What Explains Small and Medium-Sized Business Groups? Comparing the Financial and the Entrepreneurial Perspective

The paper contrasts two theoretical perspectives that account for business group formation in the smal business sector: the financial perspective and the organizational/entrepreneurial perspective. Two main hypotheses are derived from these perspectives: the first hypothesis concerns capital and knowledge intensityrequired by the business; the second one refers to the entrepreneur’s ownership of firms in business groups. The empirical results show that the financial and the organizational perspectives are both relevant in explaining business groups in the small business sector, but the entrepreneurial perspective is more appropriate when explaining the ownership structure of firms within business groups.