Benefits of business concentration

Business concentration (especially resource concentration) is defined here as the degree of dispersion of a business group’s business units and group assets (Chen & Chu, Reference Chen and Chu2012; Kwak & Kim, Reference Kwak and Kim2020). A business group concentrating its resources on related industries can integrate information and knowledge into its subgroup and generate specific advantages. Because they have similar industry knowledge backgrounds, technical languages, and management structures, their specificity advantages can increase their operational efficiency and effectiveness (Chen & Chu, Reference Chen and Chu2012; Chen et al., Reference Chen, Lin, Wang and Guo2022; Kwak & Kim, Reference Kwak and Kim2020). The benefits of a business concentration strategy, such as a position on the learning curve, enable business groups to lower the cost structure and improve product quality by using their capabilities and customer–supplier relationships (Lee et al., Reference Lee, Jiraporn and Song2020; Mahmood et al., Reference Mahmood, Chung and Mitchell2013; Wang et al., Reference Wang, Chen, Guo and Lin2020). In addition, business concentration can bring market power, such as the power to bargain for lower prices, delay or transfer payments, and arrange for extensive presales support, which can be regarded as a business group’s intangible assets (Kwak & Kim, Reference Kwak and Kim2020). Moreover, this study proposes a third advantage: resource restructuring. When business concentration is high, the restructuring effects of the business group will be more effective. The main reason is that unrelated diversification requires more investment, greater uncertainty, and greater external financial needs. Business groups restructure their foreign affiliates and prefer to adopt high-resource-concentration strategies to reduce financial risk and maintain socioemotional wealth, such as retaining control of the business, family member wealth, and relationships (Bennedsen, Lu & Mehrotra, Reference Bennedsen, Lu and Mehrotra2022; Chung et al., Reference Chung, Dahms and Kao2021). Business groups eradicate unprofitable subgroups through asset reorganization and then invest resources in potential subgroups (Bergh & Lim, Reference Bergh and Lim2008).

Cost of business concentration

Despite its advantages, some costs are incurred when business concentration is high (Lin et al., Reference Lin, Chen, Ahlstrom and Wang2021; Srikanth et al., Reference Srikanth, Anand and Stan2021). When a business group invests its assets in highly similar industries or markets to obtain business concentration advantages, portfolio risks and bottleneck costs may arise. Business groups with a relatively high level of business concentration have a high probability of suffering financial distress, such as unstable cash flow, delayed payments, and difficulty switching assets to a different supplier (Lee et al., Reference Lee, Jiraporn and Song2020), making it more difficult to respond to dynamic market environments (Lee et al., Reference Lee, Jiraporn and Song2020).

In addition, when business concentration is high, there will be bottleneck costs in the operating process. Here, we define bottleneck costs as a phenomenon in which the background knowledge of business groups fails to reveal blind spots, making it difficult to be innovative and improve operational processes. There are three causes of bottleneck costs: resource redundancy, resource depletion, and organizational saturation. Overinvestment in the same industry can lead to resource redundancy (Mahmood et al., Reference Mahmood, Chung and Mitchell2013). When the original operation of the business group is inefficient, business groups with overconcentrated internal resources cannot innovate and become resource depleted (Mahmood et al., Reference Mahmood, Chung and Mitchell2013). Moreover, organizational saturation occurs when resources are highly concentrated and organizational capacity has reached its limit, as with the Penrose effect, which arises from limited and incomplete information about the subsidiaries’ operational environment (Lin et al., Reference Lin, Chen, Ahlstrom and Wang2021; Srikanth et al., Reference Srikanth, Anand and Stan2021). Therefore, business groups cannot translate knowledge and experiences into meaningful learning processes under the fast and irregular rhythm of internationalization (Lin et al., Reference Lin, Chen, Ahlstrom and Wang2021; Zhang et al., Reference Zhang, Priem, Wang and Li2023). Organizational saturation prevents a business group from managing its organization efficiently and responding agilely to a dynamic environment; because changing a group’s mindset is difficult, it is unable to absorb new knowledge and experiences from external networks (Chung et al., Reference Chung, Dahms and Kao2021; Srikanth et al., Reference Srikanth, Anand and Stan2021).

