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.

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:

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.

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.

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

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.

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.

“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.

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.

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.

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.