Process in family business internationalisation: The state of the art and ways forward

Although the internationalisation of family businesses (FBs) has received increasing attention in recent years, much remains to be learned about how FB internationalisation unfolds as a process. Our review of 172 empirical studies from the period of 1991–2018 indicates that only 25 studies included both longitudinal data and strong process theorising, even though internationalisation is inherently processual, and FBs are longitudinal in nature. We acknowledge that both variance- and process-based theorising are needed to build an understanding of the FB internationalisation process. We contribute to the field by building an FB internationalisation process model based on a review analysis. Within the model, process-based internationalisation pathways are combined with variance-based capabilities (positive influences) and liabilities (negative influences) that affect internationalisation, with economic and non-economic goals viewed as driving the various internationalisation processes. On the basis of the model, we suggest that future research could adopt more longitudinal and individually focused approaches, as a means to understand the FB internationalisation process in various FBs and contexts, over various time periods, life cycles, and FB generations.     

The Relationship Between Psychic and Cultural Distance and Business Ethicality Attitudinal Values of Future Business Leaders

ABSTRACT

Psychic distance and cultural distance between countries are phenomena that can affect a company's entry strategy into foreign markets, as can differences in levels of business ethicality. The author examines the use of three measures of psychic and/or cultural distance (Brewer, 2007; Ellis, 2008; Fletcher & Bohn, 1998) and assesses the extent to which they are related to business ethicality values. A two-stage sampling design was used to survey undergraduate business students in 23 countries regarding their business-related ethics attitudes. This study had 13 countries in common with the Brewer (2007) and Fletcher and Bohn (1998) studies and 12 countries in common with Ellis (2008). Comparisons were made between the index values of the countries and their average scores on a scale of business ethicality by correlation analysis. Correlations were not statistically significant. The results suggest that none of the measures of distance examined is a good indicator of business ethicality and vice versa. Thus, one cannot assume a priori that a country that is culturally or psychically close to one's own country will have similar business ethicality values.     

Family-centred non-economic goals and the internationalisation of family firms: Evidence from Australia

Despite the growing body of literature on the internationalisation of family firms, further research is required to understand the underlying factors that influence their international behaviour. Past research has consistently shown that family firms are less likely to adopt an internationalisation strategy compared to their non-family counterparts, yet we still have limited understanding of the underlying reasons why this is so. By incorporating the bifurcation bias concept to the socioemotional wealth perspective of family firm behaviour, we argue that greater attention needs to be given to the influence of family-centred non-economic (FCNE) goals on the family firm’s international behaviour. Using survey data collected on over 300 Australian family firms, regression analysis was used to examine the influence of FCNE goals on the family firm’s extent of international involvement. The results suggest that business families which emphasise FCNE goals are more likely to exhibit a lower attitudinal commitment towards international expansion, which in turn determines the level of international involvement of the family firm. Results also suggest that the extent of international involvement of the family firm has a significant negative effect on the level of achievement of FCNE goals.     

The Impact of Psychic Distance on the Internationalisation of the Australian Firm

Abstract

This paper explores the relationship between management characteristics and psychic distance, psychic distance and internationalisation and management characteristics and internationalisation. It is argued that internationalisation takes different forms and that psychic distance will impact differently on each form whether it is outward, inward or linked. It is shown that whereas some management characteristics impact on internationalisation directly, others have impact through psychic distance acting as an intervening variable. The management implications for the above are discussed, as is its effect on planning future international activities.     

Internationalisation of family small and medium sized enterprises: The role of stewardship orientation,family commitment culture and top management team

The purpose of this paper is to determine how aspects of organisational culture, typical to family businesses, influence internationalisation. Proposing that stewardship orientation, family commitment culture and top management team related factors influence internationalisation; we empirically examine 80 internationalising family SMEs (FSMEs) from the manufacturing sector in Finland. Variance based structural equation modelling (PLS) shows that family commitment culture is negatively associated with the degree of internationalisation. On the other hand strategically flexible top management teams with industry experience in FSMEs are positively associated with the degree of internationalisation. Contributing to an understanding of the internationalisation of family businesses, the findings suggest that family commitment culture and stewardship orientation, often associated with an inward orientation, may operate against internationalisation, however when coupled with the strategic flexibility of the top management team, we found stewardship orientation to positively impact internationalisation suggesting that it provides an outward orientation. Implications for practice are advanced.     

External managers,family ownership and the scope of SME internationalization

SMEs are important to world business and the majority of SMEs are family firms. Yet some family SMEs are inert, local firms while others are dynamic and international. Do certain governance structures encourage the scale and scope of their internationalization? We jointly apply social capital and corporate governance theories to explain the scope of family SMEs internationalization, and find that professional managers externally recruited from outside the family are important, but only for lower levels of family ownership, suggesting synergistic combinations of ownership and management. It is the combination of external capital with external managers that really works.     

