Corporate Expansion During Pro-Market Reforms in Emerging Markets: The Contingent Value of Group Affiliation and Diversification
38 Pages Posted: 15 Nov 2017
Date Written: November 12, 2017
This study examines how emerging economy firms pursue growth in the domestic market during pro-market reforms. Grounding in the literature on institutional perspective on strategic adaptation during institutional transition, we propose an inverted U-shaped relationship between pro-market reforms and firms’ pursuit of growth through new investments. However, the effect of pro-market reforms is likely to vary depending on organizational forms and prior logic of competition. More specifically, we propose that business group affiliation has a positive moderating effect, while prior diversification has a negative moderating effect on the relationship between pro-market reforms and corporate expansion through new investments. Our empirical findings based on a sample of 6,072 new investment projects undertaken by 3,028 companies in India during 1995-2014 provide robust empirical support for the hypothesized relationships.
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