Institutional Voids or Organizational Resilience? Business Groups, Innovation, and Market Development in Latin America

The paper compares the innovativeness of group-affiliated firms (GAFs) and standalone firms (SAFs), and it investigates how country-specific institutional factors affect the group-innovation relationship. The paper analyzes the contrasting predictions of two competing views: the institutional voids and the organizational resilience theses. The empirical analysis focuses on a large sample of firms in Latin America. In line with the organizational resilience thesis, the results point out that the superior innovation performance of GAFs is stronger for national economies with more efficient financial, legal, and labor market institutions.