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"Enabling Internationalization Excellence for Family Enterprises"

IFE, 2017

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Research on the Internationalization of Family Enterprises – Toward the Holy Grail?

The research on the internationalization of family enterprises took off in 1991 when Miguel Angel Gallo and Jannicke Sveen published the first scientific article on the topic. This study dealt with the facilitating and restraining factors for family enterprises to go international. For nearly 30 years from that publication, various studies have attempted to increase our understanding on the specific factors related to the internationalization of family enterprises. Although this field of research has witnessed explosive growth (e.g. Pukall and Calabro, 2014), there is still lot to do in gaining findings that have large consensus behind them. We are still in a situation wherein opposing findings often fight with each other, for instance:

  • Family enterprises are more inclined to (e.g. Chen, 2011) vs. less inclined to internationalize (e.g. Cerrato and Piva, 2012).
  • High family ownership and involvement in management yield better results (e.g. Munoz-Bullon and Sanchez-Bueno, 2012) vs. worse results (e.g. Sciascia et al., 2013) in internationalization.
  • Family enterprises are too inward-looking to form external network relationships and incorporate nonfamily expertise for internationalization (e.g. Scholes et al., 2016) vs. family enterprises benefit from their long-term orientation, agile decision making, and partnerships with other family enterprises for successful internationalization (e.g. Mitter and Emprechtinger, 2016).

The distinctiveness of family enterprises has been largely adopted through various theories, such as agency theory (Karra et al., 2006), resource-based view (Chrisman et al., 2005), and socioemotional wealth (Gomez-Mejia et al., 2011). These theories may not have been brought into internationalization context enough, which may partially explain the debate going on around the field when strong theoretical anchors are not used. From the perspective of internationalization theories, most studies have leaned toward conclusions that the internationalization processes of family enterprises mostly align with the Uppsala model, i.e. slow and stepwise process that progresses from nearby and culturally close foreign markets to more distant ones (e.g. Graves and Thomas, 2008). However, there are also studies that provide with evidence on faster born global –pathways (e.g. Kontinen and Ojala, 2012). Intertwining family enterprise and internationalization theories would yield more generalizable findings in the future.

Nevertheless, the research on the internationalization of family enterprises is not a waste of time. Family enterprises are distinctive firm types (Zelllweger et al., 2018) and they account for major economic impact around the world (Hennart et al., 2017). The big names in international business research, such as Jean-Francois Hennart and Alain Verbeke, have also joined in studying the internationalization of family enterprises, which also implies the significance of this research area. If we believe these gentlemen, family enterprises should focus on providing high-quality products in global niches for which family enterprises possess advantages through long-term orientation and strong social capital (Hennart et al., 2017), and should reduce the impact of emotional attachments and heritage assets on rational decision making in international business (Kano and Verbeke, 2018). Kano and Verbeke list the following actions to follow in order to have successful international business in family enterprises:

  • Appointing professionals (i.e. not necessarily family members) to international business management
  • Encouraging international education for family members
  • Having structured decision-making processes for international expansion
  • Measuring rigorously the international business performance
  • Having external evaluation on the international business activities
  • Having the family heritage as a high standard precept for exemplary and value-based operation

Indeed, it is obvious that family enterprises possess specific features that facilitate internationalization, but in order to success, there needs to be open-mindedness toward the general cornerstones of effective business practices. We researchers have significant role in investigating the optimal balance between internal and external factors related to family enterprises that enables success in constantly changing global business environment.

-Jaakko

References:

Cerrato, D., & Piva, M. (2012). The internationalization of small and medium-sized enterprises: the effect of family management, human capital and foreign ownership. Journal of Management & Governance, 16(4), 617-644.

Chen, H.-L. (2011). Internationalization in Taiwanese family firms. Global Journal of Business Research, 5(4), 15-23.

Chrisman, J. J., Chua, J. H., & Sharma, P. (2005). Trends and directions in the development of a strategic management theory of the family firm. Entrepreneurship theory and practice, 29(5), 555-576.

Gallo, M. A., & Sveen, J. (1991). Internationalizing the family business: Facilitating and restraining factors. Family Business Review, 4(2), 181-190.

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

Graves, C., & Thomas, J. (2008). Determinants of the internationalization pathways of family firms: An examination of family influence. Family Business Review, 21(2), 151–167.

Hennart, J. F., Majocchi, A., & Forlani, E. (2017). The myth of the stay-at-home family firm: How family-managed SMEs can overcome their internationalization limitations. Journal of International Business Studies, 1-25.

Kano, L., & Verbeke, A. (2018). Family firm internationalization: Heritage assets and the impact of bifurcation bias. Global Strategy Journal, 8(1), 158-183.

Karra, N., Tracey, P., & Phillips, N. (2006). Altruism and agency in the family firm: Exploring the role of family, kinship, and ethnicity. Entrepreneurship Theory and Practice, 30(6), 861-877.

Kontinen, T., & Ojala, A. (2012). Internationalization pathways among family-owned SMEs. International Marketing Review, 29, 496-518.

Mitter, C., & Emprechtinger, S. (2016). The role of stewardship in the internationalisation of family firms. International Journal of Entrepreneurial Venturing, 8(4), 400-421.

Muñoz-Bullón, F., & Sánchez-Bueno, M. J. (2012). Do family ties shape the performance consequences of diversification? Evidence from the European Union. Journal of World Business, 47, 469-477.

Pukall, T. J., & Calabrò, A. (2014). The internationalization of family firms: A critical review and integrative model. Family Business Review, 27(2), 103-125.

Scholes, L., Mustafa, M., & Chen, S. (2016). Internationalization of small family firms: The influence of family from a socioemotional wealth perspective. Thunderbird International Business Review, 58(2), 131-146.

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.

Zellweger, T. M., Chrisman, J. J., Chua, J. H., & Steier, L. P. (2018). Social structures, social relationships, and family firms. Entrepreneurship Theory and Practice.