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Business Groups in the WestOrigins, Evolution, and Resilience$
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Asli M. Colpan and Takashi Hikino

Print publication date: 2018

Print ISBN-13: 9780198717973

Published to Oxford Scholarship Online: April 2018

DOI: 10.1093/oso/9780198717973.001.0001

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The United States in Contemporary Perspectives

The United States in Contemporary Perspectives

Evolving Forms, Strategy, and Performance

(p.402) 15 The United States in Contemporary Perspectives
Business Groups in the West

David Collis

Bharat Anand

J. Yo-Jud Cheng

Oxford University Press

While classic business groups are not common in the US today, the phenomenon of unrelated diversification remains prevalent, accounting for about 15 percent of corporate assets. Given the presumed efficiency of markets and the absence of institutional voids in the US, the continuing presence of this organizational form is perhaps a surprise. We document that although certain types of diversified entities—notably, the conglomerate—have declined in importance over time in the US, they have given way to different organizational forms—particularly private equity. We establish that there exists considerable systematic heterogeneity in returns across both types of unrelated diversified firms, which can be masked when focusing only on the average performance of diversified firms. We offer a simple theoretical framework to explain the first two facts: why unrelated diversification continues to persist in the US, and how certain unrelated diversifiers continue to create economic value even as market efficiency improves.

Keywords:   business groups, United States, unrelated diversification, conglomerates, private equity, corporate strategy

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