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| Author: | Kali, R. |
| Title: | Business groups, the financial market and modernization |
| Journal: | Economics of transition
2003 : VOL. 11:4, p. 671-696 |
| Index terms: | Diversification Groups Stock markets Technology |
| Language: | eng |
| Abstract: | Business groups are an important aspect of the industrial organization of many developing countries. A theory suggesting that they may be organizations that facilitate modernization in the presence of financial market constraints is developed in this article. An important function of the stockmarket is the diversification of risk that comes with specialized, productive technology. But in the face of serious information problems a well functioning stockmarket may fail to emerge, relegating the economy to a low productivity-poverty trap. Bilateral links between a company and a group of others may be a more cost effective way to achieve risk-sharing. Such business groups may be feasible when a full-fledged stockmarket is not. |
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