ORGANIZATION DESIGN AND CORPORATE GOVERNANCE OF BUSINESS GROUPS: A COMPARISON OF THE PUBLIC AND PRIVATE SECTOR

Abstract

Business groups are large inter-organizational entities that significantly contribute to economic activities worldwide. While being a highly relevant form of business organization in many emerging nations (Hoskisson, Johnson, Tihanyi, & White, 2005), they are still well represented in some of the post-socialistic countries. For instance, private- and public- sector (state-owned) business groups in Croatia account for a one third of the GDP (Lider, 2011) and play a very important role in the development of the national economy. However, we know very little about the corporate strategy, governance processes and organizational structure applied within business groups, especially given the fact that business groups around the world vary considerably (Khanna & Yafeh, 2007). Therefore, the aim of the paper is to examine how business groups in Croatia are organized and managed. A comparative analysis of the largest business groups listed by the Croatian Chamber of Commerce offers useful insights about their level of diversification, group configuration and board structure, as well as regarding the organizational architecture of their holding company, the current level of the group internationalization, and the business group-level performance. The results clearly show similarities and differences present between among private- and state-owned business groups of interest. Thus, the paper contributes to better understanding of organizing practices of the largest business systems in Croatia, and offers specific insights about the divide between the private- and public-sector business groups.