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State capitalism and performance persistence of business group-affiliated firms: A comparative study of China and India

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Abstract

Business groups emerged in developing economies through direct or indirect support from the state in order to overcome a variety of institutional voids and/or to further state objectives of economic growth. However, the efficacy of this organizational form and its associated governance structures have been debated given the dual possibility of business groups to allocate resources among its affiliates for cross-subsidization or winner-picking. We argue that elements of the institutional environment comprising of the state’s approach to organizations and the political context of these interactions vary across countries, thereby influencing business groups’ resource allocation strategies and affecting the persistence of affiliated firms’ superior performance. Contrasting the types of state capitalism in China and India, we develop and test our hypotheses. We find that the effect of business group affiliation on firms’ superior performance persistence is stronger in a state-led system of state capitalism (e.g., China) than in a co-governed system (e.g., India) and that this divergence of the business group effect is weakened as affiliated firms internationalize. Our findings have implications for understanding business groups across institutional contexts and the influence of diversity in the types of state capitalism on organizational strategies.

Keywords

business groups comparative institutionalism state capitalism performance persistence China India 

Resume

Les groupes d’entreprises ont émergé dans les économies en développement grâce au soutien direct ou indirect de l’Etat pour contourner une variété de vides institutionnels et/ou pour déclarer d’autres objectifs de croissance économique. Cependant, l’efficacité de cette forme organisationnelle et des structures de gouvernance qui y sont associées ont été débattues étant donné la double possibilité pour les groupes d’entreprises d’allouer des ressources à leurs affiliés par le biais de subventions croisées ou de sélection des vainqueurs. Nous considérons que les éléments de l’environnement institutionnel, comprenant l’approche de l’État envers les organisations et le contexte politique de ces interactions, varient selon les pays; influençant ainsi les stratégies d’allocation des ressources des groupes d’entreprises et affectant la persistance des performances supérieures des entreprises affiliées. Différenciant les types de capitalisme d’Etat en Chine et en Inde, nous développons et testons nos hypothèses. Nous constatons que l’effet d’affiliation aux groupes d’entreprises sur la persistance des performances supérieures des firmes est plus fort dans un système de capitalisme d’Etat dirigé par l’Etat (Chine) que dans un système co-gouverné (Inde), et que cette divergence de l’effet du groupe d’entreprises est affaiblie à mesure que les sociétés affiliées s’internationalisent. Nos résultats ont des implications pour comprendre les groupes d’entreprises à travers des contextes institutionnels différents et l’influence de la diversité des types de capitalisme d’Etat sur les stratégies organisationnelles.

Resumen

Los grupos empresariales surgieron en economías en desarrollo a través del apoyo directo o indirecto del estado con la finalidad de superar una variedad de vacíos institucionales y/o para avanzar los objetivos del estado de crecimiento económicos. Sin embargo, la eficacia de esta forma organizacional y sus estructuras de gobierno asociadas ha sido debatido dada la doble posibilidad de que los grupos empresariales asignen recursos entre sus afiliados para subsidios cruzados o selección de ganadores. Sostenemos que los elementos del entorno institucional que comprende el enfoque del estado a las organizaciones y el contexto político de estas interacciones varía entre países, influyendo la estrategia de asignación recursos de los grupos empresariales y afectando la persistencia del desempeño superior de las firmas afiliadas. Contrastando los tipos de capitalismo de estado en China e India, desarrollamos y probamos nuestras hipótesis. Encontramos que el efecto de afiliación al grupo empresarial en la persistencia superior de desempeño de las empresas es más fuerte en un sistema liderado por el estado de capitalismo de estado (por ejemplo, China) que en un sistema co-gobernado (por ejemplo, India) y que esta divergencia del efecto del grupo empresarial se debilita a medidas que las empresas afiliadas se internacionalizan. Nuestros hallazgos tienen implicaciones en el entendimiento de los grupos empresariales entre contextos institucionales y en la influencia de la diversidad en los diferentes tipos de capitalismo de estado en las estrategias organizacionales.

Resumo

Grupos de negócios emergiram nas economias em desenvolvimento por meio de apoio direto ou indireto do Estado, a fim de superar uma variedade de vazios institucionais e / ou para promover objetivos de crescimento econômico do Estado. No entanto, a eficácia dessa forma organizacional e de suas associadas estruturas de governança tem sido debatida, dada a dupla possibilidade de que grupos de negócios alocarem recursos entre suas afiliadas para subsídios cruzados ou seleção de vencedores. Argumentamos que os elementos do ambiente institucional que compõem a abordagem do Estado às organizações e o contexto político dessas interações variam entre os países, influenciando assim as estratégias de alocação de recursos dos grupos de negócios e afetando a persistência do desempenho superior de empresas afiliadas. Contrastando os tipos de capitalismo de estado na China e na Índia, desenvolvemos e testamos nossas hipóteses. Descobrimos que o efeito da filiação ao grupo de negócios na persistência do desempenho superior das empresas é mais forte em um sistema estatal de capitalismo de estado (por exemplo, China) do que em um sistema cogovernado (por exemplo, Índia) e que essa divergência no efeito do grupo de negócios é enfraquecida na medida em que as empresas afiliadas se internacionalizam. Nossas descobertas têm implicações para a compreensão de grupos de negócios em contextos institucionais e a influência da diversidade nos tipos de capitalismo de estado nas estratégias organizacionais.

摘要

发展中经济体里受国家直接或间接支持的商业集团出现, 以克服各种制度空隙和/或实现经济增长的国家目标。然而, 考虑到商业集团在其附属机构中分配资源进行交叉补贴或赢家选择的双重可能性, 这种组织形式及其相关治理结构的功效一直存在争议。我们认为, 由国家对组织的态度以及这些相互作用的政治情境组成的制度环境要素因国家的不同而不同, 从而影响商业集团的资源分配策略, 并影响附属企业卓越绩效的持续性。对比中国和印度国家资本主义的类型, 我们开发并测试了我们的假设。我们发现, 在国家主导的国家资本主义的体系(如中国)中, 商业集团的归属对企业卓越绩效持续性的影响要强于共同治理体系(如印度), 而且商业集团影响的这种差异随着关联企业的国际化而减弱。我们的发现对理解跨制度情境下企业集团以及国家资本主义类型的多样性对组织战略的影响具有启示意义。

Notes

Acknowledgements

All authors contributed equally to this article. We thank the JIBS Editor Mona Makhija, three anonymous reviewers, and participants at the 2013 Academy of International Business Annual Conference and 2013 Academy of Management Annual Conference for their constructive comments. Lin Cui acknowledges funding support from the Australian Research Council (Grant Number DE130100860), and Preet S. Aulakh acknowledges funding from the Social Sciences and Humanities Research Council of Canada (Grant Number 435-2012-1219).

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Authors and Affiliations

  1. 1.Department of Management and MarketingUniversity of MelbourneMelbourneAustralia
  2. 2.Research School of ManagementAustralian National UniversityCanberraAustralia
  3. 3.Schulich School of BusinessYork UniversityTorontoCanada

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