Coase Revisited: Business Groups in the Modern Economy

Mark Granovetter

in Technology, Organization, and Competitiveness

Published in print March 1998 | ISBN: 9780198290964
Published online November 2003 | e-ISBN: 9780191596162 | DOI:
 Coase Revisited: Business Groups in the Modern Economy

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Ronald Coase's celebrated query as to why economic actors typically aggregate into entities called ‘firms’ rather than transacting as individuals in a market has engendered a vigorous stream of research. This paper asks a parallel question: why is it that in all modern economies, firms themselves aggregate into larger entities, often more stable than any literature predicts, which are here referred to as ‘business groups’? After establishing some working definitions, and discussing the curious conjunction of empirical importance and analytical invisibility of business groups, an attempt is made to establish the most significant dimensions along which such groups vary. The chapter ends with some speculations on the role of these groups in economic development. The six sections of the chapter are: Coase Encounters of the Second Kind; A Working Definition of Business Groups; The Invisible Problem of Business Groups; Background and Critique of the Existing Literature; Business Groups: the Empirical Patterns (axes of solidarity; ownership relations; authority structure; moral economy; finance, capital, and the role of banks; and relations with the state); and Discussion.

Keywords: authority structure; business groups; capital; economic development; finance; firms; modern economies; moral economy; ownership relations; Patterns; relations with the state; role of banks; Ronald Coase; solidarity

Chapter.  17397 words. 

Subjects: Microeconomics

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