Towards a deeper understanding of performance variance in the context of business groups: A multilevel analysis at the business unit level

In this study, we employ a multilevel analysis to investigate the relative importance of industry, business group, corporation, and business unit effects on the performance of business units that are nested within business group affiliates. Empirical results demonstrate that business unit effects explain (1) about four times as much variance as does the corporate effects, (2) over four times as much variance as the industry effects, and (3) over eighteen times as much variance as the business group effects in business unit performance. Moreover, the results provide evidence that corporate effects are distinct from business group effects and it is imperative to study the complex interplay between the two distinct headquarters to understand the impact of business group as an organizational form. These findings extend our theoretical and empirical understanding of performance variability in the context of business groups.