Business Groups in Spain : Regulation and Ideology Drivers for Transformation

I analyze the drivers of the emergence and transformation of business groups in advanced countries. Based on the analysis of the transformation of Spanish business groups in the 20th and 21st centuries, I complement the traditional explanations for the existence of business groups (weak institutions and a closed economy) with two novel explanations (industry regulation and owner ideology). I separate business groups into four types based on their ownership (state-owned, bank-owned, family-owned, and labor-owned) to discuss differences in the drivers of their existence. First, state-owned business groups emerge as a result of the ideology of national economic development and import substitution, reduce in scope with pro-market reforms, but continue to exist in line with the ideology of social stability and strategic development. Second, bank-owned business groups emerge as a result of industry regulations, and decline sharply with the deregulation of the industry after pro-market reforms. Third, family-owned business groups emerge to take advantage of growth opportunities in a closed economy with weak institutions, but refocus their activities in response to competitive pressures after pro-market reforms. Finally, labor-owned business groups emerge as a result of an ideology of social development and solidarity, and continue in existence after pro-market reforms in line with their ideology