2698 results in Foundation Books
5 - Empirical Results and Managerial Implications
- Ram Kumar Kakani, Professor, XLRI Xavier Institute of Management, Jamshedpur, India, Santosh Sangem, Assistant Professor, Finance, XLRI Xavier Institute of Management, Jamshedpur, India, Madhvi Sethi, Associate Professor, SIBM, Symbiosis University, Bengaluru
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- Indian Business Groups: Strategy and Performance
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- 13 July 2022
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- 01 January 2015, pp 112-168
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Summary
Having identified a set of research questions in Chapter 4, we present in this chapter the answer to those research questions. For each research question raised, we present relevant regression results (in brief) of important variables and evaluate the performance−characteristics linkage of Indian business groups from Section 5.1 to Section 5.9. We discuss the empirical results further in Section 5.10 and deduce few take homes in the last two sections, i.e., 5.11 and 5.12. Throughout this chapter, we follow the following notation for significant independent variables in the regressions based on their significance:
(a) A single asterisk (*) beside the coefficient denotes significance at the 90 per cent level of confidence.
(b) Two asterisks (**) beside the coefficient denotes significance at the 95 per cent level of confidence.
(c) Three asterisks (***) beside the coefficient denotes significance at the 99 per cent level of confidence.
Shareholder value and group characteristics
Research question # 1:
What is the relationship of Indian business groups’ shareholder value creation (marketbased financial performance measure) with their diversification strategy and other group characteristics? Is the relationship between the Indian business groups’ aggregate financial performance and the product diversification strategy static, irrespective of the changes in the economic policies of the state (liberalization) and the economic cycles, facing the industry?
We had used two dependent variables for shareholder value dimension, namely Modified Tobin's Q ratio (TOBIN) and Market Price over Book Value ratio (PBV). Our regression result indicates that product diversification strategy (both related and unrelated), long-term solvency position, and size of the group were highly significant factors in determining shareholder value maximization for all the study periods. While product diversification and working capital ratios were negatively related, size of the group was positively related to shareholder value maximization. Age was negatively related to value during the pre-liberalization period only. Current ratio and international diversification were positively related to value creation in the first two periods, i.e., pre-liberalization and post-liberalization growth periods. Net exports were positively related to value creation in the post-liberalization recessionary period. We also found that leverage of a business group had no impact on Tobin's Q Ratio during any of the three periods.
2 - E-Governance in Public Policy Discourse in India
- Pradeep Nayak, Joint Commissioner, National Land Records Modernisation Programme, Government of India, Administrative Training Institute, Bhubaneswar, Odisha
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- The State and Land Records Modernisation
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- 02 December 2022
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The discourse of e-governance has struck its root in India as a consequence of her achievement in IT sector and the English educated middle class population. Thanks to the liberal economic reforms, the rise of IT professionals and software export earnings has led some observers to propose that ICTs will enable India to leapfrog industrial age economies to information age. Undoubtedly, such developments have also strong significance for governance reforms and citizenship. There is growing influence of the IT entrepreneurs and NGOs who advocate the adoption of IT corporate governance model to the public bureaucracy. Ideologically, e-governance discourse in India promises to bring political transparency and techno-managerial notion of governance. In India, the whole discourse of e-governance is anchored on using ICTs to prevent corruption. Mazzarella observes:
The Indian incorporation of the information society did not just invoke both a new commodity fetish (sleek consumer computing) and a new human right (the right to information). Computers networked by means of the Internet…offer a new weapon against the most ingrained of official infirmities: corruption… the attraction was rooted in a naïve notion of the inherent incorruptibility of the digitised information, as opposed to the surreptitious modifications to which handwritten ledger entries were so manifestly subject.
In understanding the current e-governance discourse in India, it is necessary to understand the contemporary ideological trends and practices in public policy sphere. Govindan Parayil locates the euphoria of IT led development beliefs in the context of contemporary neoliberal developmental discourses advocated by donor agencies and many civil society organisations in the context of failure of the modernisation and dependency theories of development. India is not immune from such intellectual trends. ‘ICT fetishism and cyber libertarian development thinking has enveloped the discourse on information revolution and socio-economic development in the world.’