Business concentration and business group performance

At a low level of business concentration, business groups that set up group affiliates in foreign markets can enjoy diversified resources, knowledge, and management experience to enhance innovation, thereby enhancing their adaptability to enter different markets and improve performance (Chatterjee & Eyigungor, Reference Chatterjee and Eyigungor2023; Hou & Robinson, Reference Hou and Robinson2006). However, business groups desiring to enter different industry backgrounds face a conundrum. These business groups can create resource synergy only when they have well-designed communication and sharing channels with subgroups in a range of industries (Chatterjee & Eyigungor, Reference Chatterjee and Eyigungor2023; Chen et al., Reference Chen, Lin, Wang and Guo2022); hence, initial governance and communication costs are high. In addition, not all business groups can use differentiated resources and capabilities to produce resource synergies when international processes accelerate; because of the Penrose effect, business groups have bounded rationality and an upper limit to its ability to decode, assimilate, and absorb reverse knowledge from their group affiliates in a short and quickly international period (Lin et al., Reference Lin, Chen, Ahlstrom and Wang2021; Srikanth et al., Reference Srikanth, Anand and Stan2021). Accordingly, owing to rising benefits and stagnating costs, there is a positive relationship between business concentration and performance at a low level of business concentration.

At a moderate level of business concentration, the business group has more opportunities to integrate its limited knowledge about production processes and management systems with subgroups in related industries. This indicates that the business group needs fewer collaboration requirements, so the communication and government costs are low when the concentration increases (Purkayastha et al., Reference Purkayastha, Kumar and Lu2017; Srikanth et al., Reference Srikanth, Anand and Stan2021). Therefore, the cost of portfolio risk and bottleneck costs quickly increases, whereas the cost associated with governance and communication decreases, and the total cost steadily increases. At a moderate level of business concentration, restructuring will exert its influence since business groups will consider the commitment of their resources in potential profit industries through restructuring (Bergh & Lim, Reference Bergh and Lim2008). Thus, the benefits of restructuring increase significantly, but the benefits of diversification increase and then decrease after a specific point at a moderate concentration level. Accordingly, the slightly increasing benefits and rapidly increasing costs would result in negative net gains for business groups with moderate business concentration.

At a high level of business concentration, the benefits of diversification result from investing in different industries and countries, and the costs of governance and commutations decrease (Chen et al., Reference Chen, Lin, Wang and Guo2022; Lin et al., Reference Lin, Chen, Ahlstrom and Wang2021). This study argues that business groups desiring to enter a similar industry background may find themselves in a dilemma. A high level of trade within business groups may reduce the probability of diversified knowledge sharing, absorption, transmission, and creation during knowledge-sharing processes (Bennedsen et al., Reference Bennedsen, Lu and Mehrotra2022; Chung et al., Reference Chung, Dahms and Kao2021). Similar backgrounds are more likely to contribute to duplicative thinking among affiliates, thereby increasing portfolio risk and bottleneck costs in terms of resource redundancy, resource depletion, and organizational saturation. Investment in highly similar industries inevitably involves investment risk, low-cost elasticity and a diminished ability to respond to dynamic markets (Chatterjee & Eyigungor, Reference Chatterjee and Eyigungor2023; Lee et al., Reference Lee, Jiraporn and Song2020). In summary, the costs associated with portfolio risk and bottleneck costs decrease, whereas the costs associated with governance and communication decrease more slowly. This leads to a sharp increase in the total cost. At a high level of business concentration, business groups set up group affiliates in foreign markets with similar industry knowledge backgrounds and management structures, and the specificity advantages can increase operational efficiency and improve product quality through learning curves (Chen & Chu, Reference Chen and Chu2012; Chen et al., Reference Chen, Lin, Wang and Guo2022). However, the advantages of diversification decrease at a high level of business concentration (Choi & Cowing, Reference Choi and Cowing2002), when the benefits of restructuring are more pronounced. Most family groups in Taiwan expand their market territory through internationalization into related diversification to avoid greater uncertainty and external financial needs. Business groups restructure their foreign affiliates and prefer to adopt high-resource-concentration strategies to reduce financial risk and maintain higher control rights and socioemotional wealth (Chung et al., Reference Chung, Dahms and Kao2021). Business groups eradicate unprofitable subgroups through asset reorganization and then invest resources in potential subgroups (Bergh & Lim, Reference Bergh and Lim2008). Thus, the benefits of restructuring continue to increase, but the benefits of diversification also decrease at high levels of concentration. Taken together, the benefit and cost performance experience a net increase when concentration is high.

