Diversified Business Groups and Corporate Refocusi

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Diversiﬁed business groups and corporate refocusing in emerging economies
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Journal of Management
ARTICLE
10.1177/0149206305279895
Hoskisson et al. / Refocusing
/ December
in Diversified
2005 Business Groups
Diversified Business Groups and

Corporate Refocusing in Emerging Economies
Robert E. Hoskisson*
Department of Management, W. P. Carey School of Business, Arizona State University, Tempe, AZ 85287-4006
Richard A. Johnson
Michael F. Price College of Business, University of Oklahoma, Norman, OK 73019-4006
Laszlo Tihanyi
Department of Management, Mays Business School, Texas A&M University, College Station, TX 77843-4221
Robert E. White
Department of Management, W. P. Carey School of Business, Arizona State University, Tempe, AZ 85287-4006
As emerging economies have improved their economic institutions, the performance of many
large business groups has been reduced because such groups acted as market-substitute mecha-
nisms. Consequently, business groups have become increasingly involved in refocusing activities.
The authors develop a framework in which such refocusing is explained as an attempt to balance
overall transaction costs faced by groups with organization-specific costs in order to improve
group performance. They examine external and internal factors that might lead to the initiation of
refocusing and also explain why different ownership structures may affect the direction of that
refocusing (e.g., related vs. unrelated diversification).
Keywords: business group; restructuring; refocusing; emerging economy; ownership

structure
*Corresponding author. Tel: 480-965-2286; fax: 480-965-8314.

E-mail address: robert.hoskisson@asu.edu
Journal of Management, Vol. 31 No. 6, December 2005 941-965
DOI: 10.1177/0149206305279895
© 2005 Southern Management Association. All rights reserved.
941
942 Journal of Management / December 2005
Corporate refocusing, a type of asset restructuring in which the firm both reduces its num-
ber of businesses and makes changes to its diversification strategy, is particularly challenging
in emerging economies (Carrera, Mesquita, Perkins, & Vassolo, 2003; Hoskisson, Eden, Lau,
& Wright, 2000). From the practitioner’s point of view, refocusing in these countries often
involves governmental institutions, shifts in regulations, and constant changes in the market-
place (Wright, Filatotchev, Hoskisson, & Peng, 2005). From the researcher’s point of view,
emerging economies tend to exemplify less-than-perfect market institutions and business
environments with scarce factor resources relative to developed economies (Wan, 2005; Wan
& Hoskisson, 2003). Nonetheless, because of their recent rapid development, relatively large
population bases, and increased share in world trade, emerging economies have become
increasingly important. Understanding corporate refocusing in the emerging economy con-
text is particularly relevant owing to the limited applicability of previous theories that evolved
from empirical research in developed markets. Furthermore, the study of refocusing in emerg-
ing economies provides additional evidence on the variance in organizational behavior in dif-
ferent business systems around the world (Djankov, Glaeser, La Porta, Lopez-de-Silanes, &
Shleifer, 2003).
In this article, we center our examination of corporate refocusing on an important attribute
of many emerging economies: local firms’ affiliations with diversified business groups.
Although business groups exist in some developed economies such as Sweden (Collin, 1998)
and Japan (Aoki, 1990), they differ primarily in the amount of government control over such
groups, with developed economy business groups having less direct government control
(Collin, 1998). Business groups are generally composed of legally independent firms that are
bound by formal ownership and informal social ties to take coordinated actions (Khanna &
Rivkin, 2001). For example, the Tata Group, which was founded by Jamsetji Nusserwanji Tata
in 1868 as a private trading firm and is currently India’s largest business group, includes 91
firms in a wide range of industries. The group covers the chemicals, communications, con-
sumer products, energy, engineering, information systems, materials, and services industries.
The group’s revenue was $14.25 billion or about 2.6% of India’s GDP in 2003-2004. Tata’s
member companies employ about 220,000 people and export their products to 140 countries.
However, as India’s economy has developed, Tata executives have sought to refocus its mem-
ber businesses to “build a more focused company without abandoning the best of Tata’s manu-
facturing tradition” (Kripalani, 2004). Over a 10-year period, Tata has refocused from 250
businesses to its current set.
The existence of business groups such as Tata in emerging economies is often theorized to
result from imperfections of local labor, capital, and product markets (Leff, 1976). Prior
research suggests that firms in emerging economies may be better off as parts of diversified
business groups because of the relatively high transaction costs prevalent in underdeveloped
institutional environments (e.g., Khanna & Palepu, 2000). High overall transaction costs are
the results of undeveloped capital, consumer, and labor market institutions, as well as ineffi-
cient transportation and telecommunications. Thus, business groups can act as intermediaries
between economic actors and imperfect markets by potentially filling institutional voids
(Caves & Uekusa, 1976). By integrating arguments from institutional and transaction cost the-
ories, we argue that market-oriented institutional changes affect the overall transaction costs
in an economy. As the underlying transaction costs are reduced because of these changes,
Hoskisson et al. / Refocusing in Diversified Business Groups 943
large diversified business groups have an increased incentive to restructure (refocus) so as not
to incur excessive organization costs. We offer a number of propositions regarding factors that
might hinder or spark a business group to respond to the underlying incentive to refocus its
business portfolio.
In particular, we provide an overview of external factors, including external shocks, exter-
nal control mechanisms, variance in country policy toward institutional development, market
power and competition, and cultural factors. The discussion of these external factors will help
to clarify the potential variations in the level of business group refocusing due to differences in
environmental factors (Boisot & Child, 1996). We also examine internal factors that may
affect the timing or likelihood of refocusing, including poor performance, leadership issues,
and organizational culture and trust.
Finally, we examine how different ownership arrangements might affect the direction of
refocusing. Although most prior empirical work has considered the business group as a homo-
geneous organizational form, this assumption has serious limitations. For example, prior
research has identified significant variations in business group ownership, including dominant
family, bank, and government ownership positions, as well as groups partly controlled by
nonbank financial institutions or foreign ownership (La Porta, Lopez-de-Silanes, & Shleifer,
1999). Family ownership of diversified business groups is prominent in many emerging econ-
omies across Latin America (Hoskisson, Cannella, Tihanyi, & Faraci, 2004), Taiwan (Chung,
2001), India (Ramaswamy, Li, & Veliyath, 2002), and elsewhere. Banks with a strong owner-
ship position in a business group are often found in those countries whose capital markets are
not fully developed, such as the Philippines (Unite & Sullivan, 2003). Other business groups
are partly controlled by developmental financial institutions (e.g., George & Prabhu, 2000).
Partial foreign ownership of groups can take place through investment by large international
firms engaging in foreign direct investment. Unlike banks or families that have an ownership
stake in business groups, foreign owners are usually less embedded in the social network of
the group. In contrast, governments often play a more central role in emerging countries
through their ownership interests in local business groups (Kornai, Maskin, & Roland, 2003).
We offer propositions regarding how these ownership positions might influence the direction
and type of refocusing undertaken and their impact on overall organizational costs.
Background
Corporate Restructuring and Refocusing
Corporate restructuring has been a very popular strategy during the past 25 years. The
impact of these activities has been felt in almost every sector of the U.S. and European econo-
mies. Corporate restructuring encompasses multiple forms of change that we can separate into
three categories: asset restructuring, financial restructuring, and organizational restructuring
(Johnson, 1996). Asset restructuring involves the sale or spin-off of businesses within the cor-
porate portfolio leading to a refocused (predominantly lower) level of diversification
(Markides, 1996). Financial restructuring encompasses leveraged buyouts (LBOs), stock
repurchases, and leveraged recapitalizations, whereas organizational restructuring entails

