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Asia Pacific Journal of Management

, Volume 35, Issue 4, pp 887–917 | Cite as

Does business group affiliation encourage R&D activities? Evidence from India

  • Surenderrao KomeraEmail author
  • P. J. Jijo Lukose
  • Subash Sasidharan
Article
  • 667 Downloads

Abstract

The decision to undertake investment in innovative activities is an important strategic choice made by firms. This study investigates the relationship between business group (BG) affiliation and research & development (R&D) activities of Indian firms. Using an empirical approach that accounts for endogeneity and selection bias, we observe that BG affiliation has significant positive influence on the sample firms’ R&D activities. Employing various proxies for institutional development, we show that the effect of BG affiliation on R&D declines with the improvements in institutional and regulatory mechanisms. Further, this study explores the linkages between diversification strategies at the group level and R&D investments by firms affiliated with BGs. Results show that degree of related diversification is positively associated with the affiliates’ innovation efforts.

Keywords

R&D investment Business groups Diversification India 

Notes

Acknowledgements

We are grateful to two anonymous referees, Senior Editor Professor Anil Nair, and Professors T. N. Srinivasan and Satish Krishnan for insightful comments and suggestions. We thank seminar participants at IIM Kozhikode, IFMR Chennai, IISc Bangalore and participants of the annual Conference of Forum for Global Knowledge Sharing, Bangalore, 2014; Conference on Micro Evidence on Innovation and Development, New Delhi, 2015; and Academy of Management, Anaheim, 2016 for valuable comments. We take the complete responsibility for any remaining errors or omissions.

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Authors and Affiliations

  • Surenderrao Komera
    • 1
    Email author
  • P. J. Jijo Lukose
    • 2
  • Subash Sasidharan
    • 3
  1. 1.Institute for Financial Management and Research (IFMR)Sri CityIndia
  2. 2.Indian Institute of Management KozhikodeKozhikodeIndia
  3. 3.Department of Humanities and Social SciencesIndian Institute of Technology MadrasChennaiIndia

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