Business Groups as Information Resource: An Investigation of Business Group Affiliation in the Indian Software Services Industry

A tale of two levels: the diversification of business groups

“…Examining business groups' diversification patterns through the lens of inter-industry linkages may reveal that business groups are highly strategic in their diversification choices. Theoretically, it may indicate that business groups are less of an outcome of institutional voids, but more of a consequence of pursuits for critical resources and growth opportunities (Lamin, 2013;Manikandan & Ramachandran, 2014). If it is the case, business groups will certainly not lose their relevance even after institutional environments in emerging markets and developing countries reach a similar level of quality to that of developed countries.…”

“…Its member firms transact with one another in a special market-like environment characterized by rich social ties, enhanced trust, and lowered transaction costs (Granovetter, 1995;Luo & Chung, 2005). Moreover, member firms may be able to get access to the various knowledge, know-how, and social connections of other firms within the boundary of the business group even without actually transacting with them thanks to the diminished potential of opportunism (Lamin, 2013).…”

“…This will help the member firms to get access to valuable information that can lead them to come up with alternative uses of and extensions to their own existing resources (Denrell et al, 2003). Linkages with multiple other industries may also provide the member firms with crucial market information without their needing to expand into areas unrelated to their existing portfolios (Lamin, 2013).…”

“…The value of such an industry may be reduced if a member of the business group is already participating in an industry that is related to the potential target industry. By operating in an adjacent industry, the business group may already be able to access critical market information that can be gained by entering the potential target industry (Lamin, 2013).…”

“…For example, according to Lamin (2013), Indian information services firms that are business group member firms can serve more diverse industries and markets than standalone firms by tapping into the group-wide knowledge and social capital. She finds that this role of the business group as an information source becomes more substantial as the group-level diversification increases.…”