reorganizations within the firm that do not involve the sale or disposal of assets.1
In the current study, we are examining corporate refocusing. Corporate refocusing (John-
son, 1996), downscoping (Hoskisson & Hitt, 1994), and dediversification (Markides, 1996)
describe activities designed to reduce the number of businesses within the firm. This reduction
in the businesses within the portfolio often involves a change in corporate diversification strat-
egy (Hoskisson & Johnson, 1992). For example, the sale or spin-off of multiple businesses
may lead to a new portfolio that emphasizes a set of related or unrelated businesses. Thus, cor-
porate refocusing represents asset restructuring that leads to a smaller firm with a concomitant
change in diversification strategy (Hoskisson, Johnson, & Moesel, 1994).
Emerging Economies and Corporate Refocusing
Emerging economies constitute about 20% of the global economy and 80% of the world’s
population today. This group of countries has been receiving growing attention in the past two
decades because of their increasing share in world trade and foreign direct investment and
their rising numbers owing to the collapse of the socialist system around the world (London &
Hart, 2004). There is no uniform classification of countries as emerging economies, however.
The term emerging economies originated from the International Finance Corporation (IFC), a
member of the World Bank Group, in the early 1980s to distinguish those middle-income
emerging markets where foreign financial institutions were allowed to buy securities. In
recent years, the meaning of emerging economies has expanded to countries that were previ-
ously labeled as developing countries. According to recent World Bank classifications,
emerging economies in 2003 fell in the gross national income (GNI) range of $756 to $9,265
per capita (World Bank, 2004). Because this relatively broad income classification includes
some countries with little economic progress and others with inefficient socialist economic
systems, researchers tend to include additional qualifications when they study firm strategies
in emerging economies.
Emerging market economies from an institutional theory point of view are characterized by
government policies promoting the development of market-friendly institutions and by
accompanying relatively fast economic growth rates (Hoskisson et al., 2000; Wright et al.
2005). Although there are substantial differences in the backgrounds of emerging economies,
such as those of China, the Czech Republic, Malaysia, and Thailand, there are important simi-
larities in their recent institutional development. According to neo-institutional economists,
institutions in general are “the underlying determinant of the long-run performance of econo-
mies” (North, 1990: 107). By building well-functioning market institutions, emerging econo-
mies may be able to reduce their market imperfections and lower their cost of transacting
(North, 1990).
Emerging economies traditionally suffer from deficiencies in areas such as transportation
and telecommunications (Wan & Hoskisson, 2003), making it more costly for firms in those
economies to transact with other firms. As a result of inefficient distribution systems, import
restrictions, and a lack of necessary capital, key raw materials are often unavailable to firms. In
addition, necessary human resources, such as competent research scientists or well-trained
managers, are typically in short supply because of underdeveloped systems of education. The
aforementioned factors all contribute to increased transaction costs faced by firms.
Besides this lack of basic factor resources, the underdevelopment of necessary market
institutions greatly affects local firms conducting business in emerging economies (Wan,
2005). Missing market institutions in these countries can include transparency in economic
reporting; a stable currency; a stable government; liquid, well-functioning equity and lending
markets to fuel expansion and growth (cf. Hoskisson, Johnson, Yiu, & Wan, 2001); and a
strong legal system to provide aggressive enforcement of property rights and a brake on
opportunism, graft, and corruption (Devlin, Grafton, & Rowlands, 1998).
As emerging economies develop better market institutions, the cost of transacting may
drop substantially. Lower levels of transaction costs coupled with reduced uncertainty provide
several advantages for local firms. Local firms in general may be able to benefit from
improved access to capital and other resources. Clearer ownership structures and improved
capital market allocation open the doors to foreign direct investment. At the same time, how-
ever, institutional reforms may present new threats to local firms in emerging economies. Fre-
quent changes in government policies are a general source of environmental uncertainty
(Ramamurti, 2000). Governments in emerging economies, for instance, tend to implement
extensive privatization policies, leading to an inflow of new competitors and widespread
financial distress for firms that are unwilling or unable to change (Megginson & Netter, 2001).
Thus, although the overall level of transaction costs may be lower as market institutions
develop, the increased number of entrants likely results in increased competition for local
firms.
Although emerging economies appear to present dynamic environmental conditions for all
local firms, the propensity to refocus in this setting may be different among local firms owing
to differences in their ownership structures (La Porta et al., 1999). Firms in emerging econo-
mies, for example, are often parts of diversified business groups. Recent research indicates
that, when faced with environmental challenges, business groups’ refocusing responses may
differ from those of independent firms (Hoskisson, Cannella, et al., 2004). We argue that the
refocusing of business groups in emerging economies represents a unique trade-off between
transaction and organizational costs. To fully understand business group refocusing, we must
first examine the origins of business groups and their role in emerging economies.
Emerging Economies and the

