How do business group affiliated firm in emerging markets outperform standalone firms? A knowledge-based view

Abstract

Purpose This study seeks to understand how business group-affiliated firms perform in emerging markets. Previous studies identify that in spite of changes in the competitive landscape, seemingly counter-intuitively, business group affiliates outperform their standalone counterparts in emerging markets. This study adopts a knowledge-based view to resolve this apparent paradox. Design/methodology/approach This study uses a problematization methodology to qualitatively analyze the strategic decisions of Indian business group-affiliated firms. This study cross-validates their analysis with the empirical results available in published academic and practitioner articles. Findings Previous studies explain this outperformance paradox based on assumptions that include filling institutional voids, access to strategic resources and leveraging political connections. By questioning these assumptions, this study identifies an alternative explanation that is based on affiliates’ ability to adopt a strategic approach that balances knowledge capital acquired through international expansion and innovation. Practical implications The findings have important implications for managers of business group-affiliated firms in emerging markets, as well as for those in developed markets seeking to compete or collaborate in emerging markets. Originality/value This study provides a framework for managers of business group affiliates to identify suitable pathways to higher levels of competitive advantage.