The Scope of Business Groups : A Penrosian Analysis

Organizations face trade-offs when designing growth strategies. With limited resources, managers have to decide in which type of business they want to deploy their resources. We integrate the Penrosian theory of the growth of the firm with institutional perspectives to analyze when business groups expand in different product areas, and when they expand abroad. The empirical results support our propositions concerning the resource to growth relationships. Business groups with institutionally embedded resources, such as managerial ties to government, tend to pursue domestic product diversification. On the other hand, business groups with non-location bound resources have higher degrees of internationalization