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Innovation in Business Groups

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Author Info

  • 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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  1. Bronwyn H. Hall & Adam Jaffe & Manuel Trajtenberg, 2005. "Market Value and Patent Citations," RAND Journal of Economics, The RAND Corporation, vol. 36(1), pages 16-38, Spring.
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  7. Zvi Griliches, 1998. "Issues in Assessing the Contribution of Research and Development to Productivity Growth," NBER Chapters, in: R&D and Productivity: The Econometric Evidence, pages 17-45 National Bureau of Economic Research, Inc.
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  9. Rafael La Porta & Florencio Lopez-De-Silanes & Andrei Shleifer, 1999. "Corporate Ownership Around the World," Journal of Finance, American Finance Association, vol. 54(2), pages 471-517, 04.
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  11. Blundell, Richard & Griffith, Rachel & van Reenen, John, 1999. "Market Share, Market Value and Innovation in a Panel of British Manufacturing Firms," Review of Economic Studies, Wiley Blackwell, vol. 66(3), pages 529-54, July.
  12. Scherer, F. M., 1982. "Inter-industry technology flows in the United States," Research Policy, Elsevier, vol. 11(4), pages 227-245, August.
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  16. Heitor V. Almeida & Daniel Wolfenzon, 2006. "A Theory of Pyramidal Ownership and Family Business Groups," Journal of Finance, American Finance Association, vol. 61(6), pages 2637-2680, December.
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Citations

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Cited by:
  1. Xavier Boutin & Giacinta Cestone & Chiara Fumagalli & Giovanni Pica & Nicolas Serrano-Velarde, 2012. "The Deep-Pocket Effect of Internal Capital Markets," Working Papers 1217, Oxford University Centre for Business Taxation.
  2. Helmers, Christian & Rogers, Mark, 2011. "Does patenting help high-tech start-ups?," Research Policy, Elsevier, vol. 40(7), pages 1016-1027, September.
  3. 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.
  4. 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.
  5. 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.
  6. Nicholas Bloom & Mirko Draca & John Van Reenen, 2011. "Trade Induced Technical Change? The Impact of Chinese Imports on Innovation, IT and Productivity," CEP Discussion Papers dp1000, Centre for Economic Performance, LSE.
  7. Masanori Orihara, 2013. "Business Group Taxation and R&D Activities," Discussion papers ron254, Policy Research Institute, Ministry of Finance Japan.
  8. Fulvio, Castellacci, 2012. "Business Groups, Innovation and Institutional Voids in Latin America," MPRA Paper 41481, University Library of Munich, Germany.
  9. Bozkaya, Ant & Kerr, William R., 2013. "Labor regulations and European venture capital," Research Discussion Papers 30/2013, Bank of Finland.
  10. 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.
  11. 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.
  12. 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.
  13. Pradhan, Jaya Prakash & Singh, Neelam, 2010. "Group Affiliation and Location of Indian Firms’ Foreign Acquisitions," MPRA Paper 24018, University Library of Munich, Germany.

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