Scholars in India have been confronted with two types of issues with regard to neoliberal reform agenda in India viz., the kind of governance institutions or arrangements or specifically political institutions that are required by an economically liberalising, multireligious and multicultural society, and the capability of the neoliberal governance agenda to retain an emphasis on redistributive and welfare goals and address the rights, claims and demands for justice of disadvantaged groups.
Preface
- Ram Kumar Kakani, Professor, XLRI Xavier Institute of Management, Jamshedpur, India, Santosh Sangem, Assistant Professor, Finance, XLRI Xavier Institute of Management, Jamshedpur, India, Madhvi Sethi, Associate Professor, SIBM, Symbiosis University, Bengaluru
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- Indian Business Groups: Strategy and Performance
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Summary
This book focuses on product diversification strategies of business groups and the dynamics of its underlying relation to shareholder value. Product diversification as a business strategy has a long checkered history. From being amongst the most preferred strategies for driving growth from the early twentieth century to its fall from grace in developed countries to its revival attempts in the early twenty-first century, product diversification has been at the center of numerous debates, especially in the developed world. At the time that conglomerates in market-based developed economies were adopting the focus strategy, business groups in developing countries and other developed economies (especially in continental Europe) were increasing the extent of diversity of their business activities. While a number of them have proven to be adept in successfully handling this strategy, there are a large number of failures as well along the road to product diversification.
The major challenges faced by these diversified business groups include financial difficulties brought about by wasteful use of resources, professionalization of management, and managing promoter family dynamics. Liberalization and the process of opening up of developing economies has played an important role in generating opportunities for value creation across industries. Further, the last two decades have witnessed the growth of the ‘new economy’ with traditional sectors gradually losing their dominance in business activity.
A new set of challenges have once again been thrown up before such diversified business groups following the global credit crunch that began in the US in 2007, bringing into question their performance and the appropriateness of the diversification strategy. The rapidly changing dynamics of world markets and the technology of serving them make it imperative for top management of business groups to be highly adaptable in their approach to corporate strategy and selection of portfolio of businesses and their composition within a group.
Extant studies on value creation by diversified business groups tend to take a macro/institutional approach with diversified business groups seen as alleviating the problems created by deficient institutional structures.
4 - The Computerisation of Land Records Programme in Odisha
- Pradeep Nayak, Joint Commissioner, National Land Records Modernisation Programme, Government of India, Administrative Training Institute, Bhubaneswar, Odisha
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- The State and Land Records Modernisation
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Summary
Introduction
The implementation of centrally sponsored schemes of Computerisation of Land Records (CLR) and Strengthening Revenue Administration and Updating Land Records (SRA&ULR) redesigned as National Land Records Modernisation Programme (NLRMP) in Odisha brings forth a number of interesting issues. These issues concern the role of the state, its bureaucracy, other non-formal actors and agencies, the problems of informatisation in public organisations, and the role of the networks involved in the process.
Land records in Odisha
It has been argued that the land revenue administration in Odisha is the most complicated in India. Before Odisha became a separate state on 1st April 1936, Balasore, Cuttack, Puri and Angul were parts of Odisha division of Bihar-Odisha province, and were governed by the Permanent Settlement of Bengal System. Areas like Ganjam, Koraput, and Baliguda subdivision of Boudh district were parts of the Madras Presidency but transferred to Odisha. Similarly, Sambalpur, Khariar ex-Zamindari and the Mahadevpalli police station areas were transferred to Odisha from the Central Province. In January 1948, around twenty-five princely states were merged with Odisha. Thus, the state of Odisha inherited different revenue and tenancy laws, as the princely states and the areas transferred from Bihar, Central Province and Madras presidency had different systems of revenue administration. The common feature among these different systems was the existence of a large body of intermediaries between the state and the tiller of the soil with varying degree of sub-infeudation.
