Environmental Versus Firm-level Determinants of Firm Growth: A Structural Equation Modelling for Micro-level Analysis of Business Group Firms

Abstract

The study of the determinants of firms’ growth should consider both internal and external factors: these are the firms’ organizational features and the external competitive environment, which is also named market type, in which the firm operates. Among the internal factors, the organization model is the most important one. Among the factors that define the influence of market structure on a firm’s performance, there is business group affiliation, market concentration and business group heterogeneity. The aim of this study is to determine, in the context of business group affiliated firms, if there exists an influence of these internal and external factors. Using the structural equation model approach, results showed that a firm’s growth is influenced by both factors, and that the internal ones are prevalent.