Abstract
The prevalent organizational form in most emerging markets is business
groups. These groups have typically been viewed through a transaction
cost economics perspective where they are perceived as responses
to inefficiencies in the market. However, the evidence to date on
what generates a positive business group-performance relationship
in such environments is not well understood. This study expands the
understanding of business groups by employing the resource-based
and institutional theoretical perspectives to examine how groups
acquire resources and capabilities to prosper. The empirical evidence
is based on over 224 business groups in the emerging economy context
of China and shows that most of the endowed government resources
do not help business groups to create a competitive edge. Instead,
those business groups with strategic actions to develop a unique
portfolio of market-oriented resources and capabilities are most
likely to prosper. The results provide critical insights on the relationship
between the initiation of institutional transformation and the desired
outcome to be realized by organizational transformation, thus enriching
our understanding of institutions and strategic choices facilitated
or constrained by organizational resources in emerging economies.
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