Role of Diversified Business Groups
Business groups are the dominant form of business organization in many emerging econo-
mies (Ghemawat & Khanna, 1998; Khanna & Palepu, 2000). For instance, the largest 2,800
business groups in the People’s Republic of China contribute approximately 60% of China’s
industrial output (State Statistical Bureau, People’s Republic of China, 2000). In Korea, the 30
largest business groups comprise 40% of the country’s economic activity (Chang & Hong,
2000). Three major discipline-based explanations have been given as to why business groups
are so prevalent in emerging economies. These are the political economy, the sociological, and
the economic viewpoints.
The political economy viewpoint emphasizes the role of government in establishing busi-
ness groups. This view suggests that governments can actively encourage the formation of
business groups by providing access to capital such as loan guarantees in order to facilitate
economic development (Amsden, 1989; Guillén, 2000). Governments can also passively
encourage business group formation when high levels of government corruption are present.
In such circumstances, businesses with preferential access to government officials may find it
lucrative to diversify in order to leverage government favor across multiple industries (Evans,
1979; Ghemawat & Khanna, 1998).
The explanation of business groups by economic sociologists highlights the importance of
interpersonal relationships (Strachan, 1976). According to this perspective, business groups
are “collections of firms bound together in some formal and/or informal ways” (Granovetter,
1994: 454). Much of the work in this stream has suggested that business groups grew some-
what naturally out of family, clan, and other interpersonal relationships. For example, Fields
(1995) studied the similarity between business groups and extended families, complete with
patriarchs, inheritance rules, and mechanisms of discipline and control. More recently,
Keister’s (1998) research focused on the ability of interlocking boards of directors among
group-affiliated firms to facilitate information flow within Chinese groups.
The third view of business groups is based on institutional economics (e.g., Leff, 1976,
1978). According to this view, firms seek to overcome deficiencies in emerging economy
resource markets and institutional frameworks by banding together into diversified business
groups. Such business groups can provide internal capital, labor, material, and technology
markets, allowing their member firms to transact more efficiently (Chang & Choi, 1988;
Khanna & Palepu, 1997, 2000). Lacking a strong external capital market in emerging econo-
mies, large businesses in more mature industries often lack a satisfactory mechanism to invest
their cash in additional rent-generating activities. At the same time, smaller firms in rapidly
growing industries have difficulty in obtaining the necessary funding needed to develop new
products and to extend into new markets. However, when both the mature and the growing
firm are placed together under the umbrella of a business group, the more mature firm can pro-
vide the capital needed by the smaller firm (Guillén, 2000). Such cross-subsidies can boost the
overall performance of business group–affiliated firms.
In contrast to research on refocusing in developed economies, empirical research on busi-
ness group refocusing in emerging economies tends to highlight the impacts of external
forces, including institutional changes (Ghemawat & Khanna, 1998; Hoskisson et al., 2001).
In a study of business group refocusing in French civil law countries (which included emerg-
ing as well as developed country business groups), Hoskisson, Cannella, and colleagues
(2004) found that deregulation and increased competition led to increasing levels of refocus-
ing among independent firms but decreasing levels of refocusing among group-affiliated
firms. The authors also reported that increased country development led to significantly more
refocusing among group-affiliated than among independent firms.
Although many of the institutional and economic challenges that contributed to the preemi-
nence of the business group continue to exist to a substantial degree, most emerging econo-
mies have made substantial improvements in their economic systems during the past several
decades (Hoskisson et al., 2000). Paradoxically, these improvements have often been detri-
mental to the performance of business groups because previous market-substitute mecha-
nisms internal to business groups have become unnecessary or outdated. For example, Khanna
and Palepu (2000), in studying business groups in Chile, found that, as market institutions
developed, business group affiliation performance benefits “atrophied” over time. As a result
of these external pressures, business groups have become increasingly involved in refocusing
activities (Hoskisson et al., 2001). In the following section, we develop a framework in which
the refocusing of emerging economy business groups is explained as an attempt to balance
transaction and organizational costs, to achieve an appropriate balance of diversification
within the group, and to facilitate overall business group performance.
Institutional Changes and

Diversified Business Groups
One of the most significant changes taking place in emerging economies is the changing
role of government intervention. Governments of most emerging economies in recent years
have started to liberalize foreign trade and foreign direct investment (Sougata, 2003). Such
liberalization typically diminishes the asymmetries in foreign trade and direct investment,
exposes local firms to foreign competition, and decreases the ability of local firms to obtain
preferential government treatment (Guillén, 2000). In addition to trade liberalization, wide-
spread privatizations have been implemented in many countries to further improve economic
efficiency (Megginson & Netter, 2001; Ramamurti, 2000). The increased opportunities pre-
sented by developing market institutions, on one hand, and the growing environmental com-
plexity that has resulted from greater competition, decreased government involvement, and
private owners, on the other hand, have provided incentives to local firms in emerging econo-
mies to refocus their operations (Guillén, 2000). When institutions change in emerging econo-
mies, refocusing on a set of core businesses may be appropriate for groups to sustain their
collective competitive advantage.
We argue that institutional changes focusing on market development affect the overall
transaction costs in an economy as well as the organization costs experienced by business
groups. The notion of institutional change provided by neo-institutional economists is particu-
larly pertinent in considering the underlying level of overall transaction costs as markets
develop in emerging economies. North (1990) suggested that the overall costs of transactions
in an economy exhibit a significant sensitivity to the market institutions in a country’s environ-
ment. Such institutions constitute constraints as well as incentives for economic actors in their
market exchange (Peng, 2003; Wan, 2005). If legal infrastructure is not in place to protect con-
tractual relationships, transaction costs may be high, and firms will be less likely to engage in
economic transactions. Under these conditions, business groups may act as substitute mecha-
nisms for missing market institutions, including government bureaucracy (Keefer & Knack,
1997), legal enforcement (Clague, 1997), and societal trust levels (Fukuyama, 1995). If, how-
ever, intellectual and property rights protections improve; capital, labor, and product markets
mature; and market intermediaries arise, business groups become less important. Under these
conditions, business group refocusing may become a distinct possibility. Ultimately, this
would mean that the scope of business groups’ diversification would be reduced, potentially
leading to increased efficiency (Kim, Hoskisson, Tihanyi, & Hong, 2004).
Similarly, a diversified business group would experience different organizational costs

