Vol. 26, No. 4 (Winter
as a Corporate Strategy for a Family-Controlled Business Group
in a Frontier Market
Mahfuzul Haque and M. Kabir Hassan
This study focuses
on a family controlled firm "Beximco Group" in a frontier
market economy, which during its thirty five years of existence,
has grown to become the leading business organization in Bangladesh.
In this study, we look at the gains obtained via diversification
in a setting that is completely different from the Western world.
Bangladesh is a country that has been characterized as a "frontier
market" by the IFC, a subsidiary of the World Bank. Most
of the ideas reflected in the literature are from studies done
in the U.S. The broad ranges of institutional features that
support business activities in the West are all absent in Bangladesh,
and the findings in the literature may not be a practical application
for emerging market economies and frontier markets, which are
a step behind emerging markets. Devoid of all institutional
facilities and features that the West offers in the corporate
world, we find that diversification leads towards growth and
value creation in Bangladesh. Using accounting and market information
from Audited Financial Statements from 1983-1995 and the IFC's
EMDB data, we document that Beximco Group has made significant
progress towards the path of growth and value creation. The
findings support the hypothesis of growth through diversification.
This result is consistent with that of Khanna and Palepu (1997)
who observe similar findings for emerging market economies such
as Chile and India. Baker (1992) notes that the role of diversification
for the growth of Beatrice from a small creamery firm to one
of the largest conglomerates in the U.S., is similar to what
we see today in Beximco's growth. Diversification played a leading
role for the rise in prominence for the group in Bangladesh.