BUSINESS GROUPS AS INFORMATION RESOURCE: AN INVESTIGATION OF BUSINESS GROUP AFFILIATION IN THE INDIAN SOFTWARE SERVICES INDUSTRY

Although business groups benefit firms when markets fail, does group affiliation continue to be an advantage for firms in deregulated, globally competitive industries? I argue that affiliation allows firms to tap into the knowledge and connections of sister affiliates. This enables them to attract clients from more industries and foreign markets than can unaffiliated firms, and to attain higher international sales. Using data from the Indian software industry, I find support for these hypotheses, but only for 2000-02, when competition increased as a result of new deregulation. These results suggest business groups continue to provide benefits to group-affiliated firms, including information on market opportunities and "reputation signaling" to clients.