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Creating relational rents: The effect of business groups on affiliated firms’ performance in Indonesia

Abstract

This research attempts to extend the discussion of business groups in emerging economies by treating business groups as a form of interorganizational network that generates relational rents among affiliated firms by creating technological and managerial capabilities. Based on the relational view, this research investigates whether value created by business groups depends upon sharing, combining, and exchanging unique and specific resources or assets among affiliated firms. Results show that technological capabilities contribute to create relational rents in terms of affiliated firms’ investment in R&D and human capital. Managerial capabilities also contributed to generating relational rents through investment in managerial knowledge acquisition for affiliated firms without R&D units and in training for affiliated firms with R&D units. However, learning by exporting and learning from imported input do not yield relational rents within business groups. Overall, these findings reveal that business groups as interorganizational networks are contingent on their internal, unique, and specific capabilities, as social capital theory argues.

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Correspondence to Tirta Nugraha Mursitama.

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I gratefully acknowledge constructive comments from Shigeru Asaba, Michio Nitta, Keisuke Nakamura, Junji Nakagawa, Hiroyoshi Kano, Ishtiaq Mahmood, Andrew Delios, Mike Peng, Michael Carney, Alvaro Cuervo-Cazurra, Sea Jin Chang, Yuri Sato, Thee Kian Wie and two anonymous referees for helpful comments. I also benefited from the discussions with participants at Asia Pacific Journal of Management Special Issue Conference 2005. I gratefully acknowledge financial support for conference attendance provided by the Asia Academy of Management/APJM and National University of Singapore as well as from Center for International Exchange, Gakushuin University, Tokyo. All errors remain mine.

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Mursitama, T.N. Creating relational rents: The effect of business groups on affiliated firms’ performance in Indonesia. Asia Pacific J Manage 23, 537–557 (2006). https://doi.org/10.1007/s10490-006-9014-3

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Keywords

  • Business groups
  • Relational rents
  • Capabilities
  • Indonesian firms