Political strategy and the growth of business groups

Abstract

How do companies and government interactions affect business groups’ decisions on growth? So far, empirical evidence is based on qualitativedata that do not explain how political strategies affect the expansion or diversification of business groups. Our main contribution is to discuss theconditions that affect their growth. To do this, we conducted an in-depth field study in six business groups, and examined 17 growth decisions. Fourcategories (origin of growth, historical relationships, business group’s scope and use of specific political strategies) emerged from the analysis,based on interviews with managers and on 480 secondary data sources. We further applied the qualitative comparative method to test our categoriesas conditions for growth. We found that a historical relationship between the group and the government is a necessary but insufficient conditionfor growth through diversification. To foresee diversification, historical relationship must be aligned with government’s political interest, or withthe use of one or a combination of specific political tactics. We found no set of variables that can fully explain growth through expansion.