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The Riddle of the Great Pyramids

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  • Randall Morck

Abstract

Large pyramidal family controlled business groups are the predominant form of business organization outside America, Britain, Germany, and Japan. Large pyramidal groups comprising dozens, even hundreds, or listed and unlisted firms place the governance of large swathes of many countries' big business sectors in the hands of a few of their wealthiest families. These structures plausibly substitute for weak market institutions in economies undergoing rapid early-stage industrialization. They may also substitute for weak governments in coordinating Big Push growth programs to establish numerous interdependent simultaneously. However, no such role is evident in developed or in slowly growing developing economies, where such structures appear prone to agency problems and political rent-seeking. If sufficiently large, they may also add to economy volatility by rendering the risk of misgovernance systematic, rather than firm-specific.

Suggested Citation

  • Randall Morck, 2009. "The Riddle of the Great Pyramids," NBER Working Papers 14858, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:14858
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    Cited by:

    1. Lee, Ji-Hwan & Gaur, Ajai S., 2013. "Managing multi-business firms: A comparison between Korean chaebols and diversified U.S. firms," Journal of World Business, Elsevier, vol. 48(4), pages 443-454.
    2. Evžen Kočenda & Jan Hanousek, 2012. "State ownership and control in the Czech Republic," Economic Change and Restructuring, Springer, vol. 45(3), pages 157-191, August.
    3. Raveendra Chittoor & Prashant Kale & Phanish Puranam, 2015. "Business groups in developing capital markets: Towards a complementarity perspective," Strategic Management Journal, Wiley Blackwell, vol. 36(9), pages 1277-1296, September.

    More about this item

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • P1 - Economic Systems - - Capitalist Systems
    • P5 - Economic Systems - - Comparative Economic Systems
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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