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Interorganizational Ties and Business Group Boundaries: Evidence from an Emerging Economy

Harvard Business School, Morgan Hall 221, Boston, Massachusetts 02163
Harvard Business School, Morgan Hall 239, Boston, Massachusetts 02163
tkhanna{at}hbs.edu
jrivkin{at}hbs.edu

We identify which types of ties best distinguish pairs of Chilean firms in the same business group from pairs of Chilean firms that are not group brethren. Overlap in owners, indirect equity holdings, and director interlocks are especially strong delineators of group boundaries. Family connections and direct equity holdings do not do as good a job of distinguishing group boundaries. These findings challenge the longstanding conventional wisdom among field-based scholars that family bonds are the defining feature of business groups in emerging markets. We speculate that family bonds are so durable that, over time, they come to pervade the entirety of an economy and lose their ability to distinguish business groups from the overall network of social and economic ties. Our techniques to identify business groups may apply to research on other types of groups—interpersonal and interorganizational—in which ties among actors are multiplex, ties are only partly observed, and group definitions are socially constructed.

Key Words: business groups; group boundaries; fragile ties; emerging economy; social network

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