Diversification and information space management in business groups: The case of Turkey

Business groups (BGs) are considered as the dominant form of business organization in developing countries including Turkey. The literature on BGs has been growing in the last 15 years in Turkey. Based on Max Boisot's Information Space framework, this study develops a conceptual model describing how information management in BGs change throughout diversification-led growth process. In addition, considering cultural framework and development of BGs in Turkey, dispersion of BGs in the Information Space has been researched. Differences among diversification strategies, management controls, information usage and sharing preferences of BGs having different Information Space structures have been analyzed. Structured interviews with 15 business group managers and management consultants have been made in order to get feedback on conceptual framework and field study questions. The business group survey has been developed firstly referring to theoretical insights and then by utilizing expert opinions raised during interviews. The survey has been distributed to 173 groups among a broad list of 565 groups and 35 complete survey responses have been used in statistical analyses. As inferred by the Information Space framework, a strong correlation between codification-abstraction and information diffusion has been found. Two different Information Space structures for the BGs have been revealed: cognitive groups with high codification and abstraction and relational groups with low codification and abstraction. Cognitive groups are related to higher levels of management transition to next generations and professional managers. The number of cognitive groups with higher codification and abstraction levels is found to be more than the relational ones; which contradicts cultural studies concluding that codification and abstraction level in the country is low due to the dominance of collectivist values. Cognitive groups have 21.9% higher performance compared to relational ones. It has been found that two parameters affect business group performance: number of employees and information diffusion. According to the results of this study, codification and abstraction facilitates information diffusion, which in turn increases business group performance. This conclusion implies that transition to an abstract information management structure from a traditional one is important for BGs. Furthermore, cognitive groups have higher levels of risk controls compared to relational ones. Relational groups use implicit knowledge style more than the cognitive ones. In terms of information sharing preferences, relational groups use electronic communication and social media and cognitive groups use written instructions and directives more than the other group. Results of this study have provided fruitful theoretical and practical implications on information management, institutionalization and diversification in BGs. Keywords: Business groups, information space, diversification, management controls.