The hierarchically nested set of business groups that result from 110 Mexican firms sharing corporate directors (i.e. interlocking directors) is analysed using social network tools. It is argued that these groupings are one of the many dimensions that should be employed to understand the complex nature of ‘business groups’ broadly understood. The hypothesis that business groups are responses ‘to market failures that arise in the particular institutional contexts of emerging economies’ (Khanna and Rivkin, Strategic Management Journal, 22 (2001), p. 46) is tested using the groups constructed from data on interlocking directorates. The results show that as firms belong to more of the same sets of groups, their financial performance tends to be more similar, thus supporting the idea that ‘groups can make up for under-developed institutions, thereby reducing transaction costs’ (Khanna and Yafeh, Journal of Economic Literature, 45 (2007), pp. 340–341).

The canonical approach argues that firms located in industrial districts enjoy advantages for both innovation and performance as a consequence of the exceptionally strong knowledge spillovers that flow freely and spontaneously within them. However, diffusion of shared competences is not as easy and free as postulated in the literature. Using the resource-based view, we study whether clustered firms perform better than non-clustered firms, by providing empirical evidence that location of firms in an industrial district does not directly create innovation capabilities or economic rents. This research question is important because it enables us to better understand how firms benefit from this external knowledge flow, both to create advantages in technological innovation and to obtain superior organizational performance. To stand out in capabilities that are often localized at the centre of the same industrial district, a firm needs to develop a learning internal micro-environment capable of better absorbing localized knowledge spillovers. In particular, the organic form is revealed as a configuration well suited to combining structural flexibility with the productive flexibility offered by the district and to strengthening technological innovation capabilities, thus improving organizational performance.