By Jeoung Yul Lee
From LVMH to Meta, business groups promise brands scale, capital, and credibility. But new research shows that the gains are uneven. According to the study, there are some key factors governing which affiliates truly benefit – and which are left behind.
Whether it’s Louis Vuitton, Givenchy, and Marc Jacobs all benefiting from a reputation boost due to being under the LVMH Group banner, or Facebook, WhatsApp, and Instagram innovating at a faster pace due to all being owned by Meta, or Olay, Oral B, and Gillette all having increased investment due to being part of the Procter & Gamble group, it’s clear to see that the benefits of being part of a wider business group can be alluring for individual brands.
For business groups like LVMH, Meta, and Procter & Gamble, acquiring a number of subunits is a great way to diversify their business avenues and, thus, their risk too. But it also allows them to have a bigger stack in certain markets and to crack new markets with these brands.
The primary allure to being taken over is the increase in capital and funding that these brands gain access to.
For instance, if a large European brand wants to start selling products in Japan, they may weigh up the options and decide, due to cultural differences, that it would be easy to acquire an already successful brand in the region, rather than trying to compete – but keep their brand name and image to ensure that sales still continue.
The motive for larger business groups to acquire smaller brands under their umbrella is pretty clear: diversification, increased reputation, and opening up to new markets. But what are the benefits for the smaller brand that they acquire?
Firstly, the primary allure to being taken over is the increase in capital and funding that these brands gain access to. With a business group offer often comes vast investment, which can of course help boost and sustain the brand’s future.
Secondly, the reputational benefits from doing so allow firms to boost their own brand by piggybacking off the wider global brand – that’s if they have a positive one, of course. This can also enable smaller, more local brands to make inroads into new markets, similarly to the way acquisitions allow business groups to expand their reach.
But for all the benefits that smaller brands can secure from joining a wider business group, we found in our new research paper that not every single business will benefit equally from being under the same umbrella. Where we studied several brands that are part of a business group, we found that specific brands are more likely to benefit than others when it comes to being acquired.
Understanding why some businesses benefit more than others
Much of the previous research into affiliated firms in a business group has focused on the efficiencies of working under one umbrella and the benefits to those businesses. Thus, we decided to attempt to understand not only the benefits but the potential drawbacks to being in these business groups for smaller brands as well.
To do so, we studied a dataset of over 500 business that were affiliated to a wider group, of which there were 11.5 million firm-level datapoints on patents made by affiliated firms. This study period was over 30 years – from 1985 to 2015 – focusing on a specific dataset of Japanese affiliated firms.
By studying the patents applied for by these firms, we are able to see how innovative affiliated firms are whilst being part of that business group, and thus we could use firms’ characteristics to identify the criteria needed for businesses to thrive under a business group umbrella.
Why do some affiliated firms thrive more than others?
From our research, it became clear that the difference comes down to how well a firm can connect its own strengths with the group’s resources. Being acquired isn’t automatically a golden ticket; it’s how a brand optimises the opportunity.
We found four key factors that set thriving affiliates apart. First, autonomy matters. Brands that had some freedom to run their own operations, make decisions, and innovate internally performed much better than those tightly controlled by the parent group. Autonomy allows a brand to focus on what it does best while still benefiting from the resources of the larger group.
Second, alignment of capabilities is crucial. Brands whose products, technology, or expertise matched well with the group’s existing knowledge were able to combine ideas more effectively. These brands could see the “low-hanging fruit” – the areas where collaboration or shared knowledge created extra value – and seize it quickly.
Third, being well connected inside the group made a huge difference. Affiliates that were plugged into the wider network could sense opportunities earlier than others. Whether it was a new market trend, a technological development, or a partnership opportunity, the brands that spotted it first were able to act before competitors even knew the chance existed.
It’s not just about being acquired or gaining access to more funding; it’s about actively engaging with the group.
Finally, taking action on opportunities mattered just as much as spotting them. Some brands might see a promising idea but fail to move quickly enough to capitalise. The ones that were proactive, willing to invest, and committed to collaborative projects with other affiliates consistently got the best results.
What all of this shows is that not all brands benefit equally from being part of a business group. It’s not just about being acquired or gaining access to more funding; it’s about actively engaging with the group, leveraging its knowledge, and seizing opportunities quickly. Brands that do this not only boost their profitability but also strengthen their long-term position within the group.
How can businesses ensure they are benefiting the most from wider groups?
For the business groups themselves, it’s a reminder that structure matters. Giving affiliates the right balance of independence and collaboration, creating ways to share knowledge across the group, and fostering strong connections between brands can help more firms unlock value.
For smaller brands, the core lesson is: don’t sit back and rely on the umbrella alone. Look for ways to connect your strengths with the group’s capabilities, be proactive in spotting opportunities, and act quickly. Invest in your own internal flexibility, and don’t be afraid to lean on the group’s resources to grow and innovate.
In short, being part of a business group can be incredibly rewarding, but only if brands know how to make the most of it. The companies that thrive aren’t necessarily the biggest or the most famous; they’re the ones that actively integrate with the group, leverage its resources, and act decisively on opportunities. That’s the real formula
for success.
