Business Group Affiliation and Foreign Subsidiary Performance

Sarah Castaldi*, Sathyajit R. Gubbi, Vincent E. Kunst, Sjoerd Beugelsdijk

*Corresponding author for this work

Research output: Contribution to journalJournal articleResearch


Research Summary : Business group (BG) affiliation affects the strategic behavior and performance of firms. Until now it has been theoretically unclear and insufficiently empirically tested whether affiliation advantages extend to the foreign subsidiaries of group members. We attempt to determine if they do, and if so, to identify the boundary conditions that matter. We analyze a large panel of 451 foreign subsidiaries of 136 Indian multinational firms over the 2003–2012 period and find that BG affiliation does enhance foreign subsidiary performance when host‐market institutions are weak and when the parent is in manufacturing.
Managerial Summary : Our research speaks directly to managers of multinational firms who seek to leverage the benefits of BG affiliation across national borders. We show that BG affiliation is only beneficial when the foreign subsidiary is located in a country characterized by weak institutions and when the parent is in manufacturing. If, on the other hand, the foreign subsidiary is in a country with well‐functioning institutions and the parent in services, managers will not be able to count on BG advantages, rather they will have to develop competitive capabilities locally, that is, the foreign subsidiary will have to function more like a standalone firm.
Original languageEnglish
JournalGlobal Strategy Journal
Issue number4
Pages (from-to)595-617
Number of pages23
Publication statusPublished - Nov 2019


  • Business groups
  • Foreign subsidiary
  • Institutional quality
  • Subsidiary performance

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