Publication Type

Journal Article

Version

publishedVersion

Publication Date

7-2008

Abstract

Prior research has suggested a number of potential benefits to firm membership in business groups. These benefits include availability of capital and other resources not readily accessible in an open market, the facilitation of entrepreneurship, plus information and risk sharing advantages. We suggest that another important benefit is the assistance of group control systems in helping the firm to manage conflicting pressures in the institutional environment and facilitate coevolution of these conflicting pressures. To empirically demonstrate the relevance of this viewpoint, we examine the case of China where business groups facilitate institutional transition, actively balancing market pressures to increase levels of innovativeness in firms with institutional pressures emanating from the government to maintain high employment levels. Using data from a broad sample of more than 1,000 Chinese affiliate firms in more than 200 business groups, we find that government policy, ownership and managerial mindset influence the political goal of maintaining high employment levels, while interdependence among group affiliate firms is related to lower employment levels. However, while government ownership and the government managerial mindset were negatively related to market innovation activities, group financial and cultural control systems positively affected the tendency of affiliate firms to focus on market innovation.

Keywords

Business groups; China; Control systems; Innovation; Institutional theory

Discipline

Business | Technology and Innovation

Research Areas

Strategy and Organisation

Publication

Management and Organization Review

Volume

4

Issue

2

First Page

225

Last Page

256

ISSN

1740-8776

Identifier

10.1111/j.1740-8784.2008.00107.x

Publisher

Cambridge University Press

Additional URL

https://doi.org/10.1111/j.1740-8784.2008.00107.x

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