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International Family Enterprise

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"Enabling Internationalization Excellence for Family Enterprises"

IFE, 2017

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Socioemotional wealth – a wound or a healing cream to the internationalization of family SMEs?

What do small, resin-based medical and treatment products manufacturing Repolar and me have in common? Both have combined strong research and business – Repolar for the growth and internationalization of small family firm and I for building academic career based on research on the internationalization of small family firms. According to “Family Firm” magazine’s article (published on the 21th of September 2020 by Riitta Saarinen from Finnish Family Firm Association), an important growth factor for Repolar was when one of the co-founders, Arno Sipponen, did his dissertation on the use of resin in wound care in 2013. Tomorrow, Friday 4th of December, I will have the defense of my dissertation, which hopefully helps small and medium-sized family enterprises (family SMEs), such as Repolar, internationalize better, when we consider a key concept for family firms: socioemotional wealth (SEW). SEW encompasses noneconomic and affective aspects family members value and seek to preserve in their family business, even at the expense of economic interests. Hence, it can become a wound especially in smaller family firms, but research is insufficient. SEW can also be a wholesome resource through the commitment, long-term orientation and reliability of the family in the business.

Thus, my dissertation’s title “Good for wealth or bad for health? Socioemotional wealth in the internationalization process of family SMEs from a network perspective” asks whether SEW is a capability or a liability for the health of a family SME. As the resin salve of Repolar enters the wound and cures it, I aimed to study, how SEW enters the internationalization process of family SMEs via network relationships and either improves or impairs it. Business is global and networked, so firms and especially small firms need to seek growth and profitability from there. Hence, it is also important to study the role of family-firm-specific SEW in internationalization.

On Friday, the curtain of my research opens properly, but very briefly about the main findings: SEW is not necessarily a liability but a capability, which can be harnessed to be an enhancing factor for internationalization via active and close networking and careful partner selection. In order to maintain SEW-related noneconomic goals, family SMEs must remember to do purely economic activities alongside SEW-related activities. According to Saarinen’s (2020) article, Repolar seems to be a good example of this. The firm has a very strong family ownership and different persons from Sipponen’s family and close circle in board and R&D, which represent the role of SEW and family members’ strong pursuit to be involved in the business. However, Repolar has had a nonfamily CEO, Paavo Heikkinen, for several years already, whose main responsibility has been the growth of international business. Based on the article, the export sales to total sales has varied in between 10% and 20%, but export countries are many and manufacturing partnership is done with a Greek partner. Heikkinen values working in a family firm; decision-making is fast and “facial ownership” facilitates task assignment etc.

Thus, it seems that SEW has been harnessed well for the growth in Repolar; it is the foundation, on which you can firmly build your firm but which is not too inflexible to adopt complementary internal and external resources during the growth. Network relationships work both inside and outside the firm, and internationalization progresses slowly but steadily – like family relationships do over decades. The title of Repolar article is “Resin unites the family”, so similarly SEW can unite the members and foreign partners of family SMEs for profitable and sustainable internationalization.

My dissertation is based on the interview data on 24 Finnish family SMEs, survey data on 89 Finnish SMEs, and literature review of 172 family firm internationalization studies published between 1991 and 2018. It is therefore worth reading the dissertation itself (http://urn.fi/URN:ISBN:978-952-335-597-2), which contains many practical examples, and join the defense on Friday, which can be followed remotely via this link from 10 a.m. (UTC+2) forward: https://lut.zoom.us/j/838762410.

-Jaakko

Source: Family Firm Association, Riitta Saarinen (21.9.2020) Pihka yhdistää perhettä. pp. 10-14, Family firm.