Practicing fairness in the family business workplace

One of the main challenges facing family firms is achieving fairness between family and non-family employees in the workplace. Family and non-family employees have the potential to offer unique and distinct contributions to the firm, which makes the achievement of fairness between them messy and complicated. Hence, two interesting questions are worth exploring: Given the complex nature of the family business human capital, how can family firms achieve fairness between family and non-family employees? Why should family business decision makers and advisors promote fair practices in the family business workplace? We first introduce a fair process model as a possible solution for family businesses to achieve fairness between family and non-family employees. Then, based on several examples and studies, we show that family business owners can benefit significantly from promoting fairness in the workplace both in terms of preserving business reputation and in terms of achieving long-term family business survival and success.     

The impact of civil war on foreign direct investment flows to developing countries

We investigate the impact of civil war on foreign direct investment (FDI) flows to developing countries. We employ a new data-set that disaggregates FDI inflows to primary, secondary and tertiary sectors. Second, we control for a richer set of economic and institutional variables that could determine FDI inflows including population, gross domestic product (GDP) per capita, the degree of trade openness, exchange rate variability, inflation, the governance structure of the host country using International Country Risk Guide data and its regime type using the POLITY autocracy–democracy data. We also address the reverse causality between FDI and conflict and the potential endogeneity of explanatory variables by employing dynamic system generalised method of moments (GMM) techniques in estimation. Our results indicate that primary sector FDI flows to developing countries are not significantly affected by civil war, whereas secondary and tertiary sectors FDI are more sensitive to such outbreak, potentially leading to reversals of existing FDI. Among institutional variables, government stability and control of corruption are more significant compared to regime type, law and order, and bureaucratic quality.     

The role of family management and ownership on semi-globalization pattern of globalization: The case of family business groups

Employing a multi-level with longitudinal concern data analysis this research examines the impact from family management and ownership on semi-globalization pattern of globalization in family business groups from an integrated framework. The results reveal that the more likelihood that the controlling family utilize family management in the subsidiary, and the higher degree of pyramidal ownership in the subsidiary, the more likelihood that the family business group will choose to engage in the host regions. Additionally, family management and pyramidal ownership is positively related with the choice to engage in a higher difference region instead of a lower difference region in family business groups. The theoretical and future research implications of these findings for family enterprises and globalization research are discussed.     

The international market selection of Chinese SMEs: How institutional influence overrides psychic distance

The purpose of this research is to contribute to the ongoing debate about whether psychic distance still plays a vital role in the internationalisation of SMEs from emerging markets. Drawing on the prior research which suggests the salient impact of institutional factors on internationalisation, we investigate the role of home country institutions in international market selection. Adopting a multi-case methodology, we collected semi-structured interview data from six small and medium-sized manufacturing firms in China. Our findings suggest that while psychic distance is still important in some circumstances, both formal institutions, such as government support, and informal institutions, such as business and political guanxi, enable Chinese SMEs to choose psychically distant markets. Our findings also indicate that informal institutions interact with formal institutions to further influence SMEs’ international market selection. This research contributes to SME internationalisation studies by revealing how formal and informal institutional factors override psychic distance in influencing international market selection.     

Regional influences on the prevalence of family versus non-family start-ups

We integrate insights from family business and organizational ecology into the entrepreneurship field by constructing a theoretical framework that explains how the regional context impacts family and non-family start-ups in differing ways. Regional count data models based on a rich longitudinal dataset reveal that while economic factors such as population size and growth in regions are primarily associated with the number of non-family start-ups, factors related to regional embeddedness, such as pre-existing small family businesses as well as favorable community attitudes toward small businesses, are more strongly associated with the number of family start-ups. Our research provides support for the notion that ‘the regional context’ is an important yet under-theorized area for research on venture creation and family business.     

Family CEO and board service: Turning the tide for export scope in family SMEs

Adopting the socioemotional wealth perspective, we argue that the presence of a family CEO in family SMEs negatively affects export scope, but that such negative effect is mitigated by board service. We develop and test a model that considers the synergistic combination of family management and another important aspect of family governance in the context of family firm internationalization: the service behavior of the board of directors. The empirical evidence from a sample of 248 Belgian family SMEs shows that governance is crucial to overcoming the problems of family management: family CEOs may negatively influence export scope, but board service is able to turn the tide so that the family CEO effect becomes positive. With such novel findings, we contribute to international business and family business studies     

Internationalization of knowledge-intensive SMEs: The role of network relationships in the entry to a psychically distant market

Current research emphasizes the role of extant network relationships in the international development of small- and medium-sized enterprises (SMEs). Inevitably, these relationships are there, most likely, to provide linkages with and facilitate entry into psychically and geographically close markets. But what of firms entering psychically distant markets, for strategic reasons, as is usually the case with knowledge-intensive SMEs? Will existing network relationships remain important, and will they operate in a similar way. In this exploratory case study, in which eight Finnish software SMEs enter the Japanese market, the decision to enter these markets is found to be for strategic reasons rather than in order to follow network relationships. In addition, the way to enter these markets is not seen influenced by extant business relationships. It seems more reasonable to argue that the important relationships were actively utilized or developed to achieve the market entry, and were, in many cases, mediated relationships with non-profit government-owned consulting firms.     

