In the situation in which an
economy exhibits a high degree
of imperfection in its institutional structure, conglomerates
are typically the dominant players in a closed economy, because access
to policy makers and to scarce information is concentrated in a few
hands who corner the best deals.
Think of major businesses of recent decades in India and
invariably individual companies such as Infosys come to mind. However, the
same question asked a few decades ago would have evoked the names of
diversified business groups such as Birlas, Tatas, Ambanis, Goenkas
and Thapars. While firms such as Infosys blazed new trails in a single line
of business, the groups dominating the business landscape earlier could
not be pinned down to a single line of business. They were all
conglomerates with diversified business portfolios spanning several sectors. This is not
to say that of late only single product category firms have managed to
succeed and conglomerates have not done well recently.
It was just that diversified business groups enjoyed
significant scale and span of business operations that enabled them to dominate
the business landscape. Similarly, Mitsubishi, Sumitomo,
Mitsui, Daewoo, LG and Samsung are some of the major Asian conglomerates.
Siemens and GE are examples of European and American conglomerates
respectively. |