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Constraint absorption in emerging economies: the role of business groups

Mueen Ahmed (Department of Strategy, Indian Institute of Management Tiruchirappalli , Tiruchirappalli, India)
Sankalp Pratap (School of Management and Entrepreneurship, Indian Institute of Technology Jodhpur , Jodhpur, India)

International Journal of Organizational Analysis

ISSN: 1934-8835

Article publication date: 25 January 2021

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Abstract

Purpose

The purpose of this paper is to highlight the motivation for firms in emerging economies to engage in constraint absorption. It illustrates the mechanisms that enable business group (BG) affiliated firms to manage interdependencies vis-à-vis standalone firms in emerging economies.

Design/methodology/approach

The propositions outlined in this study are rooted in the theoretical lens of resource dependence theory (RDT). The authors integrate RDT with the resource-based view and institutional theory to explain the effect of BG affiliation on the relationship between the two types of interdependence (i.e. mutual dependence and power imbalance) and the likelihood of constraint absorption.

Findings

This paper theorizes that BG affiliation influences the relationship between mutual dependence/power imbalance and the likelihood of constraint absorption. However, if both the firms in a dyad are affiliated to a BG, the likelihood of constraint absorption is likely to be low owing to a process called “co-optation” even if mutual dependence or power imbalance between the firms is high.

Originality/value

This paper highlights how BG affiliated firms are better at managing contingencies in the external environment vis-à-vis standalone firms. This paper also advises managers that the type of organizational form is an important factor to be considered while engaging in constraint absorption in an emerging economy.

Keywords

Citation

Ahmed, M. and Pratap, S. (2021), "Constraint absorption in emerging economies: the role of business groups", International Journal of Organizational Analysis, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/IJOA-11-2019-1927

Publisher

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Emerald Publishing Limited

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