Business Groups in Historical Perspectives

Business groups-collections of legally independent firms interconnected by multiple economic and social linkages that exhibit widely diversified product portfolios-are viewed as the prototypical large-enterprise form in contemporary emerging economies. By exploring the evolution of the diversified business groups organized around British trading companies from the late eighteenth century until today, this chapter demonstrates that such organizational forms were also present in developed economies historically, and even today. In analyzing this historical evidence, the chapter first shows how organizational forms of business groups were employed over long time periods to control large and diversified multinational complexes. It then shows that these British business groups possessed competitive advantages and management skills residing in contacts, knowledge, information, and relationships that sustained long-lasting and successful international businesses and that gave them genuine efficiency-enhancing roles. A major contribution of this chapter is to demonstrate that its theoretical conclusion based on the historical experiences of business groups built up by the British-based trading companies with their eighteenth- and nineteenth-century origins comes close to mainstream assessments reached by the research on business groups in contemporary emerging markets.