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Research
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| Author(s) :,
Marleen Dieleman, Wladimir
Sachs |
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Economies
of Connectedness: Illustrated by the Salim
Group of Indonesia |
| Abstract
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Why do companies
diversify? Answers are often associated with
the concept economies of scope, defined as
the advantages associated with multi-product
companies resulting from sharable production
inputs (Panzar and Willig, 1981). Recent literature
advances that diversification in emerging
markets may be due in large part to the influence
of the institutional environment (Granovetter,
1992; Peng, 2003; Khanna and Palepu, 1997).
Guillen (2000) has combined the “economies
of scope” and “institutional”
views and argued for a resource-based
theory of business groups by assuming that
‘entrepreneurs and firms in emerging
economies create business groups if political-economic
conditions allow them to acquire and maintain
the capability of combining foreign and domestic
resources [..] to repeatedly enter new industries.’
(Guillen, 2000: 364). The literature on ethnic
Chinese groups suggests further that the capability
to repeatedly enter new industries may depend
also on social capital, such as political
connections and co-ethnic business networks.
We propose the concept of economies of connectedness,
to denote advantages associated with diversification
resulting from sharable personal relationships.
The paper illustrates the functioning of economies
of connectedness with an in-depth longitudinal
study of the Salim Group of Indonesia.
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| 26th
Strategic Management Society Annual International
Conference, Vienna, October 29-November 1 |
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