Working Paper: NBER ID: w14858
Authors: Randall Morck
Abstract: Large pyramidal family controlled business groups are the predominant form of business organization outside America, Britain, Germany, and Japan. Large pyramidal groups comprising dozens, even hundreds, or listed and unlisted firms place the governance of large swathes of many countries' big business sectors in the hands of a few of their wealthiest families. These structures plausibly substitute for weak market institutions in economies undergoing rapid early-stage industrialization. They may also substitute for weak governments in coordinating Big Push growth programs to establish numerous interdependent simultaneously. However, no such role is evident in developed or in slowly growing developing economies, where such structures appear prone to agency problems and political rent-seeking. If sufficiently large, they may also add to economy volatility by rendering the risk of misgovernance systematic, rather than firm-specific.
Keywords: No keywords provided
JEL Codes: G3; P1; P5; Z13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| pyramidal family-controlled business groups (L22) | improved economic outcomes (O49) |
| pyramidal family-controlled business groups (L22) | coordination among firms (L14) |
| pyramidal family-controlled business groups (L22) | mitigate agency problems (G34) |
| pyramidal family-controlled business groups (L22) | economic stability (E63) |
| pyramidal family-controlled business groups (L22) | economic volatility (E32) |