A resource dependence perspective on the business group effect in developed markets: Evidence from Western European firms

Abstract

Recent research shows that business groups matter in developed institutional settings. However, little is known about why business groups influence affiliate performance in such environments. Using a resource dependence lens, we explain how the business group effect may be contingent on a firm's industry environment. Consistent with a resource dependence perspective, our variance decomposition analysis of 3,733 firms in Western Europe (2006–2021) shows that the business group effect is significantly larger in less munificent and more complex industry environments. However, contrary to this perspective, our results also reveal that business groups matter more in less dynamic industry environments. Overall, by examining the importance of the industry environment in explaining how much business groups matter, this paper contributes to a more nuanced understanding of the business group effect in developed markets and provides several directions for future research in this domain.