Indore (Madhya Pradesh): Business group affiliation significantly increases the odds of successfully completing cross-border acquisitions (CBAs), according to a new study co-authored by Prof Sumit Chakraborty, published in the prestigious journal ‘Strategic Organization’.
Based on an analysis of 1,293 CBAs announced by Indian firms between 2000 and 2017, the research found that business group-affiliated firms were markedly more successful in closing deals than their standalone counterparts.
The study attributed this advantage to the unique informational benefits that business group firms enjoyed.
Tightly knit through shared social networks and mutual trust, these firms facilitated intra-group knowledge exchange that helped reduce information asymmetry in complex international deals, the study said. The data revealed that business group-affiliated firms were 76.7 per cent more likely to complete CBA deals than standalone firms.
But these advantages are not universal. The study found that regulatory quality distance—the gap in regulatory standards between the home and host countries—lowered the benefit of group affiliation.
In countries with stronger regulatory institutions, the need for internal informational support declined, reducing the added value of business group networks.
Similarly, cultural distance—differences in language, norms and business practices between countries—also undermined the positive effect of business group affiliation, the study said.
When cultural distance was high, the challenges of navigating unfamiliar social and organisational norms might outweigh the benefits of intra-group knowledge flows, the study found.
“These findings underscore the complex, context-specific nature of business group advantages,” said Prof Chakraborty. “While group affiliation offers a powerful mechanism for overcoming information gaps, its effectiveness depends heavily on the institutional and cultural environment in which the deal occurs,” he added.
For executives of group-affiliated firms, the message is clear: leveraging group-level experience, maintaining strong internal communication channels and actively coordinating across affiliates can enhance acquisition outcomes. For business group leadership, investing in systems that foster information sharing across the group may prove strategically valuable.
The implications extend beyond cross-border mergers and acquisitions (M & A). In an era of rising global uncertainty, business group affiliation can serve as a strategic buffer, offering access to insights, experience and resources that help firms navigate international risk, as per the study.
The study also offers a timely perspective for Indian conglomerates. Business groups like Tata, Reliance and Aditya Birla Group have long been pillars of India’s corporate landscape. As these firms increasingly pursue global growth, the research underscores the importance of using group capabilities not just for scale, but also for strategic agility in foreign markets.
Emerging market firms with global ambitions would do well to heed the study’s core insight: business group ties can be a hidden asset—but only when used smartly and with a clear-eyed view of the regulatory and cultural terrain.
