Using Organization Structure to Buffer Political Ties in Emerging Markets: A Case Study

We use and extend resource-dependence theory by analyzing how loosely-coupled organizational structures facilitate the management of political ties by business groups in emerging economies. This topic is particularly salient because business groups are a prevalent organizational form in these countries where they face both a high dependence on governments to secure key resources and a unique set of risks associated with political ties. We identify and analyze four buffering mechanisms that enable loosely-coupled business groups to protect themselves against the adverse effects of such ties. We ground and contextualize these mechanisms by relying on a longitudinal case study of the Salim Group - a very large and well-connected Indonesian business group under the Suharto regime. This study is particularly relevant in the context of the renewed interest in the study of firms' organizational structure.