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International Family Enterprise

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"Enabling Internationalization Excellence for Family Enterprises"

IFE, 2017

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Are Finnish Family Enterprises Too Family-Oriented for International Growth?

PwC recently conducted a large-scale Family Business Survey Report about family enterprises both globally and in Finland. The survey dealt with various themes, among which a closely examined one was internationalization. In Finland, 54 phone interviews and 57 face-to-face interviews were conducted, which yielded some interesting findings. Finnish family enterprises expect more growth than their counterparts in Sweden, Germany and globally, both overall and in terms of international sales during the next five years. The survey, however, raises a concern over the relatively low willingness among Finnish family enterprises to use nonfamily executives in running the business. According to the survey, enterprises with nonfamily executives tend to grow more aggressively. Accordingly, it asks whether Finnish family enterprises are capable enough to achieve the high international growth targets with current skills, people and product/service portfolio.

An arising theoretical perspective to better understand family enterprises has been socioemotional wealth (SEW), which suggests that family enterprises and their family members try to preserve noneconomic rewards or affective endowments, such as family values or dynastic succession, in the family business. This might reflect to economically irrational decisions, like for instance, not to join cooperatives, diversify, or include nonfamily members in the organization, since these moves would reduce the SEW of the families. As PwC’s report suggests, however, nonfamily members could provide family enterprises with significant knowledge and skills to better capitalize on international opportunities. This notion has also been recognized in academic research both in terms of the positive effect of external board members and nonfamily managers and leaders.

Are Finnish family enterprises too family-oriented to grow? Maybe. Certainly family ownership and involvement in management are worth pursuing for in the context of internationalization, if they have skilled people in the family. Business – and international business – is about relationships with people in essence, and if these people are not skilled and knowledgeable in what they do and how they interact with people around them, internationalization efforts might suffer. The export-driven Finnish family enterprises in PwC’s survey highlight the importance of sales skills and support for salespeople when doing international business. In this context, Finnish family enterprises could ask themselves if they are having the best salespeople from top to bottom to contribute to international sales – whether they are family or nonfamily members.

PwC’s survey also notes that although Finnish family enterprises indicate stronger growth aspirations overall for the coming years, they lag behind their peers in terms of aggressive growth. Based on the face-to-face interviews, Finnish family enterprises pursue more sustainable and less risky long-term growth. There is naturally nothing to protest against this, and actually family enterprises in general are great examples of sustainable growth both domestically and internationally. However, it wouldn’t hurt stepping outside the family comfort zone in case the best talent is not around the dinner table but around the corner.

 

Yours sincerely,

Jaakko Metsola and the research team

 

Banalieva, E. R., & Eddleston, K. A. (2011). Home-region focus and performance of family firms: The role of family vs non-family leaders. Journal of International Business Studies, 42, 1060-1072.

Cruz, C. C., Gómez-Mejia, L. R., & Becerra, M. (2010). Perceptions of benevolence and the design of agency contracts: CEO-TMT relationships in family firms. Academy of Management Journal, 53(1), 69-89.

Gomez-Mejia, L. R., Cruz, C., Berrone, P., & De Castro, J. (2011). The bind that ties: Socioemotional wealth preservation in family firms. The Academy of management annals, 5(1), 653-707.

Gómez-Mejía, L. R., Haynes, K. T., Núñez-Nickel, M., Jacobson, K. J., & Moyano-Fuentes, J. (2007). Socioemotional wealth and business risks in family-controlled firms: Evidence from Spanish olive oil mills. Administrative science quarterly, 52(1), 106-137.

Gomez-Mejia, L. R., Makri, M., & Kintana, M. L. (2010). Diversification decisions in family-controlled firms. Journal of Management Studies, 47, 223-252.

Sciascia, S., Mazzola, P., Astrachan, J. H., & Pieper, T. M. (2013). Family involvement in the board of directors: Effects on sales internationalization. Journal of Small Business Management, 51(1), 83-99.

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