Do Diversified Business Groups Help Organizational Performance?: An Industry-wise Analysis

Abstract

The superior performance of firms affiliated with business groups as compared to unaffiliated firms has not been clearly established in the literature. Previous studies examining the effect of business groups on firm performance have found varying results (Khanna and Palepu 2000a, 2000b; Chang and Hong 2002; Chu 2004). These findings are the results of analysis conducted at the aggregate level across all industries. This study examines performance of affiliated and unaffiliated firms separately across three industries in India. The results indicate that the impact of group affiliation is not uniform across industries. Further, the study examines the relationship between business group diversification and firm performance across industries after controlling for certain variables that impact performance. Findings indicate that the relationship is not unique across various industries. � 2016 Copyright � Taylor & Francis Group, LLC.