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Does business group affiliation encourage R&D activities? Evidence from India

Surenderrao Komera (), P. J. Jijo Lukose () and Subash Sasidharan ()
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P. J. Jijo Lukose: Indian Institute of Management Kozhikode

Asia Pacific Journal of Management, 2018, vol. 35, issue 4, 887-917

Abstract: Abstract The decision to undertake investment in innovative activities is an important strategic choice made by firms. This study investigates the relationship between business group (BG) affiliation and research & development (R&D) activities of Indian firms. Using an empirical approach that accounts for endogeneity and selection bias, we observe that BG affiliation has significant positive influence on the sample firms’ R&D activities. Employing various proxies for institutional development, we show that the effect of BG affiliation on R&D declines with the improvements in institutional and regulatory mechanisms. Further, this study explores the linkages between diversification strategies at the group level and R&D investments by firms affiliated with BGs. Results show that degree of related diversification is positively associated with the affiliates’ innovation efforts.

Keywords: R&D investment; Business groups; Diversification; India (search for similar items in EconPapers)
Date: 2018
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