Associate Professor of Entrepreneurship
JOURNAL ARTICLE | Strategic Management Journal | 26 | October 2005
Are Emerging Economies Less Efficient? Business Group Affiliation and Performance Persistence
By drawing a theoretical distinction between the persistence of superior and poor performance, the authors reconcile the conflicting predictions of the 'revisionist' and accepted views on the persistence of firm performance in emerging economies.Using a sample of manufacturing firms in the US and India, they show that superior firm performance in emerging economies persists only as much as developed economies in line with the revisionist argument. They also provide evidence consistent with the accepted view that poor firm performance persists longer in emerging economies compared to developed economies.Further exploration of the latter shows that, contrary to predictions of extant theories, firms in emerging economies that are affiliated with an MNC or a Business Group have a greater persistence of poor performance than firms that are unaffiliated with these intermediate governance structures, and hence would be better off operating at arms length.