Managing the complexities of internationalization: The role of business group diversification

Abstract

Internationalized firms often deal with different institutional configurations across countries which in turn can generate tensions in their operations due to information asymmetries. Considering that business groups can be an efficient organizational form utilized to minimize transaction costs, we explore how business groups can also leverage their international performance in the presence of institutional complexities. Using a unique longitudinal sample of 62 Latin American firms, we suggest that the negative impacts on performance caused by international institutional complexities can be alleviated trough business group diversification. Specifically, we point out that business group diversification positively affect business group performance in the presence of institutional voids and aggregated complexity, while in the case of societal complexities results were not significant.