We analyse the relationship between manufacturing firms’ short-run economic growth and the institutional environment at local level in Italy and Spain, by explicitly accounting for the role played by business group membership. We hypothesise a differential effect of local institutions on firm-level economic growth related to business group membership in line with the theoretical argument that business groups play a fundamental role in the presence of market imperfections and weak institutions. We also hypothesise a ‘substitution effect’ between local institutions and the organisational form characterising the business group (with its group-specific inter-firm relations), such that any advantage arising from business group membership is likely to diminish as local institutional quality improves. Our empirical results support the predicted associations. First, high-quality local institutions matter for independent firms only. Second, any advantage associated with (international) business group membership seems to disappear as the local institutional environment improves.

Cainelli, G., Ganau, R., Giunta, A. (2022). Business Groups Institutions and Firm Performance. INDUSTRIAL AND CORPORATE CHANGE, 31(1), 215-233 [10.1093/icc/dtab046].

Business Groups Institutions and Firm Performance

Giunta Anna
2022-01-01

Abstract

We analyse the relationship between manufacturing firms’ short-run economic growth and the institutional environment at local level in Italy and Spain, by explicitly accounting for the role played by business group membership. We hypothesise a differential effect of local institutions on firm-level economic growth related to business group membership in line with the theoretical argument that business groups play a fundamental role in the presence of market imperfections and weak institutions. We also hypothesise a ‘substitution effect’ between local institutions and the organisational form characterising the business group (with its group-specific inter-firm relations), such that any advantage arising from business group membership is likely to diminish as local institutional quality improves. Our empirical results support the predicted associations. First, high-quality local institutions matter for independent firms only. Second, any advantage associated with (international) business group membership seems to disappear as the local institutional environment improves.
2022
Cainelli, G., Ganau, R., Giunta, A. (2022). Business Groups Institutions and Firm Performance. INDUSTRIAL AND CORPORATE CHANGE, 31(1), 215-233 [10.1093/icc/dtab046].
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11590/401024
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