Business groups: entry barrier–innovation debate revisited

Abstract

We argue that in the presence of market imperfections, business groups’ market share in a sector acts as a proxy for barriers to enter that sector. Recognition of group share as a proxy for entry barriers allows us to revisit the entry barrier–innovation debate in the context of emerging economies. Evidence presented in this paper note innovative performance is at its peak when groups’ market share is at an intermediate level, suggesting that either too many or too few entry barriers could be harmful for innovation. This result appears robust across a variety of non-parametric and parametric regression techniques.