In the late-nineteenth century, B.H. Baden Powell described the land tenure system and the land revenue administration in Odisha as being ‘full of interest,’ as the ‘Odisha settlement was made without any reference to any theory requiring a landlord or a middleman.’ Odisha had
neither exactly a landlord Settlement nor a village Settlement, nor a raiyatwari Settlement; but when the survey was made and the details of the holdings were ascertained, the Settlement Officers simply had to respect to actual facts; they recorded and secured all rights as they found them existing. Some features of each of the three systems may therefore be traced. A few of the local magnates or chiefs were recognised as landlords, and their assessment was allowed (as a favour) to be permanent.
Dedication
- Pradeep Nayak, Joint Commissioner, National Land Records Modernisation Programme, Government of India, Administrative Training Institute, Bhubaneswar, Odisha
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List of Tables and Figures
- Ram Kumar Kakani, Professor, XLRI Xavier Institute of Management, Jamshedpur, India, Santosh Sangem, Assistant Professor, Finance, XLRI Xavier Institute of Management, Jamshedpur, India, Madhvi Sethi, Associate Professor, SIBM, Symbiosis University, Bengaluru
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- Indian Business Groups: Strategy and Performance
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Indian Business Groups: Strategy and Performance
- Ram Kumar Kakani, Santosh Sangem, Madhvi Sethi
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The uniqueness of the Indian context lies in the fact that during the post-liberalization period of the 1990s, most business groups encountered severe financial difficulties, to the extent of struggle for survival, and ultimately lost their former dominant presence. The 2000s have been a witness to the revival of some of these business groups whereas many others are still in search of the suitable strategic response to the new economic and institutional environment. The book explores the forces of product diversification strategy of Indian business groups through a conglomeration of empirical analysis and case studies. The authors cover a period exceeding 25 years of business group activity in the Indian context, and attempt to relate the performance of Indian business groups to their diversification strategy, juxtaposed against the context of institutional change in the Indian economy.
5 - The Computerisation of Land Records Programme in Karnataka
- Pradeep Nayak, Joint Commissioner, National Land Records Modernisation Programme, Government of India, Administrative Training Institute, Bhubaneswar, Odisha
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- The State and Land Records Modernisation
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Summary
Introduction
The state of Karnataka's revenue administration comprises 29 districts, 176 sub-divisions, 203 taluks, 27,481 revenue villages and nearly 9000 village accountants’ offices. The state has inherited a varied and diverse set of regional land revenue systems and tenures owing to the amalgamation of the state of Coorg and regions from the erstwhile states of Mysore and Hyderabad, and the Madras and Bombay Presidencies. According to the Karnataka Development Report (2007) the state has in recent years adopted a number of reform measures for ‘improving’ governance such as the privatisation of government activities by disinvestment, adoption of Public Private Partnership (PPP) model and downsising the bureaucracy to improve ‘operational efficiency and productivity in administration.’ Successive governments in Karnataka have actively pursued a policy of increasing the use of ICTs for empowering citizens with information and speedy delivery of services. The elements of policy environments that triggered a series of reforms are competitive politics, pressure of globalisation, influence of ICTs, pressure of World Bank and macro-economic reforms initiated by the Government of India. In this chapter, we carry forward the analysis of computerisation of land records programme in Karnataka with special reference to the Bhoomi programme. It has been aptly described by James Manor as one of the successful governance reforms in Karnataka. Here we provide an outline on implementation of Computerisation of Land Records (CLR) and Strengthening Revenue Administration and Updating Land Records (SRA&ULR) programmes in Karnataka, and launching of Bhoomi project, the reasons for the success of Bhoomi programme, its impact on public, revenue officials, and taluk offices and the critical appraisal of the programme that has been projected as an ideal model by the central government and World Bank.
Apart from extensive consultation of the relevant secondary literature, we undertook field studies from May 2009 to January 2011. I visited 17 taluks both on southern and northern Karnataka and interviewed village accountants, tahsildars, deputy tahsildars, assistant commissioners, officials at the revenue department and Bhoomi monitoring cell in Bengaluru, survey and settlement offices and the officials of NIC both at the district and state levels.
