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

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Abstract

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.

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Notes

  1. We thank an anonymous reviewer for emphasizing this aspect.

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Authors and Affiliations

  1. Hohai University, Nanjing, China

    Mingfang Li

  2. Department of Management, California State University, Northridge, 18111 Nordhoff Street, Northridge, CA, 91330-8376, USA

    Mingfang Li

  3. Department of Global Business, Thunderbird: The Garvin School of International Management, 15249 N. 59th Avenue, Glendale, AZ, 85306, USA

    Kannan Ramaswamy

  4. CERAM Sophia Antipolis, Rue Dostoïevski, BP 85, 06902, Sophia Antipolis Cedex, France

    Barbara S. Pécherot Petitt

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  1. Mingfang Li
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  2. Kannan Ramaswamy
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  3. Barbara S. Pécherot Petitt
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Correspondence to Mingfang Li.

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Li, M., Ramaswamy, K. & Pécherot Petitt, B.S. Business groups and market failures: A focus on vertical and horizontal strategies. Asia Pacific J Manage 23, 439–452 (2006). https://doi.org/10.1007/s10490-006-9016-1

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