Although scholars have extensively analyzed the topic of family firm internationalization in the past decades, only recently the attention has moved to the influence of firm- and family-level governance structures on internationalization. To deepen our knowledge of the topic, I will review 19 theoretical and empirical studies conducted between 2016 and 2023. By considering a wide range of theoretical concepts and lenses, as well as identifying how governance impacts international scale and scope, this thesis adds clarity to the existing research.
Table of Contents
1. Abstract
2. Introduction
3. Methodology
4. Results
4.1 Family and internationalization
4.1.1 Family ownership and internationalization
4.1.2 Family involvement and internationalization
4.2 CEO and internationalization
4.2.1 Family CEO vs. nonfamily CEO
4.2.2 Individual characteristics of family CEOs
4.3 Board and internationalization
4.3.1 Board composition
4.3.2 Board tasks
4.3.3 Board Independence
4.3.4 Moderating effect on family CEO
5. Conclusion and suggestions for future research
6. References
Research Objectives and Key Themes
This paper examines how firm- and family-level governance structures, specifically ownership, CEO characteristics, and board composition, influence the scale and scope of family firm internationalization based on a comprehensive literature review.
- Impact of family ownership and management involvement on internationalization strategies.
- Role of family CEOs versus nonfamily CEOs in international decision-making.
- Influence of board composition, tasks, and independence on international scope.
- Application of theoretical lenses such as the Resource-Based View, Socioemotional Wealth (SEW) Perspective, and Agency Theory to family business internationalization.
Excerpt from the Book
4.1.1 Family ownership and internationalization
One way to differentiate family businesses is by considering their ownership structure. Family ownership facilitates its members to influence the firm’s strategy, goals and decisions while also being able to guard the company’s resources (Zahra, 2003). First, I explain important theoretical concepts used in IB research which help to understand the effects of different ownership forms on internationalization scope and scale.
The term socioemotional wealth (SEW) creates an important concept that finds great use in existing research. Gómez-Mejía et al. (2007) define SEW as all non-financial goals of a family firm that are both meaningful and essential for the particular family. Examples of these are reputation and image, influence as well as family control (Naldi et al., 2013). Additionally, this multi-dimensional perspective includes the identification of family members with the business, their emotional attachment and social connections (Berrone et al., 2012). The SEW perspective states that the family makes decisions bearing the risks of SEW loss in mind, therefore it favors decisions that minimize potential SEW loss (Gómez-Mejía et al., 2007). To preserve this wealth, family members tend to choose lower or no levels of internationalization (Gómez-Mejía et al., 2010). Family members even avoid high-return strategies if there is a potential risk of losing their SEW. Likewise, it is possible that they take risky internationalization decisions to safeguard their SEW, although the outcome might reduce the firm’s financial resources (Gómez-Mejía et al., 2014). Scholars therefore conclude that “the identification of family members with the firm negatively affects the degree of internationalization” (Alayo et al., 2022a, p. 3). On the flip side of this argument, it becomes clear that a second effect can occur. Family members who strongly identify with the business might propose internationalizing as a way to ensure the firm’s perpetuation (Alayo et al., 2022a). Connected to family identification is the level of conservatism found in the family. Scholars use Dunning’s
Summary of Chapters
Abstract: Provides an overview of the literature review on how family-level and firm-level governance structures influence internationalization, based on 19 studies published between 2016 and 2023.
Introduction: Outlines the research problem regarding family firm heterogeneity and governance, establishing the focus on international scale and scope and defining the research questions.
Methodology: Describes the systematic approach to selecting and analyzing 19 academic studies covering various theoretical perspectives and international samples.
Results: Synthesizes the main findings regarding the impact of ownership, the CEO, and the board of directors on internationalization behaviors.
Family and internationalization: Analyzes the impacts of family ownership and management participation on the internationalization process.
Family ownership and internationalization: Discusses the influence of socioemotional wealth and bifurcation bias on ownership structures and internationalization decisions.
Family involvement and internationalization: Explores how family participation in management, particularly in family-managed firms, affects foreign sales and entry strategies.
CEO and internationalization: Investigates the specific role of the CEO in guiding the firm's international path.
Family CEO vs. nonfamily CEO: Examines the different strategic priorities and tendencies of family versus nonfamily CEOs regarding internationalization and performance.
Individual characteristics of family CEOs: Evaluates how factors like education, work experience, tenure, and generation influence the internationalizing capabilities of family CEOs.
Board and internationalization: Reviews how corporate boards influence internationalization through their structure and oversight.
Board composition: Analyzes how board diversity and the presence of external or nonfamily members impact internationalization outcomes.
Board tasks: Examines how specific board roles, such as control or networking, mediate the relationship between international activities and firm performance.
Board Independence: Discusses the role of board independence, CEO duality, and minority shareholder protection in international decision-making.
Moderating effect on family CEO: Explores how the board can act as a professionalizing force to moderate the potential negative influences of a family CEO on international expansion.
Conclusion and suggestions for future research: Summarizes the key findings and highlights promising areas for continued academic inquiry into family firm internationalization.
References: Lists the academic sources used to support the findings within the review.
Keywords
Family firm, internationalization, governance, socioemotional wealth, ownership structure, family CEO, board of directors, bifurcation bias, agency theory, resource-based view, export intensity, international scope, international scale, corporate governance, firm performance.
Frequently Asked Questions
What is the primary focus of this paper?
This paper focuses on conducting a literature review to understand how firm-level and family-level governance structures, such as ownership, CEOs, and boards of directors, influence the internationalization behaviours of family firms.
What specific measures of internationalization are addressed?
The analysis is strictly limited to international scale (e.g., export intensity/foreign sales) and scope (the geographic breadth/number of markets) of internationalization.
What is the central research goal?
The study aims to clarify how governance heterogeneity impacts internationalization strategies and to identify consistent findings as well as research gaps in existing literature from 2016 to 2023.
Which scientific methods are employed?
The research is a systematic literature review analyzing 19 empirical and theoretical academic papers, focusing on various countries and theoretical lenses used in international business research.
What topics are covered in the main section?
The main section evaluates the influence of family ownership and involvement, the role of different types of CEOs (family vs. nonfamily), and the impact of the board of directors on the firm's internationalization.
Which key concept describes family goals in this paper?
A central concept used is Socioemotional Wealth (SEW), which refers to the non-financial goals of a family firm, such as reputation, control, and emotional attachment, which often drive strategic decisions.
How does a family CEO usually impact internationalization compared to a nonfamily CEO?
The literature generally suggests that family CEOs, driven by the desire to preserve SEW and prevent loss of control, may show a negative influence on international scope and scale compared to professionally hired external (nonfamily) CEOs.
What role does the board of directors play in family firms?
The board is identified as a crucial governance mechanism that can provide professional expertise, minimize bifurcation bias, and moderate the potential risks associated with family influence, thereby facilitating internationalization.
- Quote paper
- Jana Scherzer (Author), 2023, The Influence of Governance Structures on Family Firm Internationalization, Munich, GRIN Verlag, https://www.grin.com/document/1371695
