International new ventures and firm performance: evidence from India

This study aims to explore the role of liberalization, business group affiliation and degree of internationalization (DOI) on the performance of Indian international new ventures (INVs).

The study identifies Indian INVs incorporated between 1991 and 2010 against the backdrop of liberalization. To test various hypotheses, a random effects panel regression analysis was conducted for publicly listed Indian INVs.

The results highlight that business group affiliation and DOI are positively related to INV performance. Further, liberalization negatively moderates the relationship between group affiliation and INV performance. The authors’ findings indicate that as institutions improve, the positive effect of business group affiliation on firm performance decreases in emerging markets.

This paper highlights the benefits accruing to business group affiliated INVs and the moderating role of liberalization on firm performance. Future studies may augment the authors’ understanding of INV performance by testing heterogeneity within business groups and their impact on INV performance across other emerging economies.

As institutional reforms strengthen over time, the positive effect of group affiliation on INV performance declines. Hence, managers of group affiliates need to adapt to the changing institutions faster and develop their fit with the institutional environment earlier than standalone firms, to mitigate their profitability issues.

To the best of the authors’ knowledge, this is the first paper to discuss the role of business group affiliation and the moderating role of liberalization on INV performance with theoretical and managerial implications.