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The origins of business groups in China: An empirical testing of the three paths and the three theories

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  • Keun Lee
  • Xuehua Jin

Abstract

The available empirical literature tends to focus on the performance comparison between business groups (BGs) and non-business groups, and there is no study that quantitatively verifies the origins of the business groups, particularly in China. This paper uses the survey data of SOEs (state-owned enterprises) in China to verify the three paths toward business groups, such as M&As (merger and acquisitions), spin-offs and joint ventures. This study discusses three alternative theories to explain the emergence of the business groups in China. These are the market-based view, the state-activism view and the resource-based view. This paper found that the greater autonomy given after changing into a shareholding corporation is one of the most consistent and significant factors leading to the business group, regardless of the paths. First, this implies that SOEs have gone from traditional SOEs, to shareholding corporations, and then finally to business groups. Second, it finds that there are certain differences among the three paths toward the business group. The degree of market competition and control by the city-level government are the significant variables in the path via M&A, toward the business group. This is consistent with the state activism view. The significant variables for the spin-off path are the low leverages and the connection with the state. This is consistent with the resource-based view. The JV (joint venture) path seems to be consistent with the market-based and resource-based view, with the significant variables of private/foreign owner-controller, high investment activity, low leverage and size.

Suggested Citation

  • Keun Lee & Xuehua Jin, 2009. "The origins of business groups in China: An empirical testing of the three paths and the three theories," Business History, Taylor & Francis Journals, vol. 51(1), pages 77-99.
  • Handle: RePEc:taf:bushst:v:51:y:2009:i:1:p:77-99
    DOI: 10.1080/00076790802602206
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    Citations

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    Cited by:

    1. Andrea Goldstein, 2013. "The Political Economy of Global Business: the Case of the BRICs," Global Policy, London School of Economics and Political Science, vol. 4(2), pages 162-172, May.
    2. Nam, Kyung-Min, 2015. "Compact organizational space and technological catch-up: Comparison of China's three leading automotive groups," Research Policy, Elsevier, vol. 44(1), pages 258-272.
    3. Wu, Lichao & Wei, Yingqi & Wang, Chengang, 2021. "Disentangling the effects of business groups in the innovation-export relationship," Research Policy, Elsevier, vol. 50(1).
    4. Yulia Muratova & Jakob Arnoldi & Xin Chen & Joachim Scholderer, 2018. "Political rotations and cross-province firm acquisitions in China," Asian Business & Management, Palgrave Macmillan, vol. 17(1), pages 37-58, February.
    5. Lee, Keun & Kim, Byung-Yeon & Park, Young-Yoon & Sanidas, Elias, 2013. "Big businesses and economic growth: Identifying a binding constraint for growth with country panel analysis," Journal of Comparative Economics, Elsevier, vol. 41(2), pages 561-582.
    6. Pradhan, Jaya Prakash & Singh, Neelam, 2010. "Group Affiliation and Location of Indian Firms’ Foreign Acquisitions," MPRA Paper 24018, University Library of Munich, Germany.
    7. Jakob Arnoldi & Yulia Muratova, 2019. "Unrelated acquisitions in China: The role of political ownership and political connections," Asia Pacific Journal of Management, Springer, vol. 36(1), pages 113-134, March.

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