Russian Business groups : ownership and control, performance and market structure
Abstract
The focus of this thesis is the impact of business groups on company performance and the
evolution of market structure in Russia. Business groups’ control of a large share of
industry is a distinguishing and controversial characteristic of the Russian transition. This
thesis contributes to the quantitative analysis of the economic impact of Russian business
groups.
The first chapter analyses the gap between control and ownership in Russian companies.
We find a significant difference in the size and structure of the total gap compared to the
component resulting from the use of pyramidal ownership structures. Our results suggest
that standard estimators that account only for the pyramidal effect might be biased by the
presence of endogeneity and measurement error problems. The second chapter examines
the impact of business groups on company performance. In a majority of specifications,
including the use of instrumental variables, we find that business groups have a
consistently insignificant impact on the productivity growth of companies they control.
This conclusion contrasts with previous studies of the impact of Russian business groups
on firm performance. The third chapter tests the applicability of Sutton’s sunk costs
theory of market concentration to Russian industries. Our results are consistent with
Sutton’s theoretical predictions that concentration in industries with endogenous sunk
costs does not decrease with market size.