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Innovation in Business Groups

Author

Listed:
  • 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.

Suggested Citation

  • Sharon Belenzon & Tomer Berkovitz, 2010. "Innovation in Business Groups," Management Science, INFORMS, vol. 56(3), pages 519-535, March.
  • Handle: RePEc:inm:ormnsc:v:56:y:2010:i:3:p:519-535
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    File URL: http://dx.doi.org/10.1287/mnsc.1090.1107
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    References listed on IDEAS

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    More about this item

    Keywords

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

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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