Economic Performance of Bussiness Groups and Group-affiliated Companies: Evidence from Taiwan
Date Issued
2008
Date
2008
Author(s)
Chen, Chien-Nan
Abstract
Since the late 1980s, associated with the significant economic liberalization and privatization, large business groups in Taiwan grow fast and play a dominant role in Taiwan’s economy. Business groups are often seen as the main driver of economic development in many developing economies such as Korea, India, Chile, and so on. They dominate the development of economic activities. Therefore, in recent years, the performance of diversified business groups in emerging economies gained increased attention in academy research, and has became a central research topic in management literatures. The thesis examined the performance of bussiness groups and group-affiliated companies in Taiwan by conducting three empirical studies with related but different focuses. Study 1 focuses on the group-level performance, to investigate the relationship between the structural chacteristics and performance of business group. The empirical results suggest that resource concentration is positively associated with group profitability. In addition, highly diversified business groups perform worse than limited diverisifiers. Study 2 focuses on the performance comparison between different organization forms. The empirical results show that the profitability of firms affiliated with business groups is significantly higher than that of independent, non-group-affiliates. Meanwhile, business groups and group-affiliates both show a significantly higher level of growth in size, and a higher level of lending capacities than non-affiliates. In addition to profitability, it is also found that business groups do demonstrate expansion capability and financial synergies. However, they also have low operating efficiency, implying that managing business groups is more difficult than managing independent firms. Study 3 examines the performance of group-affiliated companies. We found that, when business groups own more intangible and financial resources, the better the performance of the group-affiliated companies. Similarly, at the affiliate-level, those affiliated companies that own more financial resources significantly outperform those affiliates with limited financial resources. In terms of status, it is found that group members with higher status within a group outperform those with lower status. In addition, internal transactions within a group are positively associated with group-affiliates’ performance. All these imply the existence of a positive group-effect and an efficient internal product market among Taiwanese business groups. Given all the empirical results of the above, this dissertation aims to provide us a picture on the performance and related antecedence factors of business group and group-affiliated companies in Taiwan. Overall, Taiwan’s institutional contex is suitable for the survival and development of business groups during our analysis period.
Subjects
business group
group-affiliated company
group effects
performance
emerging economy
SDGs
Type
thesis
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