4 - Conceptual Framework and Research Methodology
- Ram Kumar Kakani, Professor, XLRI Xavier Institute of Management, Jamshedpur, India, Santosh Sangem, Assistant Professor, Finance, XLRI Xavier Institute of Management, Jamshedpur, India, Madhvi Sethi, Associate Professor, SIBM, Symbiosis University, Bengaluru
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Summary
Our first three chapters stress on the need to look differently at business groups; which are, in any way, the state of affairs in most parts of the world, except possibly in the Anglo-Saxon economies. In most economies across Europe and much of Asia and Africa, such business groups constitute a significant part of the business landscape. Business groups and their portfolio of companies have come under great criticism in recent decades, particularly from researchers using Anglo-Saxon structures of financial markets (see, for example, Claessens et al., 2000) – pitting often the interest of the financial investors (including small retail investors) with the controlling family business group. The existence of business groups have been widely ascribed to the weakness or non-development of markets, particularly of finance, in developing countries (see, for example, Khanna and Palepu, 1997). From a strategy perspective, however, it needs to be emphasized that business groups play a very important governance role; a role that a financial market possibly cannot replace (Saha et al., 2011).
Bank-based governance in Germany and Japan and public executive dominated governance in the U.S., Korea, France, China, and even (recently) Japan and Germany point out the importance of non-market executive-based governance that is not always linked to finance. In fact, the executive ambition in Japanese MITI (Ministry of International Trade and Industry) in terms of creating globally competitive domestic enterprises and acquiring technological capability1 was very important in shaping up investment direction of several large Japanese business groups known as Keiretsus or Zaibatsus. These were large capitalist enterprises of Japan before World War II, similar to cartels or trusts usually organized around a single family. The intent of the business family and the financial investor cannot thus be equated (Saha et al., 2011). We state that these two factions connected to an affiliate constitute different stakeholders and the primacy of the financial stakeholder (of an affiliate firm) cannot be over-riding.
Business Group, thus, is a supra-firm institution – its writ runs across several independent often-listed firms that constitute a closed group network (Saha et al., 2011). The institution of the business group, thus, throws up unique set of governance issues.
7 - Summary of the Work
- Ram Kumar Kakani, Professor, XLRI Xavier Institute of Management, Jamshedpur, India, Santosh Sangem, Assistant Professor, Finance, XLRI Xavier Institute of Management, Jamshedpur, India, Madhvi Sethi, Associate Professor, SIBM, Symbiosis University, Bengaluru
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- Indian Business Groups: Strategy and Performance
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Summary
“If human beings are not drowned,’ asked the little mermaid, ‘Can they live forever? Do they never die as we do here in the sea?” – The Little Mermaid,a fairy tale by Hans Christian Andersen.
What are business groups?
Business groups are a collective network of legally independent firms whose strategic and operating decisions are controlled by either members of a family or group of families. These families have control over the decision-making of these firms by virtue of holding at least a significantly influential ownership stake. Part of the ownership stakes in these business networks are usually held by the family through investment firms, trusts, or foundations set up by them with cross-holdings in affiliates making up the remaining group ownership share. The primary investment firm/trust/foundation in most cases provides direction for/controls the overall activities of the group firms. Industrial activity in a large number of countries continues to be dominated by such business groups.
They often diversify across different product lines with many divisions under them, similar to the U.S. conglomerates. In India, for instance, the Gautam Thapar Avantha group controls a host of firms predominantly in electrical and chemical industries. Another example is the Tata group controlled by the House of Tatas, operating in diverse product portfolio encompassing steel to software to salt.
Product focus based on strong core competencies combined with international diversification has been the success mantra, propounded by academicians and consultants alike. This strategy is adopted by many successful developed country transnational corporations such as Coco-Cola, Microsoft, Lafarge, and Pfizer, especially during the last three decades of increasing globalization. Contrary to some recent theories suggesting product (unrelated) diversification as a success mantra in the emerging markets vis-à-vis focused strategies as success mantra in the developed world, most developing country business groups adopting the focus strategy were also successful. Large number of business groups, which diversified more and more claiming synergies and other benefits found such benefits to be either illusory or over-rated, leading to erosion in shareholder wealth. The recent problems of big unrelated conglomerates in developing nations such as Daewoo in South Korea, Astra in Indonesia are but some of the examples that indicate all is not well with highly diversified unrelated conglomerates.
