Author's profile

Chiara Fumagalli

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Author articles


  • Research on internal capital markets has shown that, within multi-segment firms, investment capacity in one sector can be enhanced by cash generated in other sectors. This suggests that firms that enjoy access to internal capital markets can take actions that are not available to their stand-alone rivals due to financial constraints, which would explain why group firms and conglomerates engage more in corporate innovation. Although conglomerates and business groups are ubiquitous both in advanced and emerging economies, the economic literature on the product market effects of groups is fairly limited. In particular, it is not obvious how internal capital markets operating within groups affect the competitive behaviour of affiliated firms. This analysis sheds light on one of the channels through which groups shape the economic environment, exploring the idea that internal capital markets - by alleviating financial constraints - enhance a firm's actual and perceived competitive strength. This research does so by investigating whether entry in manufacturing industries is affected by the cash reserves hoarded by incumbent and entrant groups.

    08/11/2012 | 3,433