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The Nature of the Business Group: Power, Relational Contracts and Scope

Author

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  • Raja Kali

    (Raja Kali, Department of Economics, Sam M. Walton College of Business, University of Arkansas Fayetteville. E-mail: rkali@walton.uark.edu)

Abstract

We propose a framework for understanding the business group, a hybrid organizational form that occupies the middle ground between firm and market and is a prominent feature of emerging economies. These organizations are characterized by varying levels of diversification and integration. We provide an explanation for the covariation, both positive and negative, in the scope, scale and ‘strength’ of integration of business groups. This notion of integration embodies the strength of ties that connect disparate subsidiary activities to the core of the business group, and is, we believe, novel to the theory of the firm. We also suggest the framework may be useful for understanding internal organizational hierarchy and multiproduct firms.JEL: L22, L14, M13, D23

Suggested Citation

  • Raja Kali, 2013. "The Nature of the Business Group: Power, Relational Contracts and Scope," Journal of Interdisciplinary Economics, , vol. 25(1-2), pages 147-175, January.
    • Handle: RePEc:sae:jinter:v:25:y:2013:i:1-2:p:147-175
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    Citations

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    Cited by:

    1. Theodore Tsekeris, 2017. "Network analysis of inter-sectoral relationships and key sectors in the Greek economy," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 12(2), pages 413-435, July.

    More about this item

    Keywords

    Business group; boundaries of the firm; scope; scale; integration; explicit and implicit contracts;
    All these keywords.

    JEL classification:

    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights

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