Abstract
We examine the role of particularistic relationships (such as family
and prior social ties) in business groups during institutional transition
and test how particularistic ties between top leaders affect business
group performance in Taiwan, where such ties have been central to
the functioning of business groups. We propose that during market-oriented
transition, family and prior social ties could Improve group performance
by providing informal norms that strengthen the intermediation within
business groups and that family relationships could reduce strategic
restructuring and generate performance benefits. Results of a longitudinal
study over 24 years show that market transition enhanced the contribution
of family and prior social relationships but not that of common-identity
relationships, such as being from the same hometown, which do not
involve prior direct personal contact. We also found that during
transition, the positive contribution of family members would rise
up to a threshold, after which additional family members tended to
derail group performance, possibly due to informational disadvantages
and a legitimacy discount in the eyes of foreign investors. The study
helps to make sense of different predictions about the role of particularistic
ties in business group performance and makes an initial attempt at
revealing how social structure affects performance. Our findings
have implications for research on the value of business groups in
institutional transition, interorganizational relationships, and
the contingencies of social relationships.
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