The Diversified Business Group as an Innovative Organizational Model for Large State-Enterprise Reform in China and Vietnam
The diversified business group (DBG) is a ubiquitous institution in developing economies. It is a formal inter-firm network that typically involves financial institutions, distributors and manufacturers. Groupwise diversification is viewed by some as a novel form of organizational innovation by entrepreneurial tycoons while others see it as an instrument for rent seeking. Inspired by Korean chaebols but chastened by Russian financial-industrial groups, China and Vietnam are creating business groups out of state enterprises. After reviewing the theory and cross-country experience, this paper concludes that selective economic grouping can be an efficient transitional organization. DBGs can facilitate government monitoring, exploitation of scale economies for scarce managerial talent, better risk management, and realization of network and scope economies. Success in incubating national champions is, however, predicated on a high technocratic capability for restraining abuse of market power, nurturing competitive market institutions, properly sequencing large scale privatization, and crafting WTO-compatible industrial and technology policies.
|Date of creation:||07 Jan 2005|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (757) 221-4311
Fax: (757) 221-2390
Web page: http://www.wm.edu/economics/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Yishay Yafeh, 2002. "An International Perspective of Japan's Corporate Groups and their Prospects," NBER Working Papers 9386, National Bureau of Economic Research, Inc.
- Watanabe, Mariko, 2002. "Holding company risk in China: a final step of state-owned enterprises reform and an emerging problem of corporate governance," China Economic Review, Elsevier, vol. 13(4), pages 373-381, December.
- Jefferson, Gary H. & Rawski, Thomas G. & Li, Wang & Yuxin, Zheng, 2000. "Ownership, Productivity Change, and Financial Performance in Chinese Industry," Journal of Comparative Economics, Elsevier, vol. 28(4), pages 786-813, December.
- Jeong-Pyo Choi & Thomas Cowing, 2002. "Diversification, Concentration and Economic Performance: Korean Business Groups," Review of Industrial Organization, Springer, vol. 21(3), pages 271-282, November.
- Perotti, Enrico C. & Gelfer, Stanislav, 2001. "Red barons or robber barons? Governance and investment in Russian financial-industrial groups," European Economic Review, Elsevier, vol. 45(9), pages 1601-1617, October.
- Peter Nolan, 2002. "China and the global business revolution," Cambridge Journal of Economics, Oxford University Press, vol. 26(1), pages 119-137, January.
- Mody, Ashoka, 1999. "Industrial policy after the East Asian crisis - from"outward orientation"to new internal capabilities?," Policy Research Working Paper Series 2112, The World Bank.
- Kee-Hong Bae & Jun-Koo Kang & Jin-Mo Kim, 2002. "Tunneling or Value Added? Evidence from Mergers by Korean Business Groups," Journal of Finance, American Finance Association, vol. 57(6), pages 2695-2740, December.
- Claessens, Stijn & Fan, Joseph P.H. & Lang, Larry H.P., 2002.
"The Benefits and Costs of Group Affiliation: Evidence from East Asia,"
Working Paper Series
UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
- Claessens, Stijn & Fan, Joseph P.H. & Lang, Larry H.P., 2006. "The benefits and costs of group affiliation: Evidence from East Asia," Emerging Markets Review, Elsevier, vol. 7(1), pages 1-26, March.
- Claessens, Stijn & Fan, Joseph P.H. & Lang, Larry, 2002. "The Benefits and Costs of Group Affiliation: Evidence from East Asia," CEPR Discussion Papers 3364, C.E.P.R. Discussion Papers.
- Hicheon Kim & Robert E. Hoskisson & Laszlo Tihanyi & Jaebum Hong, 2004. "The Evolution and Restructuring of Diversified Business Groups in Emerging Markets: The Lessons from Chaebols in Korea," Asia Pacific Journal of Management, Springer, vol. 21(1_2), pages 25-48, 03.
- Khanna, Tarun, 2000. "Business groups and social welfare in emerging markets: Existing evidence and unanswered questions," European Economic Review, Elsevier, vol. 44(4-6), pages 748-761, May.
- Marianne Bertrand & Paras Mehta & Sendhil Mullainathan, 2002.
"Ferreting Out Tunneling: An Application To Indian Business Groups,"
The Quarterly Journal of Economics,
MIT Press, vol. 117(1), pages 121-148, February.
- Marianne Bertrand & Paras Mehta & Sendhil Mullainathan, 2000. "Ferreting Out Tunneling: An Application to Indian Business Groups," NBER Working Papers 7952, National Bureau of Economic Research, Inc.
- Kock, Carl J & Guillen, Mauro F, 2001. "Strategy and Structure in Developing Countries: Business Groups as an Evolutionary Response to Opportunities for Unrelated Diversification," Industrial and Corporate Change, Oxford University Press, vol. 10(1), pages 77-113, March.
- Claessens, Stijn & Djankov, Simeon & Lang, Larry H. P., 2000. "The separation of ownership and control in East Asian Corporations," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 81-112.
- Goto, Akira, 1982. "Business groups in a market economy," European Economic Review, Elsevier, vol. 19(1), pages 53-70.
- Jeffry M. Netter & William L. Megginson, 2001. "From State to Market: A Survey of Empirical Studies on Privatization," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 321-389, June.
- Kornai, Janos, 1992. "The Socialist System: The Political Economy of Communism," OUP Catalogue, Oxford University Press, number 9780198287766, March.
- Aoki, Masahiko, 1990. "Toward an Economic Model of the Japanese Firm," Journal of Economic Literature, American Economic Association, vol. 28(1), pages 1-27, March.
When requesting a correction, please mention this item's handle: RePEc:cwm:wpaper:13. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Daifeng He)or (Alfredo Pereira)
If references are entirely missing, you can add them using this form.