3 - The State and the Policy of Land Records Management
- Pradeep Nayak, Joint Commissioner, National Land Records Modernisation Programme, Government of India, Administrative Training Institute, Bhubaneswar, Odisha
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- The State and Land Records Modernisation
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Summary
The study of policy of land records management and the role of the Indian state cannot be completely understood without taking into account the history of the land records system along with its bewildering regional diversities, and its management particularly since the British period. British rule laid the foundation of property rights on land and took elaborate measures for survey and settlement.
The land records system: a historical perspective
The land records and revenue system and its tenurial relations have been intricately related to its social conditions since long, and to a large extent sustained by the agrarian nature of India's society and economy. For centuries, there have been layer upon layer of landholders and revenue collections interrelated among themselves. ‘… what we see is a spectral view of socially structured land control relationships with gradations…’ on the one extreme lord over land and labour and on the other end labourer on land. Between the two extreme positions there exist innumerable strata of lesser lords and larger labourers.
The land tenure systems and land relations in India is very complex due to the existence of a ‘veritable jungle of overlapping terminologies.’ Dharma Kumar, a historian, writes that the period prior to British occupation and rule was marked by chaos as the Mughal reign was in decline. The Britishers were ‘confused about the rights they had to confirm and administer’ as very scanty information on land records was available to them. They had to choose between various claimants to rights in a tenure system largely unknown to them, and used in a multiplicity of local languages, as well as Persian/Arabic terms coined by Muslim rulers. The British added further confusion ‘in their natural tendency to look everything from an English Law or Lord-of-themanor point of view.’ Therefore the linguistic overlapping of land holdings and tenures has been prone to errors and misinterpretations.
Despite the variegated nature of terminologies one could observe that all kinds of holdings and rights were intricately linked to definite socio-ceremonial, communal, economic and political roles. Neither hereditary ownerships nor customary authority constituted a legal claim to ownership of the land—this complicates the process of defining and classifying the many interrelated positions of social status and landed interests.
Frontmatter
- Ram Kumar Kakani, Professor, XLRI Xavier Institute of Management, Jamshedpur, India, Santosh Sangem, Assistant Professor, Finance, XLRI Xavier Institute of Management, Jamshedpur, India, Madhvi Sethi, Associate Professor, SIBM, Symbiosis University, Bengaluru
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Conclusion: Beyond Techno-Managerial Governance
- Pradeep Nayak, Joint Commissioner, National Land Records Modernisation Programme, Government of India, Administrative Training Institute, Bhubaneswar, Odisha
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- The State and Land Records Modernisation
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Summary
Land continues to be the most crucial resource for an agrarian economy like India. It has regained importance as India is heading towards massive industrial-urbanisation and more and more agricultural land is being acquired for non-agricultural purposes. The importance of correct and up-to-date land records therefore cannot be underestimated. In addition to this, it is urgent in the context of granting forest land rights to the tribals and forest dwellers, inheritance rights to women, and vanishing common property resources across the country. However, the computerisation of land records programme clearly reveals that the schemes for modernisation of land records are being taken up for an incremental policy shift to facilitate the growth of land market and title regime. The overall performance of computerisation of land records has been a disappointing one if viewed from broader perspectives.
The National Knowledge Commission Report (2009) has aptly observed that many of the e-governance programmes are vendor driven and, ‘simply digitising the existing government processes merely adds an additional layers of expense, complexity, delay and confusion.’
