Ownership, resources, and business-group effects on affiliate performance: Evidence from Taiwan

Business groups not only help affiliates circumvent market imperfections, but they also have great influence on the economic development of emerging markets. This study applies three ways to clarify the influence of business-group effects on affiliate performance. First, this study finds that the business group can explain a respectable portion of the variations in affiliate performance. Second, this study examines the impact of family ownership, resource abundance, and resource dispersion on affiliate performance and finds that group size and financial resources positively affect affiliate performance, while family ownership and group diversification do not have a significant effect on affiliate performance. Finally, the magnitude of business-group effects is subject to the ownership and resources of each business group. Family groups, large groups, and highly diversified groups have smaller business-group effects, while groups with high financial resources have greater business-group effects, indicating that business-group effects are heterogeneous and dependent on different group features. This study provides support to the resource-based and the institution-based views of business groups.