Family business going abroad: the effect of family ownership on foreign market entry mode decisions

Abstract

Research on family firms’ internationalization\ud is growing, but empirical findings are mixed.\ud To reconcile prior studies, we focus on strategic\ud decisions related to internationalization, specifically\ud the foreign market entry mode selection process. We\ud suggest that the choice about entry mode is especially\ud significant for family owners because it may either\ud align or conflict with two key family-related goals:\ud maintaining family control and keeping a long-term\ud orientation of the business. We argue that these goals\ud have different weights within family firms according\ud to differences in ownership structure, with significant\ud implications for international strategic decisions. We\ud rely on a sample of medium-sized family-owned\ud Italian firms and show that different types of family\ud ownership structures affect entry mode decisions\ud differently and specifically influence the time horizon\ud of the foreign investment and willingness to cooperate\ud with external actors. We also provide empirical\ud evidence that the presence of a non-family manager\ud moderates the relationship between family ownership\ud and entry mode decisions. Our study expands on prior\ud research by highlighting how family firms enter\ud foreign markets and pointing out the strategic implications\ud of family firm heterogeneit

Family Firm Goals and their Effects on Strategy, Family and Organization Behavior: A Review and Research Agenda

“…partnering with another company), desiring to avoid limiting control of their business (Pongelli et al . ). Research further suggests that family businesses pursuing the goal of transgenerational control have a higher perceived selling price for their firm (Zellweger et al .…”

Family firms in the global economy: Toward a deeper understanding of internationalization determinants, processes, and outcomes

“…This leaves considerable room to investigate the role of family heterogeneity and whether and how family ownership and control affect other relevant internationalization dimensions, such as choice of entry mode (Boellis, Mariotti, Minichilli, & Piscitello, 2016;Chang, Kao, & Kuo, 2014;Kuo, Kao, Chang, & Chiu, 2012. Liang, Wang, & Cui, 2014Pongelli, Caroli, & Cucculelli, 2016), and internationalization speed (Lin, 2012).…”

Joint (Ad)ventures—Family firms' international entry mode choices for emerging markets

“…The perceived benefits of such partnerships are controversial, but in the sampled cases (Nakos et al, 2014), succeeded due to the mutually beneficial terms of the IJVs. Again, these findings clearly indicate a loss of control, even to an unknown partner, is acceptable for family firms, when the long-term survival of the firm is secured (Pongelli et al, 2016), as summarized in Proposition 6: Proposition 6. Family firm principals mainly motivated to leverage their IJV partner for market/network access choose them among strangers (based on pre-defined criteria).…”

“…With regards to equity entry modes, family firms are found to lean towards WOS (Boellis et al, 2016) as they allow the owning-family to preserve family control and influence (Arregle et al, 2019;Claver et al, 2008;Gómez-Mejía et al, 2007). The formation of an IJV is genuinely seen as breaking with the dominant logic of family firms, who aim at keeping control and influence in the family, although economically it could be the most rational choice (Pongelli et al, 2016). Nonetheless, few recent studies found evidence that an unfamiliar culture in the target market might still motivate family firms to consider an the entry mode of an IJV to overcome the perceived barriers (Kao et al, 2013).…”

“…The focus on first entries of European, in our case German, family firms into the emerging markets of China and India therefore offers a relevant setting for an investigation of the reasons why family firms break with their dominant logic of keeping control and if there are implications for the IJV partner selection (Pongelli et al, 2016).…”