Market-oriented institutional change and R&D investments: Do business groups enhance advantage?

Young Rok Choi, Toru Yoshikawa, Shaker A. Zahra, Bong H. Han

Research output: Contribution to journalArticlepeer-review

20 Scopus citations


Emerging market firms (EMFs) are increasingly relying on innovation to find their competitive advantage, but our understanding of how institutional change affects firm innovation has been limited. We analyzed Korean manufacturing firms from 1994 to 2006 to test the proposition that market-oriented institutional change in an emerging economy alleviates firms' financing constraints and monitoring problems and improves the effectiveness of their innovation activities. Institutional evolution in the economy was found to affect Korean business groups and independent firms differently. Institutional change reduced the financing constraints on independent firms more than for business group affiliates in R&D investment. Independent firms, however, appeared less capable than group affiliates of translating the benefits of improved institutional environments into efficient R&D investment. This asymmetry may lead to a wider gap in the efficiency of R&D investment between business group affiliates and independent firms.

Original languageEnglish (US)
Pages (from-to)466-475
Number of pages10
JournalJournal of World Business
Issue number4
StatePublished - Oct 1 2014

Bibliographical note

Funding Information:
The authors thank JWB Editor Jonathan Doh and the anonymous reviewer for their guidance and constructive comments. The first author wishes to acknowledge the financial support of the National University of Singapore (Grant R-535-000-007-133 ).

Publisher Copyright:
© 2013 Elsevier Inc.


  • Business groups
  • Financing constraints
  • Governance reforms
  • Institutional change
  • Research and development


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