depending on the level of diversification (Hill & Hoskisson, 1987). The inner workings of a
business group typically resemble the multidivisional (M-form) structure (Chu, 2001). The
M-form structure, which facilitates the span of control for managing a set of diversified busi-
nesses, is characterized by a central corporate office and semiautonomous divisions or subsid-
iaries (Williamson, 1975). The M-form structure has more hierarchical control and coordina-
tion than holding company forms involving legally independent firms. Thus, the
organizational challenges for managing diversified business groups might be similar to those
facing diversified M-form firms in that organization costs would increase as the number of
affiliated firms increases.
The proposed relationships between business group diversification and transaction and
organizational costs are illustrated in Figure 1. The downward-sloping transaction cost curve
(TC1) represents the overall transaction costs in an economy produced by the legal infrastruc-
ture and the available market institutions. The upward-sloping curve (OC1) represents the
average organizational costs in a country that a diversified business group experiences to con-
duct internal transactions. The overall cost from the given set of market institutions would be
realized at the intersection of the transaction cost and organizational cost curves, where the
combined transaction and organization costs are the lowest. Thus, the overall optimal com-
bined transaction and organization costs would be realized at Point A in Figure 1. This would
be the set point for the average level of diversification based on these costs for business groups
in an emerging economy.
Institutional Transition, Transaction Costs,

and Pressure to Refocus
As Figure 2 illustrates, when market institutions have evolved such that there is better legal
protection for transactions, more capital available in the market, better financial intermediar-
ies, and a more developed product market, overall transaction costs are lowered in the emerg-
ing economy. This lower level of transaction costs is illustrated by curve TC2. The new lower
overall transaction cost level decreases the need for internal group markets and broad levels of
diversification in diversified business groups. As such, the optimal level of diversification in
the overall economy would be lowered for these business groups (Point B). Accordingly, there
would be an incentive for refocusing to lower the level of diversification. In effect, the large
unrelated diversified business groups would no longer be as necessary as substitutes for mar-
ket institutions. Thus, the continued development of institutions exerts pressure on large
business groups to reduce their levels of diversification.
External and Internal Factors

That Influence Refocusing Activity
Although lower overall transaction costs create an incentive to refocus, business groups
may not initiate refocusing immediately. Several important external and internal factors can
trigger the refocusing decisions of business groups. We explain below the most relevant exter-
Figure 1
Costs and Business Group Diversification
Transaction Organization
Costs Costs
OC1
Costs
TC1
A
Business Group Diversification
Figure 2
Potential for Business Group Refocusing
With Institutional Changes (Improvements)
Costs Costs
OC1
Costs
TC1
TC2
B A
nal and internal circumstances that may either lead groups to initiate or may hinder refocusing.
External factors include (a) external shocks, (b) external control mechanisms, (c) variance in
country policy toward developing market-oriented institutions, (d) market power and compe-
tition, and (e) country cultural factors. Internal factors include (a) poor performance, (b) lead-
ership, and (c) organizational culture and trust. We discuss the importance of these factors
below and develop propositions to summarize the logic offered.
External Shocks
The need for refocusing of business groups may not only be due to institutional changes
such as the development of more market-based systems in emerging economies. Various
shocks or crisis events in many emerging economies have dramatically increased the pressure
for business groups to refocus (Khanna & Palepu, 1999). For example, the Asian currency cri-
sis that began in 1997 (Haggard, 2001) and the decline of the Soviet Union and its move
toward market reforms (cf. Filatotchev, Buck, & Zhukov, 2000) have all affected refocusing in
various ways.
Although the Asian financial crisis began in 1997, its aftereffects are still present and
encourage reform (Haggard, 2001). The crisis itself led to dramatic decreases in currency val-
uation even in resilient economies such as Hong Kong and Singapore. As currency values fell,
so did the value of corporations operating in these countries (Bruton, Ahlstrom, & Wan, 2001).
Likewise, unemployment rose and currency reserves fell. The decline made it very clear that
there were widespread problems with macroeconomic institutions, ineffective firm strategies,
and mismanagement. There can be no question that profound structural changes are taking
place in Southeast Asia today. Increases in foreign competition from China and India, the pres-
ence of global competitors, and the recent deregulation of many sectors in the economy have
led to the need to adapt to these new environmental contexts through refocusing to new busi-
ness models that are more effective. However, it has taken the currency crisis to spark
refocusing in many firms in Southeast Asia.
Proposition 1: Business groups operating in countries with macroeconomic shocks will be more
likely to refocus than business groups operating in countries without macroeconomic shocks.
External Control Mechanisms
One fundamental difference between firms operating in developed market economies and
firms operating in emerging economies is the lack of external control mechanisms to disci-
pline inefficient managers in the latter. The market for corporate control is not developed to the
extent that it can help to resolve inefficiencies. Thus, takeovers are largely absent in many
emerging economies (although this is beginning to change). This is important because
research in developed economies suggests that takeovers can spark refocusing activities
(Berger & Ofek, 1999).
Part of the reason the market for corporate control is less active is the high degree of politi-
cal power retained by large business groups. This may lead to government protection from
takeover attempts. Second, shareholder rights have not been protected to the extent necessary
to facilitate change. Accordingly, shareholders may worry about losses in such exchanges.
Third, the market for corporate control is an adversarial process characterized by winners and
losers, conflict, and loss of face. In societies such as those in Southeast Asia that emphasize
harmony, reciprocity, and the preservation of face, adversarial processes are often ignored or
shunned (Carney, 2004). The lack of an active market for corporate control, adequate share-
holder protection, and cultural biases against adversarial processes serve to reduce the amount
of refocusing and may help entrench managers of business groups (Bruton et al., 2001;
Filatotchev et al., 2000).
Proposition 2: Business groups operating in countries with a more active takeover market will be
more likely to refocus than business groups operating in countries with a less active takeover
market.
Variance in Country Policy Toward

Developing Market-Oriented Institutions
One of the primary objectives for economic reform in Eastern Europe, the former Soviet
Union, and China was to increase productivity by dismantling the centrally planned econo-
mies present in those countries (Filatotchev et al., 2000). Through the use of large-scale privat-
ization of state-owned enterprises, local governments hoped that such removal of major con-
straints on managerial action coupled with improved managerial incentives would allow
widespread refocusing of newly privatized firms. However, there have been significant varia-
tions among the privatization policies of different countries owing to their path-dependent
institutional development (Boisot & Child, 1996; Nee, 1992; Xin & Pearce, 1996).
In the case of Russia, the centralized planning system was replaced through mass privatiza-
tion by means of vouchers issued to all adult citizens. As government ownership declined,
decision making and overall control of independent firms became decentralized (Filatotchev
et al., 2000). In China, however, control is still very centralized despite the privatization pro-
cess (Carney, 2004). Part of the reason for this may be political; Chinese state-owned enter-
prises (SOEs) are burdened with social welfare responsibilities. As such, the difficulty in
implementing a large-scale privatization program is seriously undermined by the role of the
state in economic exchange. However, Blanchard and Shleifer (2001) argued that in transition
economies, where weak institutions fail to support economic growth, a strong central govern-
ment could play an important role. Accordingly, the refocusing that has taken place in China
has been more orderly, with less employment displacement.
Alternatively, much of the refocusing activity in Russia has involved downsizing (e.g., lay-
offs) (Djankov & Murrell, 2002; Filatotchev et al., 2000). Given that most of the firms are
either single-business or vertically integrated firms, widespread asset refocusing through sell-
offs is not entirely feasible. The lack of institutional development and resulting limited foreign
investment are hindering change in Russia (Hitt, Ahlstrom, Dacin, Levitas, & Svobodina,
2004). Filatotchev and colleagues (2000) found that financial institutional shareholdings were
positively related to downsizing, but managerial ownership was negatively related. Their
results suggested that managerial ownership is serving to entrench management potentially to

