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Innovation in Business Groups

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  • Sharon Belenzon

    ()
    (Fuqua School of Business, Duke University, Durham, North Carolina 27708)

  • Tomer Berkovitz

    ()
    (Graduate School of Business, Columbia University, New York, New York 10027)

Abstract

Using novel data on European firms, this paper investigates the relationship between business groups and innovation. Controlling for various firm characteristics, we find that group affiliates are more innovative than standalones. We examine several hypotheses to explain this finding, focusing on group internal capital markets and knowledge spillovers. We find that group affiliation is particularly important for innovation in industries that rely more on external funding and in groups with more diversified capital sources, consistent with the internal capital markets hypothesis. Our results suggest that knowledge spillovers are not the main driver of innovation in business groups because firms affiliated with the same group do not have a common research focus and are unlikely to cite each other's patents.

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File URL: http://dx.doi.org/10.1287/mnsc.1090.1107
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Bibliographic Info

Article provided by INFORMS in its journal Management Science.

Volume (Year): 56 (2010)
Issue (Month): 3 (March)
Pages: 519-535

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Handle: RePEc:inm:ormnsc:v:56:y:2010:i:3:p:519-535

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Keywords: business groups; innovation; patents; internal capital markets; knowledge spillovers;

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References

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Cited by:
  1. Xavier Boutin & Giacinta Cestone & Chiara Fumagalli & Giovanni Pica & Nicolas Serrano-Velarde, 2009. "The Deep-Pocket Effect of Internal Capital Markets," 2009 Meeting Papers 1070, Society for Economic Dynamics.
  2. Pradhan, Jaya Prakash & Singh, Neelam, 2010. "Group Affiliation and Location of Indian Firms’ Foreign Acquisitions," MPRA Paper 24018, University Library of Munich, Germany.
  3. Sumon K. Bhaumik & Ying Zhou, 2014. "Do business groups help or hinder technological progress in emerging markets? Evidence from India," William Davidson Institute Working Papers Series wp1066, William Davidson Institute at the University of Michigan.
  4. Fulvio, Castellacci, 2012. "Business Groups, Innovation and Institutional Voids in Latin America," MPRA Paper 41481, University Library of Munich, Germany.
  5. Helmers, Christian & Rogers, Mark, 2011. "Does patenting help high-tech start-ups?," Research Policy, Elsevier, vol. 40(7), pages 1016-1027, September.
  6. Hansen, Thorsten, 2010. "Innovation and the International Firm Structure: Theory and Evidence from German Firm-Level Data," Discussion Papers in Economics 11464, University of Munich, Department of Economics.
  7. Bozkaya, Ant & Kerr, William R., 2013. "Labor regulations and European venture capital," Research Discussion Papers 30/2013, Bank of Finland.
  8. Nicholas Bloom & Mirko Draca & John Van Reenen, 2011. "Trade Induced Technical Change? The Impact of Chinese Imports on Innovation, IT and Productivity," NBER Working Papers 16717, National Bureau of Economic Research, Inc.
  9. Pradhan, Jaya Prakash, 2011. "Regional heterogeneity and firms’ innovation: the role of regional factors in industrial R&D in India," MPRA Paper 28096, University Library of Munich, Germany.
  10. Masanori Orihara, 2013. "Business Group Taxation and R&D Activities," Discussion papers ron254, Policy Research Institute, Ministry of Finance Japan.
  11. Mario García Molina, 2010. "Crisis Y Diversificación De Los Grupos Empresariales Colombianos A Finales De Los Noventa," DOCUMENTOS DE TRABAJO - ESCUELA DE ECONOMÍA 007571, UN - RCE - CID.
  12. Giacomo Rodano & Emanuele Tarantino & Nicolas Serrano-Velarde, 2012. "Bankruptcy Law and the Cost of Banking Finance," Working Papers 1218, Oxford University Centre for Business Taxation.
  13. Enrico Guzzini & Donato Iacobucci, 2014. "Ownership as R&D incentive in business groups," Small Business Economics, Springer, vol. 43(1), pages 119-135, June.
  14. Enrico Guzzini & Donato Iacobucci, 2012. "The role of ownership as R&D incentive in business groups," Working Papers 1205, c.MET-05 - Centro interuniversitario di Economia Applicata alle Politiche per L'industria, lo Sviluppo locale e l'Internazionalizzazione.

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