ICT, public sector reforms and neoliberalism
It has been explained in the theoretical framework that the move towards reinventing government organisations on business principles like New Public Management and application and adoption of ICTs has its theoretical foundation in the contemporary neoliberal economic policies pursued by the states across the world. India is no exception to this trend. The sole objective of neoliberal structural reforms is to institutionalise the political agenda of a free market. The dominant concern of the administrative structure under the neoliberal economy is to promote the primacy of market values by adopting ‘techno-managerial practices and values.’
Since the 1990s, there has been a re-emphasis on the central role of the state and the complementariness or embeddedness of the state and market. The role of the state is now to focus on creating necessary conditions for securing and promoting market and property reforms apart from techno-managerial initiatives. It is therefore natural to expect international donor agencies like World Bank to promote neoliberalism as its sole policy objective with the help of multilateral aid agencies.
6 - The Computerisation of Land Records Programmes in Karnataka and Odisha: A Comparative Study
- Pradeep Nayak, Joint Commissioner, National Land Records Modernisation Programme, Government of India, Administrative Training Institute, Bhubaneswar, Odisha
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- The State and Land Records Modernisation
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Summary
Introduction
The CLR and SRA&ULR programmes started simultaneously in Karnataka and Odisha and in other parts of India as centrally sponsored schemes. We analyse here the different trajectories in achievements and constraints encountered by these states by comparing the processes, outcomes and impacts of these schemes which would broaden our understanding. The factors behind the success of computerisation of land records and online delivery of land records in Karnataka and the poor and dismal performance in Odisha will be analysed by comparing their administrative and institutional aspects in policy implementation and the capacity of the political and administrative elites to deliver the results.
In India, a wide variation among the states exists in terms of their political, administrative and economic performances and social and cultural composition. All the states show different trajectories of development during the British period as well as after Independence; the political, economic and cultural variables have been the determining factors in shaping the regime performances. In the macro context, we see different political issues at the central government level and at micro level, we perceive the political, social, economic and cultural issues among the states as varying. These differences have widened after Independence. The decline of the Congress party's dominance, the rise of regional parties, coalition governments at the centre and in some states, the rise of lower and the intermediate classes in the political arena, uneven socio-economic and regional developments, assertion of regional and ethnic identities, and the economic liberalisation policies pursued both at central and state government levels have been the crucial factors in shaping the inter-state differences in India. Although there is absence of a ‘general theoretical framework’ for studying the political and administrative developments among the states, yet the states in India continue to operate in an ‘independent political space.’
To Myron Weiner, our very understanding of the Indian political system depends upon the pattern of political developments across the states. Despite existence of some commonalities among all the states in India, like common constitution and common legal and administrative system, but in terms of socio-economic and political developments, there are wide variations among the states though each state is a political constituent of the Indian state.
2 - Business Groups across the Globe
- Ram Kumar Kakani, Professor, XLRI Xavier Institute of Management, Jamshedpur, India, Santosh Sangem, Assistant Professor, Finance, XLRI Xavier Institute of Management, Jamshedpur, India, Madhvi Sethi, Associate Professor, SIBM, Symbiosis University, Bengaluru
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Summary
Business groups dominate most economies. They are ubiquitous in emerging economies, where they control a substantial proportion of a country's productive assets and account for the largest and the most visible of the country's firms (Amsden and Hikino, 1991; Granovetter, 1994; Khanna and Rivkin, 1999; Mazumdar, 2008). Around the world, some of the largest firms in many countries are controlled by business groups (largely, familybased), such as Dangote (Nigeria), Fiat (Italy), Ford (U.S.), Hutchison Whampoa (Hong Kong), Maersk (Denmark), News Corp (Australia), Overseas Chinese Banking Corp (Singapore), and Samsung (South Korea). Further, many business groups have a long history. For instance, the Jardine Matheson group (Hong Kong/Singapore), the Wallenberg group (Sweden), and the Bolloré group (France) were established more than 150 years ago. However, like all other types of organizations, business groups have specific characteristics that differ from one country to another. In this chapter, we discuss the same in a few large countries across the globe. The discussion in this chapter highlights the central role of the controlling family/families at the top of a business group in designing corporate structures such that agency-related problems are minimized.
