A Business Group (BG) is a collection of legally independent firms that are bound by economic (such as ownership, financial, and commercial) and social (such as family and kinship) ties. A Business Group can be as simple as a parent firm with two subsidiaries, or as complex as a network of a thousand firms cross-owning each other. We construct a wide range of variables to provide extensive information on different characteristics of business groups so a picture of their presence and function within a country can be compared with other countries. Our data are consolidated at the country level and comes from a number of proprietary sources.
A Business Group is identified as a group of two or more firms in the same economy that share the same, ultimate, controlling entity, either through direct or indirect control. The number of BGs across countries vary, with the US (7,565 in 2015), Japan (3,293) and China (2,480) having the most, to countries like Sudan and Algeria having only one or two Business Groups.
The ultimate owner of a business group effectively controls all firms in the group through direct or indirect ownership.
Family vs. Non-family Business Groups
A family group is controlled by a family, usually through a private entity. A non-family group has a widely held public entity as its ultimate owner. Family business groups can lead to fast, centralized and consistent decision making. On the other hand, lack of transparency, agency problems and risk of appropriation for minority shareholders are often presented in family business groups. Except for in Korea and India, determining whether a BG is family-owned is a difficult task. Due to lack of disclosure requirements in most countries, it is hard to determine if a firm belongs to a Business Group. A Business Group can also be government-controlled, especially in countries such as China, Malaysia and Vietnam.
Member Firms (Subsidiaries)
A firm is considered a member of a business group (a group’s subsidiary) if it is controlled either directly by the ultimate owner or by other member firms in the chain of control. The average number of firms for BGs is high in countries with large-sized BGs such as Taiwan (152 firms/group) or Japan (135 firms/group).
Firm Hierarchy Level in Group
The hierarchy level of a member firm in a business group is the number of controlling layers that exist between that firm and the ultimate owner. For example, level one subsidiary firms are directly controlled by the ultimate owner. Level two subsidiary firms are those controlled through level one subsidiaries. In our data, the maximum hierarchy level is 10.
Group Hierarchy Level
The group hierarchy level is the highest hierarchy level of a subsidiary in a Business Group , i.e. the furthest distance between any member firm and the ultimate owner. In our data, the maximum hierarchy level is 10. The highest group’s hierarchy level in a country indicates how complex Business Groups can be in any given country, while the average group’s hierarchy level indicates the average complexity. Most countries have complex BGs with a level 10 hierarchy level, while the average hierarchy level varies between 1.3-1.8, due to a wide range of business group sizes in each country.
Group Revenue and Assets
We consolidate BG revenue and assets by adding together (not proportionated) the revenues and assets of firms in the group. This is reasonable as the firms are effectively controlled through the group’s chains of control. China and Mexico have the highest average asset and revenue per group (due primarily to a number of government-owned groups), followed by Canada, US, Japan and Korea.