence firms’ strategic choices, operations and processes (Pearce, 2001), but business groups are not passive elements in this context. Therefore, there is an interdependence and an ongoing exchange between groups’ actions and government policies (Salisbury, 1969)”. They can use different ways to influence government decisions to accomplish better performance and competitive advantages. [3]

References[edit]

  1. Guo M., He L., Zhong L. (2018). Business groups and corporate social responsibility: Evidence from China Emerging Markets Review, ISSN 1566-0141
  2. Khanna T., Yafeh Y., (2005). Business Groups in Emerging Markets: Paragons or Parasites? ECGI - Finance Working Paper No. 92/2005.
  3. Gama M. A. B., Bandeira-de-Mello R., Spuldaro J. D. (2018). Political strategy and the growth of business groups RAUSP Management Journal, Vol. 53, Iss. 1, ISSN 2531-0488

Author: Natalia Pęgiel