Business groups and market failures: A focus on vertical and horizontal strategies

Drawing from transaction cost economics and strategic management, this paper develops a series of propositions that link market failure with corporate strategy. In doing so, the paper focuses on both vertical and horizontal strategies as strategic approaches that could be used to address different types of market failure. The significant contribution of the paper lies in its deconstruction of the various types of market failure and developing a theoretically grounded set of propositions that identifies appropriate corporate strategic responses that can be used to ameliorate the negative consequences of each type of failure. In doing so it also explores the evolution of business groups and the viability of strategic choices that groups are likely to make as they navigate the emerging market terrain.

Barbara S. Pécherot PetittEmail:

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Mingfang Li   (PhD, Virginia Polytechnic Institute and State University) is Professor of Management at California State University, Northridge. He also is Distinguished Visiting Professor at Hohai University, Nanjing, China, and Visiting Professor at Xian Jiaotong University, Xian, China. Mingfang Li’s research and teaching focus on strategic management, global strategy, and technology and innovation management. His recent research examines strategies from emerging economies. Mingfang Li taught at various executive seminars in China, and delivered talks at various business programs. Kannan Ramaswamy   (PhD, Virginia Polytechnic Institute and State University) is William D. Hacker Chair Professor of Management at Thunderbird. His current research interests focus on issues of critical relevance to emerging markets such as the evolution of multinationals from developing countries and the role of business groups in emerging markets. Parallel with his research interests, his teaching assignments cover similar topics within the realm of global strategy. He has taught in executive development programs for many of the world’s leading companies and also in academic programs at several global institutions. Barbara S. Pécherot Petitt   (PhD, University of Grenoble, France) is Associate Professor of Finance at CERAM Sophia Antipolis. Previously she was Assistant Professor of Finance at Thunderbird. She specializes in corporate finance, valuation, mergers, and acquisitions. Prior to joining Thunderbird, she spent two years with Financial Services Management Development Limited as a consultant, and worked for several banks and companies in London and abroad.