Business Groups and Corporate Governance: Review, Synthesis, and Extension

Abstract

Manuscript Type: ReviewResearch Question/Issue: This article addresses the diverse and fragmented literature about the corporate governance of business groups. We collected scholarly work on the subject, proposed a conceptualization of the main research questions they addressed, classified them according to their research themes, and identified future research directions. Research Findings/Insights: Academic research on corporate governance in business groups has been increasing but is still a developing field. Available analyses make use of the main theoretical frameworks in general in corporate governance research. However, there are several areas of analysis that still need stronger conceptualization and empirical work, leaving many opportunities for future studies and a pressing need to substantiate and extend the findings of previous studies. Theoretical/Academic Implications: Our study identifies four avenues for future research on corporate governance in business groups. This includes the examination of the complex relationships and co-evolutionary processes among corporate governance attributes, and organizational and performance outcomes of business groups; the effects of ownership goals on groups' performance outcomes; the role and the actual functioning of boards inside business groups; and the analyses of cross-national comparison and long-term development of the governance of business groups. Practitioner/Policy Implications: This research allows practitioners and policymakers to get a better understanding of the crucial areas regarding business groups and their governance, and offers pathways to examine inside the "black-box" of business groups.

Advancing the Corporate Governance Research Agenda

“…Their article offers an excellent summary of the current literature, concluding by offering future research directions. Colli and Colpan (2016) engage in an extensive review of a massive yet "siloed" (or segmented) literature on business groups. Their goal is to dissect from this large body of research what have we learned on how business groups design their corporate governance.…”

“…For instance, a recent stream of research has addressed corporate governance in emerging economies such as China and India, whose institutional environments are less developed or quite different from those of advanced economies (Chen, Liu, & Lin, 2015;Huyghebaert & Wang, 2012;Lattemann, Fetscherin, Alon, Li, & Schneider, 2009;Li, 2013;Nagar & Sen, 2016;Singh & Gaur, 2009;Zhang, Chen, & Feng, 2014;Zhang, Gao, Guan, & Jiang, 2014). It is claimed that business groups are an organizational form that can overcome market imperfections prevalent in emerging economies (Colpan, Hikino, & Lincoln, 2010; They exhibit unique governance challenges as well as attributes to overcome broader strategic issues such as institutional voids or competitiveness, as summarized by Colli and Colpan's (2016) article in this special issue. In addition, institutional elements in a country tend to complement each other, giving rise to the varieties of capitalism (Hall & Soskice, 2002), and national business systems (Whitley, 1999).…”

How do board ties affect the adoption of new practices? The effects of managerial interest and hierarchical power

“…We have incorporated the hierarchical relationship between a prior adopter and the focal firm, thereby suggesting that board interlocks are sometimes embedded in interfirm ties and reflect underlying power relationships. Board interlocks are prevalent in many institutional contexts, but such ties are often used as an interfirm control mechanism within a business group, especially in emerging economies (Boyd & Hoskisson, ; Colli & Colpan, ) but also in some developed economies (Colpan & Hikino, ; Lincoln et al, ). This study brings hierarchical power relationships into board interlock research.…”

“…This suggests that executives sent by those corporate owners are able to yield power based not only on equity stakes but sometimes also on the resource (Casiaro & Piscorski, 2005) that the core or higher status institution can provide to the focal firms (Zona et al, 2018). This practice is similar to how core firms in a business group control other firms in other institutional contexts such as South Korea, Turkey, and some Western countries (Boyd & Hoskisson, 2010;Colli & Colpan, 2016;Colpan & Hikino, 2018). We often observe similar board ties created by executive transfers in the context of equity strategic alliances, too.…”

Collusive Stability and Corporate Governance: The Case of UK Firms

“…A price war is likely to start among the partners within the collusive if they find exceptional earning. Similarly, Colli and Colpan (2016) identified that exceptional earnings might result in decreased overall earnings. The collusive activities are facilitated by successful collusive that is possessed by the concentrated industries (Bolotova, Connor, & Miller, 2008).…”