International Diversification, Business Group Affiliation and Firm Performance: Empirical Evidence from India

Authors


  • *This research was supported by an Asia Research Institute grant and by the Bocconi University DIR research grant (602052). We thank Andrew Delios, Ram Mudambi, Torben Pedersen and Markus Venzin for helpful comments on earlier versions of this paper.

Abstract

We investigate the impact of business group affiliation on the relationship between international diversification and firm performance for emerging economy firms. We develop the theoretical arguments based on an integration of the literature on international diversification with the institutional theory perspective. We argue for a U-shaped relationship between international diversification and firm performance, and suggest that a firm's affiliation to a business group moderates the relationship between international diversification and firm performance. Based on a sample of Indian firms, we find that firm performance is positively related to the degree of internationalization, while business group affiliation reduces the positive effect of internationalization on firm performance.

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