the detriment of firm productivity.
Research has suggested that privatization, on average, is positively related to refocusing
(Djankov & Murrell, 2002). Djankov and Murrell (2002) evaluated more than 100 studies in a
meta-analysis on privatization and reported that increased private ownership leads to more
refocusing. Interestingly, results for privatization in the Commonwealth of Independent States
(those states formerly associated with the Soviet Union) are insignificant, whereas results in
Southeast Asia have been positive. They also found that state ownership in traditional state-
owned enterprises is less effective than all other ownership types except worker owners in pro-
moting refocusing. Therefore, the level of privatization may affect the degree of business
group refocusing.
Proposition 3: Business groups operating in countries that implemented mass privatization policies
will be more likely to refocus than business groups operating in countries that implemented grad-
ual privatization policies.
Market Power and Competition
Another factor that can influence the decision of whether to undertake refocusing activity
is the degree of market power the business group has. As noted by Carney (2004), macro-
institutional change often involves distributional struggles (such as potential entry into a par-
ticular market space) that mobilize coalitions of actors to defend their shared interests. In the
case of Southeast Asia, business groups often form an elite group of politically connected
firms that may have the power to perpetuate their positions in the face of increased deregula-
tion and competition (Carney, 2004; Haggard, 2001). Thus, business groups may be able to
forestall refocusing activity, relative to independent firms (Hoskisson, Cannella, et al. 2004)
when faced with deregulation and increased competition from both foreign and domestic
firms (Kim et al., 2004). Independent firms may not benefit from the same level of market
power, political connectedness, or the support of a group of businesses that reduce business
risk (Tan & See, 2004).
Proposition 4: More powerful business groups will generally be slower to refocus than less powerful
business groups or independent firms.
Country Cultural Factors
One of the principal external factors that may affect refocusing in emerging economies is
cultural differences. For example, Southeast Asian and U.S. firms operate under two different
basic cultural models. In the United States, the prevailing culture is one of confrontation.
Examples include the active market for corporate control, willingness to dismiss CEOs, and
downsizing. Alternatively, firms in Southeast Asian countries operate more within a context
of consensus or cooperation. Preservation of face, harmony, reciprocity, and decision making
based on consensus require different sets of rules and relationships (Xin & Pearce, 1996). In
effect, the prevailing culture fosters the use of relational norms or contracting that serve as a
substitute for market-based forces (Nee, 1992). Tan, Luo, and Zhang (1998) argued that fear
of failure may lead to less risk taking and avoidance of uncertainty. A culture that does not sup-
port risk taking or market-based forces may experience less proactive change.
Interestingly, these cultural differences may be changing over time. Fisher, Lee, and Johns
(2004) examined business turnarounds in Australia and Singapore, dismissal of the CEO, and
ownership change and found that as the regulatory climate and market institutions improved,
cultural differences did not have the same impact they did prior to the aforementioned
improvements. This suggests that less-developed economies may adopt refocusing strategies
more similar to Western countries as their institutional infrastructures advance.
Proposition 5: Business groups operating within countries that emphasize relational norms or con-
tracting will be less likely to refocus than business groups operating in countries that do not
emphasize relational norms.
Poor Performance
As noted above, there are a number of internal factors that may lead to refocusing. Prior
research in developed economies (Johnson, 1996) has suggested that poor performance may
be one such factor. This may occur directly, as happened following the Asian financial crisis
when groups in many of the affected countries came under strong pressure to refocus their
operations to improve performance (Haggard, 2001). Alternatively, poor performance may
indirectly result in refocusing, such as when it leads to a takeover attempt and a firm refocuses
to try to avoid the takeover (Markides, 1996).
Proposition 6: Business groups exhibiting poor performance are more likely to refocus than business
groups exhibiting strong performance.
Changes in Leadership
Poor performance may also lead indirectly to a leadership change and to subsequent refo-
cusing. Bruton and colleagues (2001) have noted that poor performance in Asian firms has led
to increased CEO dismissal. The new CEO, then, is more likely to undertake refocusing efforts
to stem the decline in performance. When market institutions have evolved and overall trans-
action costs are lowered in the country economy, a leadership change may more readily allow a
firm to respond to the pressure for reducing level of diversification. In this regard, as noted ear-
lier, privatization through voucher or “giveaway” schemes is highly unlikely to influence
strong changes if the leadership in the organization follows the mentality from the previous
central planning regime (Filatotchev, Wright, Uhlenbruck, Tihanyi, & Hoskisson, 2003). In an
emerging economy, because a change in mind-set may be necessary, a change in leadership
can be important to trigger appropriate refocusing activities. Recently, Berger and Ofek (1999)
found that refocusing in developed economies was much more likely, relative to a control
group of firms, when there was top management (CEO) turnover. As a result, a change in lead-
ership can be important to trigger appropriate refocusing activities.
Proposition 7: Business groups with higher top management team turnover are more likely to refocus
than business groups with low levels of top management team turnover.
Level of Organizational Trust
The level of organizational trust may be another important internal predictor of refocusing
activity (Bromiley & Cummings, 1995). Relational contracting refers to personalized
exchanges governed by tacit commitments that serve to maintain the continuing relationship
(Ring & Van de Ven, 1992). Components of relational contracting are present in reputation
(Khanna & Palepu, 1997), social capital (Uzzi, 1997), and guanxi (Xin & Pearce, 1996). Rela-
tional norms and contracting are generally fostered by trust between firms, groups, and indi-
viduals (Ring & Van de Ven, 1992). Empirical evidence demonstrates that in some social set-
tings, humans exhibit trustworthy behavior (Bromiley & Cummings, 1995). As noted by
Bromiley and Cummings, the presence of trust within the organization may serve to reduce
transaction costs. Specifically, internal costs related to monitoring, enforcement, comprehen-
sive contracts, and control systems may be reduced.
Within the context of business groups in emerging economies, one can make a similar argu-
ment. With increased trust, the costs of controlling multiple businesses in the business group
and the costs of making, monitoring, and enforcing implicit and explicit contracts within the
business group should be reduced. Therefore, firms with higher levels of trust within the orga-
nization may operate with an organizational culture characterized as having lower organiza-
tional costs. Conversely, business groups operating with a culture of lower trust would exhibit
higher organizational costs. Thus, if these organizational costs (internal costs) are greater than
the transaction costs associated with market-based transactions (external costs), then it may be
more efficient to refocus the business group.
Proposition 8: Business groups that exhibit lower levels of trust are more likely to refocus than busi-
ness groups exhibiting higher levels of trust.
Ownership Influences and the Outcomes of Refocusing
Once a decision is made to refocus, the outcome of refocusing activity is shaped by the
interests of dominant owners. For example, owners are likely to have a strong influence on the
type of diversification strategy and associated organization structure that would be imple-
mented. Two dominant forms of strategy we will consider here are unrelated and related diver-
sification strategies. The most efficient organizational structure associated with the unrelated
diversified strategy is the competitive M-form structure, whereas the related diversified strat-
egy is most efficiently paired with the cooperative M-form structure (Hoskisson, Hill, & Kim,
