Are emerging economies less efficient? Performance persistence and the impact of business group affiliation
By: CHACAR, Aya
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Contributor(s): VISSA, Balagopal.
Material type: 
ArticlePublisher: UK : Wiley, October 2005Subject(s): Persistence | Business groups | IndiaStrategic Management Journal 26, 10, p. 933 - 946Abstract: By drawing a theoretical distinction between the persistence of superior and poor performance, we 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 United States and India, we show that superior firm performance in emerging economies persists only as much as developed economies in line with the revisionist argument. We 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 arm's length.
By drawing a theoretical distinction between the persistence of superior and poor performance, we 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 United States and India, we show that superior firm performance in emerging economies persists only as much as developed economies in line with the revisionist argument. We 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 arm's length.
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