This study aims to explore the mechanism of spin-off and formation of business group, based on in-depth case study of former Hyundai group. From the case, we observed that spin-offs of numerous affiliates have been implemented during over fifty years as a means of diversification and growth strategy. Spin-off is likely to have played a great role in the formation of Korean business groups. Spin-off has been favored by Korean firms mainly because it helps expand business area, preempt the market, and fully utilize managerial resources at entire group level. Business context and economic policy also triggered for big firms to establish a lot of affiliates, and adopt an organizational form of business group. For this reason, spin-off mechanism is largely path dependent in Korea.