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Innovation in Business Groups

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  • Sharon Belenzon
  • Tomer Berkovitz

Abstract

Using novel data on European firms, this paper examines the effect of business group affiliation on innovation. We find that business groups foster the scale and novelty of corporate innovation. Group affiliation is particularly important in industries that rely more on external finance and have a higher degree of information asymmetry. We also find that the innovation of affiliates is less sensitive to operating cash flows. We interpret our results as supporting the 'bright side' of business group internal capital markets and explain how legal boundaries between group affiliates mitigate the inefficiencies found in internal capital markets of US conglomerates.

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Bibliographic Info

Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0833.

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Date of creation: Nov 2007
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Handle: RePEc:cep:cepdps:dp0833

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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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Keywords: business groups; innovation; internal capital markets;

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References

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Citations

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Cited by:
  1. 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.
  2. 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.
  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. 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.
  5. Bozkaya, Ant & Kerr, William R., 2013. "Labor regulations and European venture capital," Research Discussion Papers 30/2013, Bank of Finland.
  6. Boutin, Xavier & Cestone, Giacinta & Fumagalli, Chiara & Pica, Giovanni & Serrano-Velarde, Nicolas, 2013. "The deep-pocket effect of internal capital markets," Journal of Financial Economics, Elsevier, vol. 109(1), pages 122-145.
  7. Enrico Guzzini & Donato Iacobucci, 2014. "Ownership as R&D incentive in business groups," Small Business Economics, Springer, vol. 43(1), pages 119-135, June.
  8. 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.
  9. Masanori Orihara, 2013. "Business Group Taxation and R&D Activities," Discussion papers ron254, Policy Research Institute, Ministry of Finance Japan.
  10. Helmers, Christian & Rogers, Mark, 2011. "Does patenting help high-tech start-ups?," Research Policy, Elsevier, vol. 40(7), pages 1016-1027, September.
  11. 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.
  12. Pradhan, Jaya Prakash & Singh, Neelam, 2010. "Group Affiliation and Location of Indian Firms’ Foreign Acquisitions," MPRA Paper 24018, University Library of Munich, Germany.
  13. Fulvio, Castellacci, 2012. "Business Groups, Innovation and Institutional Voids in Latin America," MPRA Paper 41481, University Library of Munich, Germany.
  14. 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.

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