Since the genesis of greater adversity advantages of business groups is their success in overcoming adversities of operating in the underdeveloped contexts of developing country home markets, business groups that have been more successful at home to grow larger would have accumulated more adversity advan- tages than smaller business groups. Although business groups per se attract greater linkages with foreign firms because of their prominence in home markets, larger business groups would be more prominent and hence attract more linkages than smaller business groups. Also, larger business groups, because of their size, would possess greater resources to learn, absorb, and leverage the knowledge accessed through linkages to expand overseas. Consequently, larger business groups would have greater LLL advantages than smaller business groups. Likewise, since the motivation and means to use FDI as a spring board stem from the size of domestic market positions, larger business groups would have greater motivation and means to use FDI as a spring board than smaller business groups. Thus, while affiliates of all business groups would have greater FDI than independent firms as hypothesized earlier, among affiliates of business groups, those affiliated to larger business groups would have greater FDI than those affiliated to smaller business groups.
Hypothesis 3. Affiliates of larger business groups have greater FDI
than affiliates of smaller business groups.