DOES SIZE MATTER? FIRM AND BUSINESS GROUP SIZE INFLUENCE ON THE BENEFITS OF GROUP AFFILIATION

This paper explores whether the benefits and costs of affiliation with a business group (BG) are influenced by firm and BG size. We explore empirically this issue using a unique data set on French small businesses ownership. Our results show that affiliation with a BG has a positive influence on SMEs performance. This result holds when we account for firm size, BG size and endogeneity issues. Moreover, we observe that the benefits of BG affiliation diminish with firm size, which is consistent with the fact that the benefits of BG affiliation increase with information imperfection. Finally, affiliation with a small BG seems more beneficial than affiliation with a large BG. This paper contribute to the literature by showing that affiliation with a BG allows overcoming market imperfections related to organization size.