Abstract
Business groups around the world are remarkable phenomena, and many academic scholars have studied their pros and cons. However, few researchershave analyzedthe economic rationale for the existence of business groups in a systematic way. Furthermore, even fewer scholars have targeteddifferent economic rationale for business groups situated in different institutional and cultural backgrounds. Focusing on business groups from China, Japan and Sweden, this paper is trying to compare different economic rationale for having business groups in three distinctive types of economies: China represents the developing economiesemerging from the late 1980s; Japan represents the developed economiesthat industrialized after World WarII;Sweden represents the developed countrieswith a longhistory of capitalist economic system. We first propose three assumptions to explain the existence of business groups,based on both the related literature and our observation. Then, they are separately analyzed with evidence from selected business groupsin the three countries. Our results show that the economic rationale for business groups in the three countries differs from each other. As for China, due to the active role of government in establishing business groups, business groups are a tool in the hands of the government to help the government to regulate the economy. Business groups in Japan mainly serve to reap economies of scope,while forming close relationshipswith the government to help revitalize the economy in critical times. Swedish business groups also diversify their industry portfolio to gain from economies of scope and at the same time seek cost-effective financing. The differences described above highly reflect the different institutional and cultural backgroundsin the countries respectively. The results might help academic scholars, business managers and government officials to better understand why business groups differ in various countries, and the role they are playing to overcome different social and economic problems.