1993). Competitive M-form organizations are characterized by significant divisional auton-
omy and accompanying decentralization of strategic control such that divisional managers are
accountable for division performance. As such, the evaluation of divisions is primarily based
on objective financial criteria, and cash flow is allocated among divisions from headquarters
on a competitive basis.
Alternatively, in firms using the cooperative M-form structure, coordination between divi-
sions is necessary to realize economies of scope through transferring skills and sharing
resources among divisions (Hill, Hitt, & Hoskisson, 1992). Coordination between divisions is
facilitated through incentive systems of divisional managers, which are linked to corporate, or
group, as well as divisional performance. Markides and Williamson (1996) found that the
cooperative M-form is more effective than the competitive M-form at realizing synergies
inherent in related diversification. However, the cooperative M-form is more expensive to
manage and thus, as firms move toward relatedness in the cooperative M-form structure, they
experience increased organizational costs (Jones & Hill, 1988).
For instance, Kim and colleagues (2004) outlined two large Korean chaebols’ (LG and
Hyundai) refocusing efforts in response to improved institutional infrastructure. LG reduced
its size as well as its level of diversification (although it still has a large unrelated component)
and pursued a competitive M-form structure. Alternatively, Hyundai Motor Group sold off
businesses and refocused into a related-diversified group of firms similar to a cooperative M-
form.
If, as our model suggests, business groups decide to employ more focused strategies such
as related diversification or vertical integration, then new organizational structures would be
required. As the M-form literature suggests, more cooperative M-form structures would be
necessary (Hill et al., 1992). Concomitantly, this would drive up organizational costs in order
to facilitate coordination between related businesses in diversified business groups. We illus-
trate this condition in Figure 3. The increase in organizational costs to implement more coop-
erative M-form structures in business groups is represented by curve OC2.
Various ownership structures may provide incentives or disincentives to focus on one or the
other of these diversification strategies and structural positions and thus may influence the
nature of the refocusing taken by a particular business group. Much of the previous research
from developed economies has classified basic ownership patterns into two groups, inside
manager-dominated groups and outside owner-dominated groups. This same research has
also suggested that one or the other ownership structure tends to dominate the decision making
regarding refocusing (Hoskisson & Turk, 1990). However, these prior studies may underesti-
mate the different incentives associated with a larger variety of ownership groups. This is
especially true for the different ownership patterns associated with business groups in emerg-
ing economies (Ramaswamy et al., 2002). Even in the context of the United States or other
more developed countries, research has demonstrated that different owners are related to dif-
ferent corporate-level strategies (David, Kochhar, & Levitas, 1998; Hoskisson, Hitt, Johnson,
& Grossman, 2002).
In the finance literature, Brickley, Lease, and Smith (1988) have likewise developed a
three-part classification of owners in the United States. Pressure-sensitive owners are suscep-
tible to the influences of power exercised by firm managers. However, pressure-resistant own-
ers tend to have clear profit and growth objectives for the firm, relatively independent from the
goals of the firm’s management. The group of pressure-indeterminate owners plays a passive
Figure 3
Potential for Business Group Refocusing With Increases in Organizational Costs
Costs Costs
OC2
Costs OC1
TC 1
TC 2
B A
role in some situations and a marginally active role in others. David and colleagues (1998)
suggested that mutual and pension fund investors are pressure-resistant in that they can inter-
vene in decision making “without fear of retribution.” However, banks cannot easily follow
the same course because much of their income is tied to interest derived from lending to target
firms (Hoskisson et al., 2002). Thus, type of owner as well as amount of ownership will be
important considerations in examining the motivation of owners in business groups refocus-
ing in emerging economies. We offer propositions regarding the different incentives of owners
concerning the desired type of refocusing as depicted in Figure 4.
Family Ownership
Dominant family ownership of a business group often implies control by an extended fam-
ily even if they do not own a 50% majority (Chang, 2003; Chung, 2001; Ramaswamy et al.,
2002). For example, Malaysian-based YTL Corporation was founded in the 1920s as a timber
business. Today the firm is run by the grandson of the founder and includes real estate, power
generation, and information technology businesses (Kennedy, 2002). In groups with a strong
family ownership position, the descendants of group founders control group-affiliated firms
through both equity stakes and complex legal structures (Chang, 2003). In such groups, it is
common for each of the group affiliates to be led by a different family member.
Similar to research on emerging markets, research by Palmer, Friedland, Jennings, and
Powers (1987) suggests that large diversified corporations in the U.S. context are much slower
Figure 4
Ownership Incentives for Refocusing
Ownership Type Related Refocusing Unrelated Refocusing
Family
Developmental
Financial Institutions
Foreign
Bank
Government
to adopt decentralized strategies for fear of losing power or hierarchical control. Accordingly,
their research indicates that family-owned firms were less likely to adopt the multidivisional
structure, which became prominent in the 1950s and 1960s among large U.S. corporations.
Similarly, large diversified business groups in emerging economies such as Korea have main-
tained family control and usually more centralized control of operations even though the
groups were quite diversified (Kim et al., 2004). Chang (2003) suggested that concentrated
ownership may create an incentive for the family owners to expropriate wealth from the sub-
sidiary businesses of a large diversified business group.
Bertrand, Mehta, and Mullainathan (2002) suggested that the relationship between owner-
ship and wealth appropriation may be attributable to “tunneling.” This refers to transferring
resources from firms in which a controlling family holds relatively small cash flow rights to a
business group subsidiary in which the family owns substantial cash flow rights. In this way,
firms can expropriate value from minority shareholders (Bergstrom & Rydqvist, 1990). In
business groups in emerging economies, it is likely that the refocusing choice would be a very
constrained type of diversification such as related constrained or vertical integration. Through
strategies such as vertical integration, where there are significant internal sales to the business
group, transfer-pricing strategies can be employed that may facilitate tunneling. In fact,
Chang’s (2003) research suggests that performance drives ownership and not the other way
around. In other words, families pursue ownership in firms that are highly profitable inside the
business group, ostensibly to allow better and more profitable resource transfers for family use
as well as growth of the business group. Research in finance (Claessens, Djankov, Fan, &
Lang, 2002) also suggests that this type of ownership can lead to managerial entrenchment.
With regard to refocusing strategies, family-owned business groups would likely move
toward related constrained diversification or vertical integration when a refocusing opportu-
nity presents itself through changes in the institutional environment. For example, Thailand’s
Central Group, controlled by the Chirathiwat family, refocused operations after the 1997
financial crisis by closing more than 120 subsidiaries and outsourcing many noncore opera-
tions (Polsiri & Wiwattanakantang, 2004).
Proposition 9: Compared to other ownership positions in emerging economies, a business group with
a dominant family ownership position is more likely to adopt a narrowly scoped diversification
strategy with a highly related group of businesses.
Developmental Financial Institutions
Developmental financial institutions (DFIs), similar to pension fund investors, might also
have specific influences given their ownership positions in diversified business groups. For
example, the World Bank has a subsidiary DFI called the International Financial Corporation,
which has an $8 billion budget to invest in privatization programs (George & Prabhu, 2000).