Japanese keiretsus
The key component of the Japanese environment is the existence of well-diversified business groups called keiretsu or industrial group. It is a distinctive feature of Japan's economy attracting considerable attention. This institution coordinates the activities of member firms and finances much of their investment activity. The complex relationship among firms within these groups is characterized by cross-ownership of equity, close ties with the groups’ main banks, and product market ties with the other firms in the groups (Aoki, 1984). Much of the financing comes from the large city banks that form the core of each of the large groups: they are both creditors and shareholders of group firms (Hoshi et al., 1991). It is for this reason that Japanese firms are known to operate in an environment that appears to mitigate information problems in the capital market.
During the pre-war period, Japan had extremely large, diversified conglomerates (zaibatsu), controlled by wealthy families and dominating the Japanese economy (Hadley, 1970; Yafeh, 1995).
About the Authors
- Ram Kumar Kakani, Professor, XLRI Xavier Institute of Management, Jamshedpur, India, Santosh Sangem, Assistant Professor, Finance, XLRI Xavier Institute of Management, Jamshedpur, India, Madhvi Sethi, Associate Professor, SIBM, Symbiosis University, Bengaluru
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Select Bibliography
- Pradeep Nayak, Joint Commissioner, National Land Records Modernisation Programme, Government of India, Administrative Training Institute, Bhubaneswar, Odisha
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1 - The State, ICTs and Governance: A Theoretical Exploration
- Pradeep Nayak, Joint Commissioner, National Land Records Modernisation Programme, Government of India, Administrative Training Institute, Bhubaneswar, Odisha
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Introduction
The study of the role of the state in promoting ICTs adoption and governance reforms is now being recognised world over as central to any discussion on administrative reforms or modernisation of the public sector. The state in India, as in other parts of the world, is no longer impervious to the challenges of Information and Communication Technologies (ICTs). Rather, new and interesting terminologies like virtual state, automated state, network state, information polity, informatisation of public administration, digital era governance, e-governance and smart governance have been repeatedly used in research works and public policy documents.
Neoliberal economic reforms and the IT revolution have influenced the role of the state in society and economy, as well as its relationship with citizens. All over the world, governments have made elaborate policy and institutional changes for the early adoption of cutting-edge technologies like ICTs in their governance structures as well as processes. International financial institutions like the World Bank, IMF and ADB and international organisations such as UNDP and UNCTAD have been prominent votaries for the adoption of ICTs in public administration. The rapid use of ICTs by the governments and the popularity of web pages of government departments led some scholars to describe ICTs as the ‘new face of government’ and ‘a new vehicle for citizen initiated contacts’. The role of the Indian state has been crucial in the phenomenal growth of informatics development. The Indian state has been actively promoting the informatics sector and such promotional and infrastructural activities of the Indian state, coupled with its success in building public and private networks, has been crucial to India's emergence as a global player in the IT sector. Such a perspective is important to understand the contemporary Indian state's integral role in determining and promoting, on a massive scale, the application of ICTs and IT industry in its governance structures for better service delivery, ushering transparency, empowering people, improving efficiency and furthering the interface of the state with IT business and industry. According to Peter B. Evans, the role of the Indian state through its regulatory agencies and stateowned ICT industries during the 1980s revealed tentative attempts to increase state action aimed at complementing and promoting private entrepreneurship.
3 - Product Diversification and Performance: Measurement and Historical Relationship
- Ram Kumar Kakani, Professor, XLRI Xavier Institute of Management, Jamshedpur, India, Santosh Sangem, Assistant Professor, Finance, XLRI Xavier Institute of Management, Jamshedpur, India, Madhvi Sethi, Associate Professor, SIBM, Symbiosis University, Bengaluru
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- Book:
- Indian Business Groups: Strategy and Performance
- Published by:
- Foundation Books
- Published online:
- 13 July 2022
- Print publication:
- 01 January 2015, pp 45-77
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Summary
Product diversification is one of the oldest strategies that has been adopted by a number of the worlds’ largest corporations at some time or the other. In this chapter, we explore the extant literature on measures of product diversification and financial performance of firms. We also review the extant empirical literature on the application of the same in firm-level studies and business group studies. While we discuss the range of measures of product diversification and financial performance, respectively, in Sections 3.1 and 3.2, Section 3.3 briefly reviews the empirical work done outside India, both at the firm level and the business group level. Extensive research has been done focusing in the past on the firm-level diversification-performance linkages in the developed countries. Some of these theories and explanations on firm-level literature are applicable to business group-level studies. Hence, we discuss the existing literature from this perspective and apply a few of these concepts of firm-level theories on business groups in Section 3.4. The institutional and other contextual factors affecting both diversification and performance of an organization are taken up in Section 3.5. In Section 3.6, we examine the business group literature in the Indian context.
