Are firms in business groups more productive? : an empirical analysis based on German micro-level data with a special emphasis on the roles of regional and sectoral diversity

The present paper analyses whether and how the affiliation of a firm to a business group affects its productivity. Based on novel data consisting of official firm data from the German Business Register including ownership information from Bureau van Dijk's MARKUS database and from the Cost Structure Panel we assess differences in productivity (1) between independent firms and firms affiliated to groups and (2) affiliated firms controlled by German owners and affiliated firms controlled by foreign owners. Controlling for a series of determinants like, for example, the internal diversity of firms and groups, region, sector and size of firms, it is shown that group members have a productivity premium between 6 and 28% depending on the considered subsample. Furthermore, affiliates under foreign control are more productive than firms controlled by domestic owners.