Asia Pacific Journal of Management

, Volume 23, Issue 4, pp 439–452

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


    • Hohai University
    • Department of ManagementCalifornia State University, Northridge
  • Kannan Ramaswamy
    • Department of Global BusinessThunderbird: The Garvin School of International Management
  • Barbara S. Pécherot Petitt
    • CERAM Sophia Antipolis

DOI: 10.1007/s10490-006-9016-1

Cite this article as:
Li, M., Ramaswamy, K. & Pécherot Petitt, B.S. Asia Pacific J Manage (2006) 23: 439. doi:10.1007/s10490-006-9016-1


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.


Business groupsDiversificationVertical integrationMarket failures

Copyright information

© Springer Science+Business Media, LLC 2006