Do family-managed and non-family-managed firms internationalize differently?

Abstract

Purpose Although the concepts of family business, internationalization, and agency theory have received some attention in the relevant literature, these concepts and theories have been used independently. The purpose of this paper is to help close the gap between what is known and what needs to be known about the decision-making processes of internationalization of family managers (FM) and non-family managers (NFMs). Design/methodology/approach The paper analyzes the story of Busscar, a Brazilian firm that began internationalization under an FM and ended it under an NFM. The management transition took place suddenly, as the family CEO died in a tragic accident, and the company appointed an NFM to replace him virtually overnight. These circumstances, as well as the fact that Busscar accelerated its internationalization process after the transition only to go bankrupt a few years later makes this case critical. Findings The paper concludes that under NFMs, the speed and scope of the firm internationalization processes were accelerated and the financial risks were augmented, which is in line with the agency theory hypothesis and contradicts suggestions that NFMs tend to be more structured. Research limitations/implications Many researchers argue that it is important to professionalize the management of family firms. It is expected that an NFM leads to a more structured strategy. The study shows otherwise; changing the manager leads to opportunistic internationalization using emerging strategies rather than deliberate ones. Originality/value This study suggests that firms, networks, entrepreneurship, and ownership are not the only important variables. Manager origin (inside or outside the family) can change everything.

Family firm internationalization: Past research and an agenda for the future

“…However, several studies specifically account for international scope, proposing more precise and robust theoretical mechanisms and delivering empirical results that diverge from those summarized earlier. For example, Alessandri, Cerrato, and Eddleston (2018) conclude that family involvement is associated with greater home region orientation, while Arregle et al (2017) and others (Avrichir, Meneses, & dos Santos, 2016;Bauweraerts & Vandernoot, 2019) specifically associate it with reduced scope of internationalization. In contrast, Zahra (2003) initially speculated, based on stewardship theory, that family involvement should have a positive effect on international scope, but this paper actually found that the effects of ownership and management differ: ownership exerted a positive effect on international scope, and management a negative one.…”

Fast or slow? Decision-making styles in small family and nonfamily firms

“…So far most research on family business focus on a wide range of dichotomies between family and nonfamily firms in their ownership, governance, returns, networks and relationships, leadership, careers and management styles (see Steward and Hitt, 2012; Avrichir et al , 2016; James et al , 2017). Although some studies addressed the decision-making topic in family firms, most have focused on very specific decisions, e.g., capital structure (Matthews et al , 1994), intergenerational successions (Bjuggren and Sund, 2001) or location preference (Kahn and Henderson, 1992).…”

Decision‐making and leadership challenges in partner‐based, owner‐managed companies

“…However, he also proposed the absence of professional business acumen can create disadvantages for an owner-managed firm that professionally managed companies would not meet. A further aspect of the agency relationship is that managers tend to use firm's resources more freely if the firm is not managed by the owner (Avrichir et al, 2016).…”