Abstract
Large, extensively diversified pyramidal business groups of listed firms dominate the histories of developed economies and the economies of developing economies. While such groups (called zaibatsu in Japan) are thought to have provided coordination for big push growth successfully in pre-second-world-war Japan after a state-run big push failed, it is still being debated whether such a pyramidal business group driven big push coordination exists in developing countries elsewhere in Asia. We hypothesize that pyramidal business groups can be private-sector mechanisms for coordinating big push growth, provided that first, competition between rival groups induces a sufficiently high level of coordination efficiency, and second, conditions exist for maintaining economic openness and basic infrastructure and legal institutions. Another condition that must be satisfied for a country to sustain economic growth after its big push phase is complete is a timely demise of business groups. Where these criteria are not met, growth stalls and the few pyramidal business groups become too powerful to dislodge.
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Notes
The Meiji era is a Japanese era which extended from September 1868 through July 1912. Japan’s modernization formally began with the establishment of the Meiji government in 1968.
For example, Berle and Means (1932) fear extreme governance abuses in pyramidal groups.
See Aikawa’s diagram in the Nissan Pyramidal Group showing tunneling to sustain a big push (Morck et al. (2005), 2007).
For example, the United States government has been suspicious that large private pyramidal business groups such as the Huawei enterprise group is being subjected to government control, in particular, in the areas of espionage.
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This paper is a progress report of an on-going research project on the behavior of business groups in Asia. An earlier version of this paper was presented at the 77th International Atlantic Economic Society Conference, Madrid, 2–5 April 2014. The author thanks the discussants, the session audience and the reviewers of this journal for their helpful comments on the earlier versions of the paper. This research is in part supported by the Social Science and Humanities Research Council of Canada.
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Nakamura, M. Economic Development and Business Groups in Asia: Japan’s Experience and Implications. Int Adv Econ Res 21, 81–103 (2015). https://doi.org/10.1007/s11294-014-9508-6
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DOI: https://doi.org/10.1007/s11294-014-9508-6