ABSTRACT
Business group governance supersedes corporate governance in catch-up development, but can hamper ongoing growth through creative destruction. Business groups balance an innovative firm’s gains against disruptions to a legacy firm, slowing growth by innovation. After catch-up growth runs its course, corporate governance eclipses business group governance as growth by innovation lifts economies to high-income status. Catch-up economies that fail to make this change can linger in a middle-income trap. Many mid-20th-century development policies impede this changeover.
