Business Groups in Emerging Markets: Paragons or Parasites?
Khanna, Tarun, and
Yishay Yafeh. 2007. "Business Groups in Emerging Markets: Paragons or Parasites?"
Journal of Economic Literature,
Diversified business groups, consisting of legally independent firms operating across
diverse industries, are ubiquitous in emerging markets. Groups around the world
share certain attributes but also vary substantially in structure, ownership, and other
dimensions. This paper proposes a business group taxonomy, which is used to formulate
hypotheses and present evidence about the reasons for the formation, prevalence,
and evolution of groups in different environments. In interpreting the evidence, the
authors pay particular attention to two aspects neglected in much of the literature: the
circumstances under which groups emerge and the historical evidence on some of the
questions addressed by recent studies. They argue that business groups are responses
to different economic conditions and that, from a welfare standpoint, they can sometimes
be "paragons" and, at other times, "parasites." The authors conclude with an
agenda for future research.
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