The Nature of Diversified Business Groups: A Research Design and Two Case Studies

Abstract

Diversified business groups dominate the private sectors of most of the world’s economies. Several of these economies have undergone sudden policy changes that significantly increase domestic competitive intensity. We demonstrate how the changes in corporate scope that accompany such “competitive shocks” can be used to weigh the importance of different explanations for the existence of diversified business groups. We illustrate our reasoning by studying the restructuring of two of India’s largest business groups following a comprehensive post‐1991 package of policy reforms. The case studies also elucidate aspects of the restructuring process that should inform larger‐sample empirical analyses.