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Business Groups, Innovation and Institutional Voids in Latin America


  • Fulvio, Castellacci


The paper presents an empirical analysis of the innovative activities of business groups in Latin America. It compares the innovativeness of group-affiliated firms (GAFs) and standalone firms (SAFs), and it investigates how country-specific institutional factors – financial, legal, and labor market institutions – affect the group-innovation relationship. The empirical analysis is based on the most recent wave of the World Bank Enterprise Survey (period 2010-2011), and it focuses on a sample of 6500 manufacturing firms across 20 Latin American countries. The econometric results point out two major conclusions. First, GAFs are more innovative than SAFs: we estimate the innovation propensity of GAFs to be 9% higher than that of SAFs. Secondly, across countries, the innovativeness of GAFs is higher for national economies with a better institutional system than for countries with a less efficient institutional set up.

Suggested Citation

  • Fulvio, Castellacci, 2012. "Business Groups, Innovation and Institutional Voids in Latin America," MPRA Paper 41481, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:41481

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    References listed on IDEAS

    1. Sharon Belenzon & Tomer Berkovitz, 2010. "Innovation in Business Groups," Management Science, INFORMS, vol. 56(3), pages 519-535, March.
    2. Juan C. Botero & Simeon Djankov & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2004. "The Regulation of Labor," The Quarterly Journal of Economics, Oxford University Press, vol. 119(4), pages 1339-1382.
    3. Ishtiaq P. Mahmood & Will Mitchell, 2004. "Two Faces: Effects of Business Groups on Innovation in Emerging Economies," Management Science, INFORMS, vol. 50(10), pages 1348-1365, October.
    4. 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.
    5. Marco Caliendo & Sabine Kopeinig, 2008. "Some Practical Guidance For The Implementation Of Propensity Score Matching," Journal of Economic Surveys, Wiley Blackwell, vol. 22(1), pages 31-72, February.
    6. Greene, William, 2010. "Testing hypotheses about interaction terms in nonlinear models," Economics Letters, Elsevier, vol. 107(2), pages 291-296, May.
    7. Castellacci, Fulvio & Natera, Jose Miguel, 2013. "The dynamics of national innovation systems: A panel cointegration analysis of the coevolution between innovative capability and absorptive capacity," Research Policy, Elsevier, vol. 42(3), pages 579-594.
    8. Fulvio Castellacci, 2011. "Closing the Technology Gap?," Review of Development Economics, Wiley Blackwell, vol. 15(1), pages 180-197, February.
    9. Castellacci, Fulvio & Archibugi, Daniele, 2008. "The technology clubs: The distribution of knowledge across nations," Research Policy, Elsevier, vol. 37(10), pages 1659-1673, December.
    10. Tarun Khanna & Yishay Yafeh, 2007. "Business Groups in Emerging Markets: Paragons or Parasites?," Journal of Economic Literature, American Economic Association, vol. 45(2), pages 331-372, June.
    11. Mahmood, Ishtiaq P. & Lee, Chang-Yang, 2004. "Business groups: entry barrier-innovation debate revisited," Journal of Economic Behavior & Organization, Elsevier, vol. 54(4), pages 513-531, August.
    12. Ai, Chunrong & Norton, Edward C., 2003. "Interaction terms in logit and probit models," Economics Letters, Elsevier, vol. 80(1), pages 123-129, July.
    13. Tarun Khanna & Yishay Yafeh, 2005. "Business Groups and Risk Sharing around the World," The Journal of Business, University of Chicago Press, vol. 78(1), pages 301-340, January.
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    More about this item


    Business groups; innovation; institutional voids; emerging economies; Latin America;

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • D2 - Microeconomics - - Production and Organizations
    • P5 - Economic Systems - - Comparative Economic Systems
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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