When and how does business group affiliation promote firm innovation? A tale of two emerging economies

When and how does business group affiliation promote firm innovation? A tale of two emerging economies

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Article ID: iaor20071136
Country: United States
Volume: 17
Issue: 5
Start Page Number: 637
End Page Number: 656
Publication Date: Sep 2006
Journal: Organization Science
Authors: , ,
Keywords: innovation
Abstract:

Using a comparative institutional perspective, we explore whether business groups' roles in facilitating affiliate firms' innovation varies by country and time period. We compare the innovativeness of firms affiliated with business groups to that of independent firms in two emerging economies: South Korea and Taiwan. On average, business group affiliates outperform independent firms in South Korea, but not in Taiwan, and in the early 1990s, but not in the late 1990s. The existence of alternative institutional infrastructures for innovation might explain these differences. Groups' abilities to share technological knowledge and financial resources among affiliates enables them to create value by promoting innovation in emerging economies, but groups' diversification might inhibit individual affiliates' innovativeness.

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