A comparative Study of China and India

Do business groups in China and India penalize or reward high performing affiliates?

Business groups allocate resources internally to either reward its top performing affiliates or to subsidize weak ones, which is reflected in the performance persistence of affiliated firms. We find that resource allocation patterns diverge between business groups in China and India, as they operate in state capitalism systems where business and state interact differently. However, this divergence is less impactful once an affiliated firm internationalizes, as the home-based rules become less applicable to them.