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The Diversified Business Group as an Innovative Organizational Model for Large State-Enterprise Reform in China and Vietnam

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  • Berhanu Abegaz

    () (Department of Economics, College of William and Mary)

Abstract

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.

Suggested Citation

  • Berhanu Abegaz, 2005. "The Diversified Business Group as an Innovative Organizational Model for Large State-Enterprise Reform in China and Vietnam," Working Papers 13, Department of Economics, College of William and Mary.
  • Handle: RePEc:cwm:wpaper:13
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    File URL: http://economics.wm.edu/wp/cwm_wp13.pdf
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    References listed on IDEAS

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    Cited by:

    1. Berhanu Abegaz, 2008. "The Speed Of Structural Convergence In The Manufacturing Industries Of Newly Industrialising Economies," South African Journal of Economics, Economic Society of South Africa, vol. 76(s2), pages 89-109, August.
    2. Michael Carney, 2008. "The many futures of Asian business groups," Asia Pacific Journal of Management, Springer, vol. 25(4), pages 595-613, December.
    3. Roderick Bugador, 2015. "The Stages Of International Growth Of The Business Groups From Emerging Economies," Organizations and Markets in Emerging Economies, Faculty of Economics, Vilnius University, vol. 6(2).

    More about this item

    Keywords

    Diversified business group; Organizational innovation; State enterprises; China; Vietnam.;

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • L3 - Industrial Organization - - Nonprofit Organizations and Public Enterprise
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • P5 - Economic Systems - - Comparative Economic Systems

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