Business Groups Reconsidered: Beyond Paragons and Parasites

In this paper, we consider the potential paths of Business Group’s (BGs) evolution. We organize
our analysis around the two dominant perspectives on BGs: institutional voids (IV) and
entrenchment/exploitation (EE). We suggest that the empirical evidence does not entirely support
either perspective, and neither fully predicts what we sometimes observe; namely that BGs not
only persist and thrive, but also sometimes do so as internationally competitive firms. This
indicates that a more contextualized approach is required, and we propose a conceptual
framework that can guide future thinking. In so doing, we take explicit account of two key
factors relevant to the dynamics of BG evolution: the state’s capacity to create market-supporting
institutions and the ability of business groups to adapt to evolving institutions. Our framework
accommodates the possibility of multiple outcomes, including ones consistent with the IV and
EE perspectives, but also ones consistent with the internationalization of BGs, including those
from emerging markets.