Business Group - Definition

Definition

The definition of business group varies. For instance, Leff defines business group as a group of companies that does business in different markets under common administrative or financial control whose members are linked by relations of interpersonal trust on the basis of similar personal ethnic or commercial background. One method of defining a group is as a cluster of legally distinct firms with a managerial relationship. The relationship between the firms in a group may be formal or informal. A keiretsu is one type of business group. A concern is another.

Encarnation refers to Indian business houses, emphasizing multiple forms of ties among group members. Powell and Smith-Doerr state that a business group is a network of firms that regularly collaborate over a long time period. Granovetter argues that business groups refers to an intermediate level of binding, excluding on the one hand a set of firms bound merely by short-term alliances and on the other a set of firms legally consolidated into a single unit. Williamson claims that business groups lie between markets and hierarchies; this is further worked out by Douma & Schreuder. Khanna and Rivkin suggest that business groups are typically not legal constructs though some regulatory bodies have attempted to codify a definition. In United Arab Emirates, a business group can also be known as a trade association. Typical examples are Adidas Group or Icelandair Group.