Journal article

Innovation in business groups

Belenzon S, Berkovitz T, London School of Economics and Political Science. Centre for Economic Performance. ...see all

CEP discussion paper no. 833 (2007)

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Abstract

Using novel data on European firms, this paper examines the effect of business group affiliation on innovation. We find that business groups foster the scale and novelty of corporate innovation. Group affiliation is particularly important in industries that rely more on external finance and have a higher degree of information asymmetry. We also find that the innovation of affiliates is less sensitive to operating cash flows. We interpret our results as supporting the 'bright side' of business group internal capital markets and explain how legal boundaries between group affiliates mitigate the inefficiencies found in internal capital markets of US conglomerates.

Author-supplied keywords

  • BUSINESS GROUPS
  • INNOVATION
  • Internal capital markets

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  • PMID: 15127047

Authors

  • Sharon Belenzon

  • Tomer Berkovitz

  • London School of Economics and Political Science. Centre for Economic Performance.

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