Countries also have DFIs, which may specialize in financing specific industries (e.g., agricul-
ture) or firm size (e.g., small businesses). For example, the Industrial Development Bank of
India has an asset base of $10 billion and offers a broad scope of services to facilitate invest-
ment (George & Prabhu, 2000). These institutions are often “pressure resistant” in the classifi-
cation proposed by Brickley and colleagues (1988). Accordingly, they are likely to actively
provide suggestions to the management of the business group, which would help the group
avoid wealth-destroying strategies, such as tunneling, found to be associated with broader
family ownership (Chang, 2003).
Because DFIs are large block shareholders, they are likely to provide monitoring behaviors
similar to active institutional investor shareholders in developed economies (Gillan & Starks,
2003). David, Hitt, and Gimeno (2001) suggested that institutional shareholders are often vig-
ilant in guarding against opportunistic managerial and other owner behavior that would result
in wealth-destroying tunneling. In general, however, because institutional investors have a
diversified portfolio, they would want firms to be more focused (Hoskisson et al., 1994;
Hoskisson & Turk, 1990), but without the tunneling associated with family ownership
(Hargis, 1998). This would indicate that they would support refocusing leading to reduced lev-
els of diversification for business groups in emerging economies.
Proposition 10: Compared to other ownership positions in emerging economies, a business group
with a strong developmental financial institution ownership position is more likely to adopt a nar-
rowly scoped diversification strategy with a moderately related group of businesses.
Foreign Ownership
Large foreign investors would likely be “pressure resistant” as well because they have a
unique relationship with the managers of the business group. They may form joint ventures (or
equity alliances) with local companies through large block ownership positions, and, there-
fore, they may closely monitor the venture. Also, because they may have significant under-
standing of the business and they do not fear retribution from a client relationship as a bank
would, they have both better information and motivation to closely monitor strategic behavior
of the business group. For instance, through a merger with International Steel Group, Mittal
Steel Company (based in the Netherlands) has become the world’s most global steel producer.
Mittal has been buying large steel operations in Eastern Europe and in other emerging market
countries and consolidating and refocusing the older operations and building more efficient
facilities (Reed & Arndt, 2004). Unlike banks, families, or governments that can control busi-
ness groups, foreign owners are usually less embedded in the social network of the group. As
such, the proportion of ownership controlled by foreign investors would likely have a negative
impact on unrelated diversification similar to developmental financial institution ownership.
Accordingly, the refocusing that might be done when an opportunity arises would most
likely result in a narrowing of the scope of the firm. However, the impact of foreign ownership
in regard to strategy and structure would depend more on the particular strategy desired rather
than an emphasis on narrow versus broad levels of diversification. Thus, the incentive would
be to generally refocus more narrowly but do it in a way that tends to support the particular
strategy of the joint venture. For example, if the joint venture intended to foster vertical rela-
tionships as in a buyer-supplier arrangement, then the particular diversification strategy would
follow from this strategic intent. If the joint venture was created to produce technologically
advanced products, then perhaps a more related and cooperative diversification strategy would
likely be pursued.
with a strong foreign ownership position is more likely to adopt a narrowly scoped diversification
strategy with a moderately related group of businesses.
Bank Ownership
Compared to family, DFI, and foreign ownership, bank ownership might provide an incen-
tive for diversified business groups to refocus their portfolio of businesses in a different man-
ner. In a group with a strong bank ownership position, the focal bank may provide and facili-
tate resource allocation among group member firms. Although such banks may provide help
and support during times of financial distress (Aoki, 1988; Hoshi, Kashyap, & Scharfstein,
1990), Brickley and colleagues (1988) classified banks and banking companies as “pressure-
sensitive investors.” This is due to the relationship they have with firms in which they may also
invest. In large part, they are dependent on these firms for their income and the interest they
derive off loans provided to client corporations. They also receive fees by providing services
to customer firms. Often banks are associated with large diversified networks as well and may
even be partially owned by a business group (Hoskisson et al., 2001). In emerging economies,
such banks may be closely associated or partly owned by the families connected with these
business groups. Such banks may also be closely associated with the government and may not
have experienced significant competition in the banking environment.
Because the largest firms in emerging economies tend to be associated with business
groups, banks may gravitate to establishing client relationships with these large diversified
business groups (Ramaswamy et al., 2002). Connection to these large business groups allows a
bank to increase its portfolio in which to receive interest from loans and fees for services pro-
vided. Business with diversified business groups reduces transaction costs and facilitates rela-
tionship-type banking. Accordingly, if there is significant bank ownership in large diversified
business groups, it is likely that refocusing would result in more unrelated-type strategies
(Ramaswamy, Li, & Petitt, 2004). In turn, unrelated diversification would broaden the number
of businesses through which a bank might create business. At the very least, banks would be
less likely to either pressure large client business groups to sell off businesses or encourage
them to refocus their operations.
with a strong bank ownership position is more likely to adopt a broadly scoped diversification
strategy with a mix of related and unrelated (related-linked) groups of businesses.
Government Ownership
Although bank ownership is expected to be associated with refocusing that maintains high
levels of unrelated diversification, the association between government ownership in a privat-
ized business group and refocusing favoring unrelated diversification may be even higher.
Andrews and Dowling (1998) suggested that the government seldom tracks the performance
of firms in which the government has a substantial ownership position. Ramaswamy and col-
leagues (2002) found that government ownership did not have an influence on Indian busi-
ness groups and thus concluded that the government might be classified as a pressure-
indeterminate investor (Brickley et al., 1988). Thus, government ownership may lower moni-
toring intensity, resulting in a diversification pattern that is more haphazard and unrelated.
However, business groups in some countries might have political motives for consciously
favoring unrelated diversification. For instance, Chinese business groups that are newly
formed and have significant government ownership might pursue unrelated diversification
and avoid refocusing in order to employ as many individuals as possible (Dharwadkar,
George, & Brandes, 2000; Thomsen & Pedersen, 2000). Employment in most previously cen-
trally planned economies is associated with social welfare issues such as housing, medical
benefits, and even educational opportunities. Refocusing often reduces head count, and busi-
ness groups that have significant government ownership and large employee bases might be
politically motivated to pursue the objective of maintaining low unemployment versus pursu-
ing other types of refocusing (Hoskisson, Yiu, Bruton, & White, 2004). Thus, groups con-
trolled by the government (whether it be local or central government) are likely to have sizable
diversified operations and resist refocusing efforts that would reduce employment levels
(Hoskisson et al., 2001). However, as institutions change in an economy such as China, other
ownership influences, especially foreign investment and mutual fund investment, might
reduce the emphasis on unrelated diversification.
with a strong government ownership position is more likely to adopt a broadly scoped diversifica-
tion strategy with an unrelated group of businesses.
Conclusion
As described in this article, refocusing in emerging economy business groups is likely to

