Caste, some would contend, is the fulcrum of Indian society. While this is up front and centre during election season, it is a decisive force in matters of education, family and even land ownership. As a new study by researchers from IIM-Bangalore and Pomona College, California, shows, India Inc also isn’t free of caste dynamics and caste bias. The study analyses over 1,200 M&A deals between 2007 and 2017 and provides evidence of how caste could be influencing business decisions—it finds a large number of mergers and acquisitions in India take place between businesses whose directors belong to the same caste group.
The research revealed that a caste bias was seen among the four broad caste groups: Brahmins, Kshatriyas, Vaishyas and Shudras. M&A transactions between sub-categories within castes, or Jatis, also paint a similar picture: Agarwals acquired Agarwal-dominant firms. In a study published in April of last year, similar homophily was found in CEO appointments and the reason for the same was that such people were more likely to be from a similar or shared social background, thus resulting in increased trust, communication and coordination—the familiarity of shared culture, so to speak. However, such deals, it was revealed in the IIM-B–Pomona College study, led to lower profits and poorer long-run performance compared with M&A deals where the leaders/leadership of the companies didn’t belong to the same caste. One of the major reasons for the same could be the lack of originality and creativity in the company due to group-thinking and increased conformity. The internal biases in boardrooms therefore directly impact the economy and companies, and the same should motivate India Inc towards recognising and negating the implicit beliefs of a caste-based society.