New Evidence on What Makes Performance Vary in Business Groups

Modern corporations across the world are built on a complex architecture where performance is not governed by merely corporate strategy or market forces. It is a multi-layered puzzle.  

In many emerging markets, companies are often part of larger entities, known as business groups (BGs). They are networks of legally independent but affiliated firms that coordinate resources, strategy, and ownership. These groups allow member firms to share capital, talent, and reputation.  

Despite these shared advantages, why do firms within the same business group often show differences in performance? It is a question that continues to intrigue business leaders and strategy thinkers. While industry dynamics, brand strength, and corporate strategy, all play a role, the structure and internal dynamics of the group itself may be just as important. 

In our new research, my co-authors Sarada Devi, Arindam Mondal, Somnath Lahiri, and I, show that to understand variance in firms' performance within BGs, it is imperative to take a closer look at the engine room of the enterprise, that is, its individual business units. 

Looking beneath the surface 

For years, research into what drives firm success has focused on industry-level dynamics or corporate-parent effects. But in emerging markets like India, business groups are layered in ways that differ from the multidivisional structures seen in the West.