reduce the overall level of diversification in such groups, given the movement toward
increased market-oriented institutions in emerging economies. An important question for
future research is to address whether the business group organizational form will disappear as
economic development continues. As noted in the introduction, business groups continue to
exist even in developed economies. Perhaps, as the Tata Group in India, business groups will
adapt through refocusing to meet new environmental circumstances (Kripalani, 2004). In
developed economies, “institutional voids” may continue to exist allowing business groups to
serve an appropriate function (Khanna & Palepu, 2000). The path dependence of institutional
development may also create differences among countries such that business groups continue
to survive. Collin (1998) and Gerlach (1997) argued that business groups continue to exist in
Sweden and Japan because of distinctive political, cultural, and sociological differences in
these countries.
It is hoped that this review will provide a foundation for research on the refocusing of diver-
sified business groups as these groups seek to develop more efficient strategies and structures
that are matched to the institutional environment of their countries of origin. Future research is
needed to not only understand the overall external and internal organization costs and the
effects of various ownership arrangements but also to better understand the idiosyncratic
external and internal organizational issues that may foster or hinder refocusing activities and
the strategic direction that refocusing takes. Although we have offered a number of important
factors that might be considered in future research, there may be others that will emerge as
research proceeds.
Note
1. Corporate restructuring as defined here from the point of the view of the strategy literature is focused on portfolio
reorganization and has little to do with actual changes in organizational structure. Although we talk about changes in
organization structure, they are associated with changes necessary to implement a particular type of diversification
strategy (related versus unrelated). For more on the specific structure types discussed in our article, see Hoskisson,
Hill, and Kim (1993).
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Biographical Notes
Robert E. Hoskisson is the W. P. Carey Chair and a professor of strategic management in the Department of Manage-
ment at Arizona State University’s W. P. Carey School of Business. He received his Ph.D. from the University of Cali-
fornia, Irvine. His research topics focus on large diversified business groups, corporate governance, corporate innova-
tion strategies, corporate and international diversification strategy, acquisitions and divestitures, strategies in
emerging economies, privatization, and cooperative strategy.
Richard A. Johnson is a professor of management and currently holds the Puterbaugh Chair in American Enterprise
in the Price College of Business at the University of Oklahoma. He received his Ph.D. from Texas A&M University.
His current research interests include international diversification, corporate refocusing in domestic and international
firms, corporate governance, international entrepreneurship, and initial public offers.
Laszlo Tihanyi is an associate professor of management in the Mays Business School at Texas A&M University. He
received his Ph.D. from Indiana University. His research interests include international strategies, corporate gover-
nance in multinational firms, and organizational adaptation in emerging economies.
Robert E. White is pursuing a Ph.D. in strategic management at Arizona State University. His research interests
include corporate governance, business groups, and corporate political activity.
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Diversiﬁed business groups and corporate refocusing in emerging economies

Article in Journal of Management · January 2006

Robert E Hoskisson Richard A. Johnson

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Diversified Business Groups and

Keywords: business group; restructuring; refocusing; emerging economy; ownership

*Corresponding author. Tel: 480-965-2286; fax: 480-965-8314.

Corporate Restructuring and Refocusing

repurchases, and leveraged recapitalizations, whereas organizational restructuring entails

Emerging Economies and Corporate Refocusing

Emerging Economies and the

Institutional Changes and

Similarly, a diversified business group would experience different organizational costs

Institutional Transition, Transaction Costs,

External and Internal Factors

External Control Mechanisms

Variance in Country Policy Toward

results suggested that managerial ownership is serving to entrench management potentially to

Market Power and Competition

Country Cultural Factors

Level of Organizational Trust

Ownership Influences and the Outcomes of Refocusing

Business Group Diversification

Ownership Type Related Refocusing Unrelated Refocusing

Developmental Financial Institutions

As described in this article, refocusing in emerging economy business groups is likely to

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