Portugal: changing environment and flexible adaptation

Business groups emerged in Portugal in the late nineteenth century amid nascent industrialization and revealing strong ties to colonial business. Economic nationalism, corporatism, and the decreasing importance of colonies nurtured different business groups in the aftermath of the Great Depression: increasingly diversified while oriented to the domestic market; inward-looking and with large capital shares in affiliate firms; internalizing corporate finance in intra-group capital flows. Everything changed dramatically in 1975, when large industrial and financial groups were nationalized. When they re-emerged twenty years later, they had metamorphosed into a different species: more focused, yet still with unrelated product portfolios; transmuted into multinationals active overseas; organized in pyramidal structures that magnify their control rights; and employed financing based on capital markets and intermediation. The quasi-experimental situation created by the 1975 nationalization emphasizes the importance of flexibility in adapting strategy and control structures to different economic and institutional contexts.