Measures of diversification strategy
The existing literature on product diversification is perhaps one of the largest bodies of work in business strategy (Chen et al., 1998). Measurement has always been an important issue in product diversification studies. Product diversification was first studied by economists interested in the relationship between product diversification and monopoly (or market) power (Gort, 1962; Arnould, 1969). Primarily, there are two types of measures to differentiate between product diversification categories – continuous and categorical measures. Business diversity is generally captured through the use of ratios to measure the degree of activity in a single business or a group of businesses (Wrigley, 1970; Rumelt, 1974).
Review of continuous measures
Some researchers have used multiple continuous diversification measures. Jacquemin and Berry's (1979) entropy measure best exemplifies such an approach. Hitherto other studies start with multiple measures but subsequently transform them into categorical measures, typically using the median or a points. of discontinuity along the continuous measure as cutoff points.
1 - Introduction to Business Groups and their Strategies
- Ram Kumar Kakani, Professor, XLRI Xavier Institute of Management, Jamshedpur, India, Santosh Sangem, Assistant Professor, Finance, XLRI Xavier Institute of Management, Jamshedpur, India, Madhvi Sethi, Associate Professor, SIBM, Symbiosis University, Bengaluru
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- Book:
- Indian Business Groups: Strategy and Performance
- Published by:
- Foundation Books
- Published online:
- 13 July 2022
- Print publication:
- 01 January 2015, pp 1-27
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Summary
Strategic management is the process through which managers ensure the longterm adaptation of their organization to their environment (Chakravarthy, 1986). Corporate strategy is the conduct by a business organization of the composition of its cluster of tangible and intangible assets. Of the various corporate strategies that firms follow, diversification arguably ranks as among the most important. Diversification is a movement by an organization (either a firm or business group) into a wider field of products/services/activities/geographies to reach out to a larger body of customers. Product diversification has a broad spectrum ranging from limited endeavors into closely related activities at one extreme, to engagement in completely unrelated activities at the other extreme (Ansoff, 1971).
Diversification and business groups
Business groups are a group of firms often initiated by family/trust and bound together by equity cross-ownership and common board membership.
Business groups are formally independent firms that are interconnected on account of single common administrative and financial control, owned and controlled by either families or trusts or foundations. These business networks are usually owned through investment firms with cross-holdings among affiliates. Industrial activity in most countries of the world continues to be dominated by these business houses. They often diversify across different product lines with many divisions under them, similar to U.S. conglomerates such as General Electric Co. popularly known as GE. The Dangote Group from Africa, started by Aliko Dangote, is another illustration of a conglomerate with diverse interests ranging from trading commodities to manufacturing cement. In India, for instance, the A. V. Thomas group controls a host of firms predominantly in the businesses of plantations and consumer products, whereas the Tata group firms controlled by the House of Tatas operate in diverse product portfolio encompassing steel to software to salt.
Business houses may exhibit insignificant individual differences yet differ in systematic ways when aggregated according to suitable criteria. A business group's long-term performance would primarily be an outcome of its overall strategy, a critical element of which is the business group diversification strategy. It comprises decisions to efficiently utilize, add, retain or divest the group's existing portfolio of resources (or assets). Some of the main issues faced by a business group's strategists are: (a) choice of product and service portfolio to create economic value and (b) the mode and timing of additions and divestments in resources (or assets).