Leveraging Multisectoral Expertise and International Knowledge: Business Group Influence on Overseas Subsidiary Formation

Abstract

We build on the Linkage, Leverage, and Learning (LLL) framework to develop theory on how business group (BG) affiliation enables knowledge sharing and resource leveraging across affiliates to facilitate global expansion via overseas subsidiary formation. We use a sample of 3,204 Indian BG affiliates from 2006 to 2014 modeled with zero-inflated negative binomial regression to examine this relationship between multisectoral expertise, the international knowledge of a BG and overseas subsidiary formation. Our results show that the positive influence of BG-level multisectoral expertise on overseas subsidiary formation is amplified by a BG's level of international knowledge as derived from its affiliates' export activities. Our findings highlight the importance of intra-group dynamics and BG heterogeneity in affiliate internationalization. We hence challenge the view of BGs existing and operating as homogeneous entities, where this across BG heterogeneity comes from the variable types and depths of exposure that a BG's affiliates have in international markets.