Working Paper: NBER ID: w16870
Authors: Randall Morck
Abstract: Classic Big Push industrialization envisions state planners coordinating economic activity to internalize a range of externalities that otherwise lock in a low-income equilibrium, but runs afoul of well-known government failure problems. Successful Big Push coordination may occur instead when a large business group, acting in its controlling shareholder's self-interest, coordinates the establishment and expansion of businesses in diverse sectors. Where business groups play this role, many basic axioms of Anglo-American corporate governance, including the advocacy of shareholder value maximization and contestable corporate control, must be qualified.
Keywords: Business Groups; Economic Development; Governance; Pyramidal Ownership; Big Push
JEL Codes: G30; O25; P11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| business groups (L20) | improved economic outcomes (O49) |
| business groups (L20) | capital allocation and resource sharing (G31) |
| business groups (L20) | mitigate market failures (D47) |
| governance structure of business groups (L22) | efficient decision-making (D91) |
| governance structure of business groups (L22) | better performance of group-affiliated firms (L25) |
| tunneling (L91) | undermine overall value of the group (D46) |