Figure 3 in the Appendix shows how these positive and negative effects are integrated to establish the S-shaped relationship between business concentration and performance. Figure 3(a) depicts how the benefits from diversification and restructuring determine the total benefits of business concentration. Figure 3(b) depicts how governance and communication costs, portfolio risk, and bottleneck costs affect the total cost of business concentration. Figure 3(c) presents the net gains in performance (bold line), total benefits (solid line), and total costs (dotted line). The lines of the net gains in performance become an S-shaped curve. We propose the following hypothesis:

Moderating the role of the family business group

Ownership structure is defined as the distribution of the management and control rights of all stakeholders in a business group (Chung et al., Reference Chung, Dahms and Kao2021; Kwak & Kim, Reference Kwak and Kim2020). On the basis of resource-based and agency theories, this study proposes three ownership structures – family business groups, outside director ownership, and manager ownership – related to resource strategy and performance.

Family business groups enjoy a close relationship between the founder and the group they control (Bennedsen et al., Reference Bennedsen, Lu and Mehrotra2022). Family businesses instill strong values, ethics, and cultural norms in their members from childhood. This common set of beliefs and values among family members, employees, and other stakeholders fosters a strong sense of identity and commitment (Bennedsen et al., Reference Bennedsen, Lu and Mehrotra2022). Therefore, at lower levels of business concentration, a family business may strengthen network connections and trust relationships and weaken the negative effects of governance and communication costs (Chung et al., Reference Chung, Dahms and Kao2021; Kwak & Kim, Reference Kwak and Kim2020). The family group can also enhance diversified knowledge sharing and assist with internal and external cross-domain cooperation (Bennedsen et al., Reference Bennedsen, Lu and Mehrotra2022). This allows the group to accumulate internal and external cross-domain cooperation and establish trust relationships and cooperative networks that other enterprises cannot easily replicate in the long term.

As internationalization increases, business groups adopt a low-level business concentration strategy, and managers encounter unfamiliar cultures, policies, and partners. Thus, bounded rationality and the Penrose effect arise from limited and incomplete information (Lin et al., Reference Lin, Chen, Ahlstrom and Wang2021). Family businesses can buffer themselves from the Penrose effect and portfolio risk across diverse group affiliates since kinship provides family groups a unique way to access a stable human resource and profit network that fosters social capital and long-term family reputation (Bennedsen et al., Reference Bennedsen, Lu and Mehrotra2022; Chung et al., Reference Chung, Dahms and Kao2021). In addition, when a business group has a moderate concentration of resources, the subgroups invest in a variety of fields. Family groups are accustomed to appointing their children and relatives to important positions in subgroups of the same or different industries, thereby holding the management and control of the subgroup. When the subgroups span industries, the trust relationship between family members can be monitored across industries, thereby reducing the cost of governance and communication and increasing the speed of decision-making, particularly concerning resource allocations (Bennedsen et al., Reference Bennedsen, Lu and Mehrotra2022; Purkayastha et al., Reference Purkayastha, Kumar and Lu2017). As a result, operating costs are lower, and financial performance improves.

However, when business concentration is high, a family-owned group weakens the positive side (resource restructuring) and strengthens the negative side (bottleneck cost) of nonlinear relationships. Taiwan engaged in large-scale restructuring from 19,941,996, when few resources were invested in restructuring family-owned business groups. Taiwan’s system of inheritance is from father to son. For all children to inherit a company, the founders may invest in unfamiliar industries and are less likely to engage in restructuring (Chen & Chu, Reference Chen and Chu2012). Moreover, family groups emphasize long-term cooperative relations, so they may have established such relations with certain manufacturers from the father’s generation. Therefore, family groups may be based on humane considerations; even if some partners may not be able to increase efficiency, family business groups may not conduct resource restructuring, nor increase the advantages of resource restructuring (weaken the positive side). In addition, family members’ beliefs and thinking models are similar since they grew up in the same environment (Chung et al., Reference Chung, Dahms and Kao2021; Srikanth et al., Reference Srikanth, Anand and Stan2021). Once a group is faced with management incidents, leaders are vulnerable to limited thinking when making decisions (Chung et al., Reference Chung, Dahms and Kao2021). This will result in resource redundancy, resource constraints, and organizational saturation problems, all of which increase the error-free rate and the need for resource flexibility and reduce the group’s ability to handle bottlenecks, resulting in continuously increasing costs (Srikanth et al., Reference Srikanth, Anand and Stan2021). In summary, when resources are concentrated, a family group may strengthen the positive side (establishing resource networks) and weaken the negative side (resource restructuring advantages and costs of bottleneck) of the nonlinear relationship between business concentration and performance. On the basis of these inferences, this research proposes the following hypothesis:

Moderating role of outside director ownership

According to the Taiwan Economic Journal database, outside director ownership includes domestic governments, foreign governments, and legal entities. According to resource-based theory, business groups with more government shares outperform general business groups because they have good relationships with the government and legal entities (Cuervo-Cazurra & Li, Reference Cuervo-Cazurra and Li2021; Holmes et al., Reference Holmes, Hoskisson, Kim, Wan and Holcomb2018). The ownership advantage can also take the form of support in firms’ dealings with foreign governments, with the home country government facilitating relationships and easing restrictions in foreign markets through commercial diplomacy (Cuervo-Cazurra & Li, Reference Cuervo-Cazurra and Li2021). This study argues that outside directors can strengthen the positive side (political assets) and benefit performance at any level of business concentration. Therefore, compared with general business groups, groups with many outside directors can obtain more government resources, regulatory protection, and information on industry developments, improving the business group’s ‘political assets’ (Li et al., Reference Li, Zhang and Shi2020; Thomsen & Pedersen, Reference Thomsen and Pedersen2000).

In addition to domestic governments and legal entities, outside directors’ ownership may come from overseas governments and legal entities. Overseas legal entities have more advanced R&D technology, and when they have more commitments to business groups, they will be more willing to pass on this specialized knowledge and resources to the business group (Li et al., Reference Li, Zhang and Shi2020; Purkayastha et al., Reference Purkayastha, Kumar and Lu2017). In addition, outside directors are not family members and cannot inherit family property. They must show good financial performance, so they are more motivated to reorganize and reallocate resources with an appropriate resource application strategy (Chen & Chu, Reference Chen and Chu2012; Thomsen & Pedersen, Reference Thomsen and Pedersen2000). Therefore, when there is a moderate or high level of business concentration, outside directors can strengthen their resource restructuring advantage by adopting restructuring in the face of nonprofitable subgroups.

Moreover, at a low-to-moderate level of business concentration, a business group with many shares held by external shareholders indicates that external entities have more power to place managers in important positions (Chen et al., Reference Chen, Lin, Wang and Guo2022). This will lead to better performance in cross-industry or cross-country operations since each industry or country has its own operating environment and requires its own management experience; hence, a group with many external directors can obtain implicit knowledge and operating experience (Purkayastha et al., Reference Purkayastha, Kumar and Lu2017). Due to overseas relations, outsider direct relationships can strengthen the group’s local management and operation capabilities through local managers or operating channels, thereby increasing the amount of resources and experience shared with the business group (Purkayastha et al., Reference Purkayastha, Kumar and Lu2017). When resources are concentrated, groups with more outside director ownership can strengthen the positive side (management knowledge and capabilities) of the nonlinear relationship. This leads to the following assumption:

Moderating role of manager ownership

Manager ownership is defined as managers holding greater management rights but who are not family members of the business group (Windy & Lukman, Reference Windy and Lukman2023). Windy and Lukman (Reference Windy and Lukman2023) argued that managerial ownership can positively moderate the impact of a company’s profitability on its debt policy. However, this study argues that manager ownership has a negative moderating effect on the relationship between business concentration and performance. Previous scholars have noted that the shareholding structure of a business group is more complicated than that of other firms (Holmes et al., Reference Holmes, Hoskisson, Kim, Wan and Holcomb2018; Mukherjee, Makarius, & Stevens, Reference Mukherjee, Makarius and Stevens2018). More specifically, business groups in Asia use pyramids and cross-shareholding to replace alternative shareholdings, thereby controlling the entire group (Holmes et al., Reference Holmes, Hoskisson, Kim, Wan and Holcomb2018; La Porta, Lopez‐de‐silanes, & Shleifer, Reference La Porta, Lopez‐de‐silanes and Shleifer2002). According to agency theory, a business group with high manager ownership is more likely to experience principal–agent conflicts between managers and shareholders (Chung et al., Reference Chung, Dahms and Kao2021; La Porta et al., Reference La Porta, Lopez‐de‐silanes and Shleifer2002). Owing to the principal–agent problem, manager ownership may strengthen the negative side (agency and governance costs) of nonlinear relationships, given the divergent interests between shareholders and managers (La Porta et al., Reference La Porta, Lopez‐de‐silanes and Shleifer2002). In addition, it is difficult for managers who are not family members to obtain the detailed and latest information to assess the group’s problems and make the right resource allocations (Bennedsen et al., Reference Bennedsen, Lu and Mehrotra2022; Chung et al., Reference Chung, Dahms and Kao2021). Manager ownership may weaken the positive side, since asymmetric information makes the manager’s job more difficult and reduces the advantages of business concentration (Bennedsen et al., Reference Bennedsen, Lu and Mehrotra2022). This study argues that the ownership of a business group with many managers can weaken the negative aspect, bottleneck costs, caused by resource redundancy, resource limitations, and organizational saturation. However, the cost of agency problems and resource misallocations will be greater than the benefits resulting from reducing bottlenecks and operating costs. Thus, this study proposes the following:

Analyses and results

This study explored the effects of business concentration and its interaction with ownership structure on business group performance using group-year as an analysis unit. Fractional polynomial regression was used to test all the hypotheses. This study shows the means, standard deviations, correlations, and variance inflation factors for all the variables in Table 1. The variance inflation factors range from 1.01 to 1.34, within acceptable limits (Chen et al., Reference Chen, Lin, Wang and Guo2022), suggesting that there is no multicollinearity problem. To avoid the multicollinearity problem, this study used the standard-centered value of business concentration squared and business concentration cubed. Table 2 shows the results of the polynomial regression analyses. Model 1 is the base model that considers only the control variables. Models 2 to 4 add direct, quadratic, and cubic terms to capture the S-shaped relationship between business concentration and business group performance. Model 2 considers the direct effect of business concentration and shows a positive and linear relationship with performance (B = 0.470, p < .1). In Model 3, the coefficient for the linear term was positive (B = 0.171, p > .05), and the squared term was negative (B = − 0.933, p > .05). Model 4 tested the joint effects of the linear, squared, and cubic terms of business concentration; the coefficient for the linear term was positive (B = 5.503, p < .05); the squared term was negative (B = − 20.696, p < .05); and the cubic term was positive (B = 13.179, p < .05). These results support Hypothesis 1. The study tested the interaction effects of ownership structure, adding three linear interaction terms in Model 5. The interaction effect between business concentration and family group was positive and significant (B = 1.727, p < .05). Hypothesis 2 is supported. The interaction effect between business concentration and outsider direct ownership was negative and not statistically significant (B = − 4.75, p > .05). Hypothesis 3 is therefore not supported. The interaction effect between business concentration and manager ownership was negative and not statistically significant (B = − 0.238, p > .05). Thus, Hypothesis 4 is not supported.

Table 1.

Correlations and descriptive statistics

* Note: p < .05; **p < .01 (two-tailed test).

Table 2.

Results of regression analyses (ROA)

Note: N = 1012 (two-tailed test), +p < .1;

* p < .05;

** p < .01;

*** p < .001 b: year and industry dummy are controlled in all model.

For the robustness test, this study adopted a three-step process by using a UTEST: STATA module (Chen et al., Reference Chen, Lin, Wang and Guo2022). An inverted U-shaped test is supported by the use of the UTEST: STATA module (t = 2.17, p < .01). The findings indicate that business concentration has an inverted U-shaped relationship with performance at the low–moderate level. The U test is also supported (t = 1.66, p < .05). The findings indicate that business concentration first decreases and then increases (a U shape) with performance at the moderate–high level. When business concentration increases, performance increases, decreases, and then increases again, supporting Hypothesis 1. Moreover, drawing on the moderating effect in Model 5 for Hypothesis 2, this study constructs three-dimensional diagrams (Fig. 2) of the S-shaped relationship between business concentration and performance.

Figure 2.

Business concentration and performance: The moderating role of a family business group.

Figure 3.

