A subsidiary of a business group is a legal entity which can raise its own external fund with limited liability while a division of a conglomerate is not. In spite of the difference between business groups and conglomerates, prior studies often focus on conglomerates or do not clearly distinguish them. We directly compare business groups and conglomerates, especially in investment strategies and firm values. Because of the limited liability, a business group is likely to choose a risky project more than a conglomerate and that strategy brings a payoff advantage to a business group when the success probability is high. Our model also considers tunneling of business groups and the portfolio of matching single firms. While the participant of newshareholders and the firm value of a business group decreases with tunneling, when the success probability is low the group value can be higher than the matching single firms.