Explaining Diversified Business Groups Failure & Focused Business Groups Success in India

XLRI Jamshedpur, Working Paper Series No. 2001-07

11 Pages Posted: 6 Jun 2006

See all articles by Ram Kumar Kakani

Ram Kumar Kakani

Lal Bahadur Shastri National Academy of Administration (LBSNAA)

Date Written: July 2001

Abstract

In most countries of the developing world such as India, Korea, and Thailand, business groups (or business houses) dominate the industrial scenario. We studied the linkage between financial performance and corporate characteristics (including their product diversity) of 240 large Indian business groups for a time span spanning 12 years (1987 to 1999). We found that as in the developed world, most conglomerates are value destroyers in the developing world too. Using large number of cases and examples, this paper explains the failure of diversified business groups and analyses the reasons behind the success of focused business groups. Presence in large number of product portfolios with poor product market power, no distinct economies or even strategic advantage in any of them has left most of the diversified groups destroying shareholder value and having poor accounting profitability in comparison to their focused counter parts.

Keywords: Business Groups, Business Networks, Diversification, Conglomerate, Performance, Product Diversification, International Diversification, India

JEL Classification: L10, M10, L20, G34

Suggested Citation

Kakani, Ram Kumar, Explaining Diversified Business Groups Failure & Focused Business Groups Success in India (July 2001). XLRI Jamshedpur, Working Paper Series No. 2001-07, Available at SSRN: https://ssrn.com/abstract=906455 or http://dx.doi.org/10.2139/ssrn.906455

Ram Kumar Kakani (Contact Author)

Lal Bahadur Shastri National Academy of Administration (LBSNAA) ( email )

Mussorie, Uttarakhand 248179
India

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
654
Abstract Views
4,389
rank
43,297
PlumX Metrics