The mixed gamble of internationalization in family and nonfamily firms: The moderating role of organizational slack

• DOI: http://doi.org/10.1002/gsj.1201
• Author: Daniele Cerrato,Kimberly A. Eddleston,Todd M. Alessandri
• Date: 01 February 2018
• Published date: 01 February 2018

SPECIAL ISSUE ARTICLE

The mixed gamble of internationalization in family

and nonfamily firms: The moderating role of

organizational slack

Todd M. Alessandri

1

| Daniele Cerrato

2

| Kimberly A. Eddleston

1

1

D’Amore-McKim School of Business,

Northeastern University, Boston, Massachusetts

2

Department of Economic and Social Sciences,

Università Cattolica del Sacro Cuore, Piacenza,

Italy

Correspondence

Todd M. Alessandri, D’Amore-McKim School of

Business, Northeastern University,

360 Huntington Avenue, Boston, MA 02115.

Email: t.alessandri@neu.edu

Funding information

Richard M. Schulze Family Foundation

Research Summary: The unique preferences of family

firms may lead to internationalization strategies that differ

from those of nonfamily firms. Furthermore, heterogene-

ity among family firms may lead to variation in interna-

tionalization. From the mixed gamble perspective, we

examine the internationalization of different types of fam-

ily firms (weak family owned, strong family owned, and

family owned and managed), as well as nonfamily firms,

considering how differences in family involvement alter

the perceptions of potential gains and losses to socioemo-

tional and financial wealth. We also highlight the varying

sensitivities of nonfamily firms and types of family firms

to the effects of available and recoverable slack. Our find-

ings underscore differences in internationalization strate-

gies among family and nonfamily firms and demonstrate

that slack alters the mixed gamble calculus of internation-

alization for the different types of firms.

Managerial Summary: Whether family firms internation-

alize more or less than nonfamily firms is debated. We

aim to reconcile this debate by investigating the extent

and breadth of internationalization and home region ori-

entation. We propose that inconsistent results regarding

family firms’internationalization are due to their hetero-

geneity whereby family ownership and management lead

to different preferences. Study results support our frame-

work by demonstrating that while nonfamily firms exhibit

the highest levels of internationalization, there is much

variance among family firms. Additionally, we demon-

strate that financial slack further explains differences

between family and nonfamily firms. Our study therefore

offers a richer understanding of family and nonfamily

firms’internationalization and reveals significant

Received: 8 February 2016 Revised: 3 August 2017 Accepted: 8 August 2017

DOI: 10.1002/gsj.1201

Copyright © 2017 Strategic Management Society

46 wileyonlinelibrary.com/journal/gsj Global Strategy Journal. 2018;8:46–72.

differences among family firms that suggest family

owners and managers view the risks of internationaliza-

tion differently.

KEYWORDS

family firms, family management vs. family ownership,

internationalization, mixed gamble, organizational slack

1|INTRODUCTION

The globalization of markets and competition has made the internationalization of firm activities a

requirement for larger firms in order to compete effectively. Internationalization provides firms with

a variety of potential benefits, but also involves challenges and risks (e.g., Barkema & Vermeulen,

1998; Hitt, Tihanyi, Miller, & Connelly, 2006). The benefits and challenges of internationalization

and the associated risk-return trade-off have led to opposing views on whether family firms interna-

tionalize more or less than nonfamily firms or if there is any difference at all (Arregle, Duran, Hitt, &

van Essen, 2017). Family firms may internationalize to a greater extent than nonfamily firms due to

their long-term vision (Claver, Rienda, & Quer, 2009), their view of international growth as an

opportunity to involve more family members in the firm (Zahra, 2003), and advantages of their

“patient capital”(Carr & Bateman, 2009) and social capital (Arregle, Hitt, Sirmon, & Very, 2007).

In contrast, family firms are often portrayed as reluctant to internationalize because of the risk to

their socioemotional wealth (SEW), where SEW refers to the family’s endowment in the firm,

including the family’s control over the firm, reputational advantages from being associated with the

firm, employment opportunities for family members, and the long-term success of the firm for future

generations (Berrone, Cruz, & Gomez-Mejia, 2012; Gomez-Mejia, Cruz, Berrone, & De Castro,

2011; Gomez-Mejia, Haynes, Nunez-Nickel, Jacobson, & Moyano-Fuentes, 2007). Such divergent

views of why family firms internationalize more or less than nonfamily firms suggest that to move

research forward, what is needed is a framework that explains why some family firms focus primar-

ily on the potential benefits of internationalization while others focus on the potential costs.

Like many strategic decisions, internationalization involves the potential for both positive and

negative outcomes. For example, internationalization offers access to new markets and resources,

which can result in increased performance. However, navigating unfamiliar markets can entail

increased costs and potential losses. Thus, internationalization decisions can be viewed as a mixed

gamble, where a mixed gamble refers to a choice that involves the possibility of both gain and loss

outcomes (Martin, Gomez-Mejia, & Wiseman, 2013). Increasingly, scholars have recognized that

many strategic decisions can be viewed as mixed gambles rather than pure gambles (only a gain or

loss outcome). The mixed gamble perspective has been shown to offer insights related to mergers

and acquisitions (Gomez-Mejia, Patel, & Zellweger, in press), IPO pricing (Kotlar, Signori, De

Massis, & Vismara, in press), and R&D investments (Gomez-Mejia et al., 2014), where each of

these contexts represent uncertain decisions that can result in gains or losses.

We contend that the mixed gamble perspective explains why family firms’internationalization

strategies differ from those of nonfamily firms and why variation exists among family firms. Indeed,

family firms’mixed gambles are different from those of nonfamily firms. Nonfamily firms focus

ALESSANDRI ET AL.47