16/04/2025
When the Fog Subsides: Strategic Reallocation in Indian Business Groups Amid Uncertainty Transition
The paper investigates the strategic reallocation of resources by business group (BG) affiliated firms during times of reduced uncertainty in emerging markets. Using a Triple Difference method, we examine the response of BG-affiliated firms along historical, sectoral, and regulatory embeddedness to institutional voids. We find that BG-affiliated firms with exposure to past uncertainty and operating in sectors dependent on stable institutions reduce diversification more than their counterparts, while BG-affiliated firms embedded in regulations increase diversification more than their counterparts, viewing the reduction of uncertainty as an opportunity to secure a diversified portfolio through enhanced rules of control.