The business concentration-performance

Theoretical contributions

This research makes several contributions to academic research and practice. The academic contributions of this study are as follows. In the past, many studies have investigated the impact of resource allocation, diversification, and ownership structure on performance, demonstrating how allocating resources through internationalization is a crucial concern for business groups (Aguilera et al., Reference Aguilera, Crespí-Cladera, Infantes and Pascual-Fuster2020; Chen et al., Reference Chen, Lin, Wang and Guo2022). The primary contribution of this study lies in the use of resource-based and agency theories to explain why business concentration has a nonlinear relationship with business group performance. Previous scholars have reported a positive effect of business concentration (Chen & Chu, Reference Chen and Chu2012; Kwak & Kim, Reference Kwak and Kim2020; Lee et al., Reference Lee, Jiraporn and Song2020) on performance and a negative effect of business concentration (Lee et al., Reference Lee, Jiraporn and Song2020; Lin et al., Reference Lin, Chen, Ahlstrom and Wang2021; Mahmood et al., Reference Mahmood, Chung and Mitchell2013; Srikanth et al., Reference Srikanth, Anand and Stan2021; Zhang et al., Reference Zhang, Priem, Wang and Li2023) on performance. This study provides evidence of both the costs and advantages of business concentration, with fluctuations between them. Additionally, it is not a consistently positive relationship. Furthermore, this study contends that at different levels of business concentration, if the advantages generated surpass the costs associated with business concentration, the result positively affects performance. Conversely, when the costs of business concentration still outweigh the related advantages, the results are the opposite results. This study also proposes that business concentration not only entails advantages such as specificity, experience learning, and market power but also includes restructuring advantages. In addition to governance and communication, portfolio investment risk, the Penrose effect, and bottleneck costs are also considered. This study suggests that these advantages and costs result from the effects of resource concentration on performance. The results of this study offer distinct academic findings for the areas of resource allocation strategy, ownership structure, and business groups. Finally, this study revealed that family businesses have a significant positive moderating effect. However, outside director ownership and manager ownership are not as expected. This finding shows that in Asian countries, at different levels of resource allocation, a business group owned by outside directors may not necessarily improve performance. Having managers as shareholders does not lead to significant principal–agent conflicts between managers and shareholders and results in significantly poor performance. Due to the unique culture of Asian countries, family business groups have a significantly greater influence on resource allocation and performance than do outside ownership and managerial ownership since hereditary culture, trust, and network relationships are prevalent in family-owned businesses. The findings of this study also offer practical evidence and theoretical contributions relevant to the organization and managerial issues in Asian business groups.

Managerial contributions and implications

This study makes several practical contributions. It identified an S-shaped relationship between business concentration and performance. The study suggests that business groups should consider not only the advantages of business concentration but also the different costs at various levels, such as governance and communication costs, portfolio risk, and bottleneck costs. Furthermore, business groups should evaluate whether the advantages at the current stage are sustainable. It is essential to assess the reasons behind the costs incurred at the current and next levels. Business groups should furthermore consider whether they can be altered through organizational restructuring and the potential impacts of such changes. In addition, this study suggests that business groups should consider whether restructuring actions should be taken to generate advantages if performance is poor in the current stage.

Additionally, if the resource concentration increases, there may be bottleneck costs. This study also suggests that business groups should consider three factors leading to bottleneck costs – resource redundancy, resource depletion, and organizational saturation – and should try to avoid potential negative effects through organizational management methods. Finally, the results reveal that family-owned businesses have a positive moderating effect, whereas outside director ownership and managerial ownership do not have statistically significant effects. The findings provide a reference for business groups and other foreign institutions in determining their equity structure in new industrial economies, such as Taiwan. Furthermore, this study suggests that family-owned businesses should continue to maintain the cooperation model driven by family heredity. This is because the inherent trust and resource connections within the family network can help resolve many challenges associated with overseas investments. Avoiding disruptions in the trust network is crucial when transitioning to the second generation. Additionally, in terms of business concentration, family-owned businesses may face a stronger Penrose effect than nonfamily-controlled business groups. Therefore, they must think about how to prevent the Penrose effect from reducing cooperation benefits and leading to incorrect decisions in overseas resource allocation in the long term.

Limitations and further research

This study used archival data, which has the following limitations. The empirical findings were limited to business groups in Taiwan; thus, the findings cannot be generalized to business groups outside of Taiwan. Future studies could compare the resource allocation strategies of business group globalization in different countries. In addition, the database is missing data on subsidiaries’ performance, which could affect the performance of the entire business group. Future studies should consider the effect of subsidiaries’ performance. Finally, this study explored ownership structure as a moderator in the relationship between business concentration and business group performance. Other moderators, such as different industries and international business variables, may also affect this relationship. Future studies could extend our framework and explore why and how these contingent factors affect the relationship between business concentration and performance in the future.