Innovation in Business Groups

Sharon Belenzon and Tomer Berkovitz

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: Using novel data on European firms, this paper examines the effect of business group affiliation on innovation. We find that business groups foster the scale and novelty of corporate innovation. Group affiliation is particularly important in industries that rely more on external finance and have a higher degree of information asymmetry. We also find that the innovation of affiliates is less sensitive to operating cash flows. We interpret our results as supporting the 'bright side' of business group internal capital markets and explain how legal boundaries between group affiliates mitigate the inefficiencies found in internal capital markets of US conglomerates.

Keywords: business groups; innovation; internal capital markets (search for similar items in EconPapers)
JEL-codes: G34 L22 L26 O32 (search for similar items in EconPapers)
Date: 2007-11
New Economics Papers: this item is included in nep-ino, nep-ipr, nep-pr~ and nep-soc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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https://cep.lse.ac.uk/pubs/download/dp0833.pdf (application/pdf)

Related works:
Journal Article: Innovation in Business Groups (2010)
Working Paper: Innovation in Business Groups (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:cep:cepdps:dp0833

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