The Multi-entity Structure and Control in Business Groups

The literature on business groups in “emerging” markets emphasizes several dimensions along which the group form may differ from its presumed opposite—the stand-alone firm. However, what does not usually capture too much attention is that the business group structure in India can and does incorporate several companies/firms which are neither publicly listed nor even individually large. So much so that several apparently stand-alone companies can also be parts of networks connecting them to other such companies/firms. The inter-connections which link these several entities are, however, crucial inter alia to the exercise of control by business families over capital and wealth far in excess of what is legally owned by them. Concentrated control over assets and concentrated “ownership” of companies are the related outcomes of these and this provides an important reason for the resilience of the multi-entity group structure. The specific structure of the network of individual business groups and their participating entities, however, change over time in response to changing institutional contexts as well as due to its endogenous dynamics. This paper seeks to develop these propositions using the specific case of the Reliance group as an illustration and further argue that liberalization, instead of developing a “market for corporate control,” has only served to reinforce this method of “entrenchment.”