Enhancing firm performance through intra-group managerial experience: Evidence from group-affiliated firms in Korea

Abstract

Although business groups often benefit from tangible and intangible resource sharing across member firms, little is known about whether and how sharing managers’ human capital within a business group can contribute to the performance of group-affiliated firms. Combining the strategic human capital perspective and studies of business groups, we argue that a business group-affiliated firm can enhance its economic performance by acquiring experience-based human capital from managers from other affiliates within the same group, as such intra-group managerial experience provides a source of strategic benefit that is distinct from either internal (i.e., within the focal firm) or external (i.e., outside the business group) experience. Our analyses of South Korean managers’ career data suggest that managerial experience acquired from other affiliated firms within a business group has a significant and positive effect on the focal firm’s performance. We also show that such intra-group managerial experience is particularly beneficial for firms with weak resources, firms in less diversified groups, and firms in less stable environments.