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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. Luong Vinh Quoc Duy & Damien Cassells, 2022. "Agglomeration and innovation effort: A longitudinal study on small and medium manufacturing enterprises in Vietnam," Review of Development Economics, Wiley Blackwell, vol. 26(3), pages 1252-1268, August.
    3. Berhanu Abegaz, 2011. "Political Parties in Business," Working Papers 113, Department of Economics, College of William and Mary.
    4. Rodriguez, Carlos & Torres, Jose, 2020. "Central coordination and profitability in large Latin American business groups," Journal of Business Research, Elsevier, vol. 119(C), pages 599-609.
    5. Carney, Michael & Estrin, Saul & Van Essen, Marc & Shapiro, Daniel, 2017. "Business groups reconsidered: beyond paragons and parasites," LSE Research Online Documents on Economics 87340, London School of Economics and Political Science, LSE Library.
    6. 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).
    7. Granda, María L., 2021. "Tax haven ownership and business groups: Tax avoidance incentives in Ecuadorian firms," Journal of Business Research, Elsevier, vol. 130(C), pages 698-708.
    8. Berhanu Abegaz, 2007. "The Speed of Structural Convergence in the Manufacturing Industries of Newly Industrializing Economies," Working Papers 67, Department of Economics, College of William and Mary.
    9. Michael Carney, 2008. "The many futures of Asian business groups," Asia Pacific Journal of Management, Springer, vol. 25(4), pages 595-613, December.

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    More about this item

    Keywords

    Diversified business group; Organizational innovation; State enterprises; China; Vietnam.;
    All these keywords.

    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 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems

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