Academic journal article Journal of East European Management Studies

Ownership and Control Strategies in Polish Business Groups *

Academic journal article Journal of East European Management Studies

Ownership and Control Strategies in Polish Business Groups *

Article excerpt

Introduction

A large body of literature addresses the term of business groups discussing their unique organisational form differing from stand-alone companies (Maman 2002) and benefits they can offer to companies at the micro level, to industries and economies at the macro level (Yiu et al. 2007). Business groups (groups of companies) such as holdings, conglomerates or corporate groups remain one of the most common forms of economic activity and exert significant impact in terms of their contribution to GDP, employment and investment both in developed and developing economies (Heugens/ Zyglidopoulos 2008). The existing literature identifies the emergence and efficiency of business groups in developed economies. Extensive research also addresses the development of business groups in Latin America, India, China and Korea, but still little is known about their emergence in post-socialist and transition economies of Central and Eastern Europe (CEE) (Buzády 2010; Zamborsky 2012). The paper intends to fill this gap and attempts to add to the understanding on the dynamics of business groups in the post-socialist environment.

The paper aim is to identify ownership structure and mechanisms of control leverage adopted in the largest Polish business groups after the unprecedented 1989 transition from centrally planned to market economy. The paper explores selected aspects of ownership and control such as ownership concentration, identity of the largest shareholder and the control mechanisms. The study is based on the hand collected data on 30 individual cases of the largest non-financial holdings listed on the Warsaw Stock Exchange. It examines groups formed within the privatisation of the former state owned enterprises still controlled by the government, group originating from the privatisation of former state owned enterprises by the case by case sale to industry investors and groups founded after 1989. As research shows the ownership and control pattern remains the most important characteristics of a business group which determines its strategy and development. The paper is organised as follows. The first section outlines the theoretical framework on business groups discussing rationales behind the groups emergence and development. In the second section the importance of ownership and control is addressed with a brief outline of the comparative analysis of business groups worldwide. The third section identifies ownership structure and control mechanisms adopted in Polish business groups which developed after the 1989 transition exploring three main types such as groups formed within the privatisation of the former state owned enterprises still controlled by the government, group originating from the privatisation of former state owned enterprises by the case by case sale to industry investor and groups founded after 1989. Final remarks are presented in conclusion.

1. The rationale for creating business groups

The term "business group" remains ubiquitous in the economics and management literature and is generally understood as a collection of heterogeneous companies tied with formal and informal links (Khanna/ Rivkin 2001; Zattoni 1999; Cuervo-Cazurra 2006). From the economic perspective business group is defined as a confederation of legally independent companies which do business in different markets under a common administrative or financial control (Guillen 2000) constituting commercial, financial, ownership and legal links. The informal relationships in the form of interpersonal trust, personal links, social ties, ethics and religious similarities as well as the commercial background reinforce financial and organisational linkages amongst affiliated companies (Mitra/ Pattanayak 2013). For the purpose of the paper the business group is understood as a set of legally separate and independent firms under common ownership control and tied with stable relationships of contractual, financial and personal links as suggested by Khanna (2000) and Cuervo-Cazzura (2006). …

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