Asia Pacific Journal of Management

, Volume 23, Issue 4, pp 439–452 | Cite as

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

  • Mingfang Li
  • Kannan Ramaswamy
  • Barbara S. Pécherot Petitt


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 groups Diversification Vertical integration Market failures 


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Copyright information

© Springer Science+Business Media, LLC 2006

Authors and Affiliations

  • Mingfang Li
    • 1
    • 2
  • Kannan Ramaswamy
    • 3
  • Barbara S. Pécherot Petitt
    • 4
  1. 1.Hohai UniversityNanjingChina
  2. 2.Department of ManagementCalifornia State University, NorthridgeNorthridgeUSA
  3. 3.Department of Global BusinessThunderbird: The Garvin School of International ManagementGlendaleUSA
  4. 4.CERAM Sophia AntipolisSophia Antipolis CedexFrance

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