Do business group characteristics matter? An exploration on the drivers of performance variation

Research on business groups and their relationship with performance outcomes has been a topic of interest during the last three decades. We seek to contribute to this literature by focusing on specific business group characteristics and the impact of foreign competition on the performance of firms affiliated with business groups. Using HLM models on a sample of 7710 affiliates from 345 business groups from India over the years 1996-2007, our empirical analysis suggests that membership in a business group contributes to 6% of the performance variation of affiliate firms. Specifically, we find that the importance of business group to performance varies by extent of group diversification, size, and age of the group contingent on the extent of foreign competition.