This volume complements the valuable Oxford Handbook of Business Groups, published in 2010 and edited by the same two distinguished Kyoto-based pioneers of the field, plus James Lincoln (of Berkeley’s Haas School). The intellectual history of the subject is reflected in the contrasting focus of the two volumes. The Handbook was largely about business groups in the emergent and developing world, reflecting a widespread perception that they played critical organizational roles there, though it also featured Randall Morck’s classic treatment of pyramided utility groups in the United States. With that exception, many felt that in mature economies corporations had conformed to the Chandlerian paradigm of nonfamily-owned, professional multidivisional organizations driving twentieth-century growth. Management consultants enthusiastically sold that allegedly superior US blueprint, but many business strategists, development economists, and business historians suspected that various differently constituted business groups rather usefully compensated for institutional voids, such as weak capital markets and logjams in the supply of entrepreneurs and complementary goods and services. Increasingly, scholars now further argue that some characteristics of business groups—family ownership; bank, state, and pyramided control structures; unrelated diversifications—can also be found, historically and today, in advanced economies, holding their own against, and in some cases outcompeting, classic corporations. Some modern business groups have developed distinctively new business models: the editors and some authors provocatively make the case for including private equity as a form of business group, while acknowledging its distinctive features. Other more traditionally constituted business groups of long-standing have mutated into forms more suited to their changing environment, in some (but not all) cases performing better than classic Chandlerian corporations. This volume surveys the recent international literature, broadly supporting the view that business groups—while they face challenges (which business firms do not?)—cannot sensibly be considered anachronistic throwbacks. In the West—as well as the developing world—many remain successful: the last word of the title—“resilience”—is not a misprint.
Part 1 summarizes concepts and arguments. It includes two chapters from the editors. The first authoritatively surveys recent debates and the complexity of typologies of business groups, noting that the editors aim generally to focus on hierarchy-type groups with holding company or pyramided control (excluding network-type groups such as airline alliances; or kigyo-shudan, the looser postwar Japanese horizontal alliances). The editors’ second chapter critically appraises the historical and management literature on the evolutionary dynamics of diversified business groups, for example showing how groups have in recent decades come to terms with the critique of unrelated diversification (which some authors suspect may be a transitory capital market fad), enabling groups to remain a viable organizational model in mature markets. Chapter 3 (by Ben Ross Schneider, Weihuang Wong, and Colpan) surveys the important role of different tax and regulatory constraints on business groups, usefully rooting their discussion in political and cultural forces highlighted in the literature on variant capitalisms. In Chapter 4, James Lincoln and Matthew Sargent demonstrate the analytical benefits of more rigorous attention to the networking features of business groups.
Part 2, occupying four-fifths of the volume, surveys twelve countries: Britain (Geoffrey Jones), Belgium (Marco Becht), the Netherlands (Ferry de Goey and Abe De Jong), Germany (Harm Schrôter), France (Youssef Cassis), Sweden (Mats Larsson and Tom Petersson), Italy (Andrea Colli and Michelangelo Vasta), Spain (Alvaro Cuervo-Cazurra), Portugal (Alvaro Ferreiro da Silva and Pedro Neves), Australia (Simon Ville), Canada (Randall Morck and Gloria Y. Tian), and the United States (the latter in two chronological chapters divided around 1960, the first by Hikino and Marcelo Bucheli; the second by David Collis, Bharat Anand, and J. Yo-Jud Cheng). These surveys by well-informed experts—historians, business strategists, and corporate governance specialists—do not disappoint. The editors have sensibly guided them to common themes while remaining sensitive to local cultural differences, without imposing crippling uniformity. One might quibble at some results. If he were alive, Chandler might gasp at the occasional classification of Unilever, Shell, and General Electric as business groups rather than classic corporations, while other readers might be more relaxed, properly considering the market/hierarchy space to be to a continuum, not a sharp dichotomy.
In the United States, international business groups like W. R. Grace & Company, bank-centered groups like Bank of New York Mellon and J. P. Morgan, as well as utilities pyramids like Electric Bond & Share and United Corporation, were initially common but strongly discouraged by New Deal taxes and regulatory controls. Then antitrust constraints on horizontal mergers after World War II encouraged striking US conglomerate growth (with some features in common with overseas and earlier US business groups). The later reaction against them can easily be exaggerated: an overall conglomerate discount did indeed emerge, but Berkshire Hathaway (nearer the old model), Danaher (with a new and distinctive management toolbox applied to aid disposals), and other conglomerate firms actually performed well above the S&P 500 in terms of total average returns on capital from 1985 to 2014. European historians have usually been more reluctant to condemn family business groups or bank-dominated holding companies a priori, without strong quantitative evidence on relative performance, so European reinterpretations are less prominent in the volume. Yet all contributors have something new to say both about why some business groups disappeared and why those that survived were far from moribund.
This is not a volume to be read from cover to cover at one go, but it will long remain on my bookshelf, well-thumbed, as a reminder of key controversies in the field and as a sourcebook for an eclectic range of national examples.