The impact of FDI in land in agriculture in developing countries on host country food security

We investigate the influence of FDI in land in agriculture in developing countries, a phenomenon also known as land grabbing, on host country food security, and suggest a differential impact depending on the investor’s country of origin. FDI in land by developed-country investors positively influence food security by expanding land used for crop production because of home institutional pressure for human rights respect and responsible farmland conduct, in addition to positive spillovers. Instead, FDI in land by developing-country investors negatively influence food security by decreasing cropland due to home institutional pressure to align to national interests and government policy objectives, in addition to negative spillovers.     

The sensitivity of compensation to social capital: Family CEOs vs. nonfamily CEOs in the family business groups

This study examines the role of CEO social capital, defined as external directorship ties held by the CEO, in determining family vs. nonfamily CEOs' compensation in a network-based business society and governance system. Using a sample of pooled data of family firms listed on the Taiwan Stock Exchange (TSE) from 2000 to 2002, the empirical results show that CEO social capital is an important determinant in setting nonfamily CEOs' pay level, consistent with the expectation of the contractual governance model. By contrast, as expected by relational governance model, family CEOs' social capital is not incentive-relevant. This study extends the literature on CEO compensation by documenting that in a market where guanxi and connections are considered valuable business tools, corporations will be willing to compensate professional CEOs for the social capital that they bring to the firm.     

The impact of the information and communications technology revolution on the internationalisation of corporate technology

The rising pace of technological change in information and communications technology (ICT) has doubtless provoked the rise of “techno-globalism” at a cross-firm level by providing a new mode of diversification. As a result of the increasing process of technological interrelatedness, the specialisation in a core pervasive technology (as ICT is nowadays) allows the firm to develop tacit capabilities, which, in turn, facilitate its corporate activity in different kinds of technology across national boundaries in an intra-firm network. Therefore ICT can be view as a platform for entry into new products as well as an enabler of fusion of technology.This paper investigates whether the increased specialisation in ICT has influenced the geographical diversification or internationalisation of firms. The association between the two phenomena is found in the later (but not in the former) period under analysis. By adopting a more detailed level of sectoral aggregation within the ICT field, the econometric analysis seems to indicate computing (rather than communications) as the ICT component driving the relationship between internationalisation of research and development activity and ICT specialisation.     

The impact of inward FDI on local companies’ labour productivity: evidence from the Italian case

The article aims to investigate the impact of inward foreign direct investment (FDI) occurring through acquisition upon the local target company’ performance, as measured by labour productivity. It relies upon the idea that multinational enterprises (MNEs) act as a device to transfer firm‐specific proprietary assets, thus causing their subsidiaries to exhibit better performance than their host country rivals. Specifically, our results show that foreign acquisitions generally increase the local target companies’ labour productivity in the medium term after the acquisition. The empirical evidence refers to foreign acquisitions that occurred in Italy in the period 1994–1997.     

The role of information technology in corporate strategy of small and medium enterprises

The crisis of the new economy might have cast doubt on the usefulness of the Internet for business activities. However, it is unquestionable that the possibilities offered by Internet-based technologies in terms of information processing, transfer and collection enable the firm to improve market knowledge and the relationship with clients and suppliers. This work explores, theoretically and empirically, the possibilities offered by the Internet to facilitate the internationalization process of Small and Medium Enterprises (SMEs) as well as to improve the relationship with other firms within the same value chain. Using a wide representative sample of Spanish SMEs, the empirical analysis confirms the benefits of the Internet in both cases.     

The impact of parallel imports on investments in cost-reducing research and development

We develop a two-country model of endogenous investment in process innovation by a manufacturer facing competition from parallel imports (PI). We find that the distortions associated with PI inhibit innovation. However, the difference between the manufacturer's expected profits under successful and failed innovation is U-shaped in the cost of engaging in PI. Thus, the reduction in R&D investment depends on both legality of PI and transport costs. The reduction in innovation could harm global welfare, depending on whether the manufacturer was deterring PI with a high wholesale price. If so, banning such trade would raise expected welfare.     

Internationalization and entrepreneurial orientation of family SMEs: The influence of the family character

Internationalization is an important entrepreneurial strategy for promoting the long-term growth and survivability of small and medium-sized enterprises (SMEs). Family involvement in top management teams (TMTs) can explain the heterogeneous behaviors of these firms’ international entrepreneurship process. This paper analyzes the moderating effects of the family’s influence on the relationship between entrepreneurial orientation and internationalization with two TMT diversities found only in family firms: the family TMT ratio and generational involvement. An analysis of 191 Spanish family SMEs indicated that entrepreneurial orientation plays a significant role in explaining the degree of internationalization in family firms and that a diversely formed TMT shapes this relationship. A high concentration of family members in managerial positions hinders the international entrepreneurship process. This fact highlights the importance of hiring non-family managers to promote internationalization. The results also reveal that involving multiple generations in decision-making hampers entrepreneurial internationalization, generating control and coordination problems.