The pursuit of international opportunities in family firms: Generational differences and the role of knowledge‐based resources

• DOI: http://doi.org/10.1002/gsj.1197
• Published date: 01 February 2018
• Author: Hanqing Fang,James J. Chrisman,Esra Memili,Alfredo De Massis,Josip Kotlar
• Date: 01 February 2018

SPECIAL ISSUE ARTICLE

The pursuit of international opportunities in family

firms: Generational differences and the role of

knowledge-based resources

Hanqing Fang

1

| Josip Kotlar

2

| Esra Memili

3

| James J. Chrisman

4,5

|

Alfredo De Massis

6,7

1

Department of Business and Information

Technology, Missouri University of Science and

Technology, Rolla, Missouri

2

Department of Entrepreneurship, Strategy and

Innovation, Centre for Family Business, Lancaster

University Management School, Lancaster, U.K.

3

Department of Marketing, Entrepreneurship,

Hospitality and Tourism, Bryan School of

Business and Economics, University of North

Carolina at Greensboro, Greensboro,

North Carolina

4

Department of Management and Information

Systems, College of Business, Mississippi State

University, Starkville, Mississippi

5

Centre for Entrepreneurship and Family

Enterprise, University of Alberta, Edmonton,

Alberta, Canada

6

Faculty of Economics & Management, Centre for

Family Business Management, Free University of

Bozen-Bolzano, Bolzano, Italy

7

Department of Entrepreneurship, Strategy &

Innovation, Centre for Family Business, Lancaster

University Management School, Lancaster, U.K.

Correspondence

Hanqing Fang, Department of Business and

Information Technology, Missouri University of

Science and Technology, 101 Fulton Hall,

301 W. 14th St., Rolla, MO 65409.

Email: chevyfhq@gmail.com

Research Summary: We argue that willingness (attitude

toward risk, return, and socioemotional wealth), ability

(extent of control), and resource availability influence the

internationalization of family firms. We hypothesize that

the internationalization of family firms led by founding

and later generation family members differs from the

internationalization of nonfamily firms and from each

other and that knowledge-based resources moderate the

relationship. Longitudinal analysis of 4,925 firm-year

observations of S&P 1500 manufacturing firms from

2002 to 2008 shows that compared to nonfamily firms,

family firms run by founding (later generation) family

members internationalize less (more). Knowledge

resources increase (decrease) the internationalization of

founder-led (later generation) family firms. Overall, how

family ownership influences firm behavior is likely to

vary as much by its type as its amount.

Managerial Summary: We explore the internationaliza-

tion of family firms based on a sample of S&P 1500

manufacturing firms from 2002 to 2008. Compared to

nonfamily firms, family firms run by founding family

members internationalize less, and family firms run by

later generation members internationalize more. However,

as knowledge resources increase, the internationalization

of founder-led family firms increases, whereas the inter-

nationalization of firms led by later generation family

members decreases. Therefore, our findings suggest that

knowledge resources can facilitate or hamper interna-

tional expansion in family firms, depending on the gener-

ation of family control. These findings underscore the

Received: 31 January 2016 Revised: 10 March 2017 Accepted: 24 March 2017

DOI: 10.1002/gsj.1197

Copyright © 2017 Strategic Management Society

136 wileyonlinelibrary.com/journal/gsj Global Strategy Journal. 2018;8:136–157.

role of goals, governance, and resources as important

drivers of differences in internationalization between fam-

ily and nonfamily firms, as well as of variations in inter-

nationalization among family firms.

KEYWORDS

family business, generational difference, international

asset investment, knowledge-based resource, R&D

investment

1|INTRODUCTION

Internationalization represents a critical strategic decision for large firms (Hitt, Hoskisson, & Ireland,

1994; Hitt, Hoskisson, & Kim, 1997; Wan & Hoskisson, 2003). Expanding into foreign markets can

potentially provide many benefits, such as economies of scale and scope, market power, and learning

from foreign partners and competitors (Geringer, Beamish, & DaCosta, 1989; Hitt et al., 1997; Rug-

man & Verbeke, 2001). However, internationalization also represents a high-risk strategic commitment

that may dilute family control and destabilize the achievement of the noneconomic goals of family

owners. Prior research shows that differencesin firm ownership can resultin variations in internationali-

zation (e.g., Tihanyi, Johnson, Hoskisson, & Hitt, 2003). Moreover, prior family business literature

points to important differences in internationalization between family and nonfamily firms (Gallo &

Garcia Pont, 1996; Gallo & Sveen, 1991; Pukall & Calabrò, 2014). This research stream generally

shows a negative relationship between family ownership and internationalization (e.g., Banalieva &

Eddleston, 2011; Boellis, Mariotti, Minichilli, & Piscitello, 2016; Fernández & Nieto, 2005; Gomez-

Mejia, Makri, & Larraza-Kintana, 2010), suggesting that family firms are often risk averse and reluctant

to expand beyond domestic boundaries.

1

Although internationalization of family firms has received

attention (Gallo & Garcia Pont, 1996; Gallo & Sveen, 1991; Gomez-Mejia et al., 2010; Pukall &

Calabrò, 2014; Singla, Veliyath, & George, 2014; Zahra, 2003), important gapsin the literature remain.

Previous studies often draw upon either a willingness or, more usually, an ability perspective to

explain strategic decision making in family firms, but both perspectives are needed to thoroughly

understanding the strategic behavior of family firms (De Massis, Kotlar, Chua, & Chrisman, 2014).

The ability perspective suggests that the extent of ownership provides family members with power

and discretion to make strategic decisions (e.g., Anderson & Reeb, 2003; Carney, 2005). However,

given equal ability, the willingness of family owners to engage in international activities is based on

the extent to which such decisions are consistent with their economic and noneconomic goals

(Gomez-Mejia et al., 2010), which are likely to differ from those of nonfamily firms (Chrisman,

Chua, Pearson, & Barnett, 2012). Furthermore, family involvement in business may influence the

investments family firms make in knowledge-based resources in comparison to nonfamily firms

(De Massis, Kotlar, Frattini, Chrisman, & Nordqvist, 2016; Habbershon & Williams, 1999).

Depending on their nature, investments in these resources can facilitate or hamper international

expansion.

1

Family firms are defined by a family’s involvement in a firm, which allows it to pursue family-centered goals as well as utilize

family-based resources in its strategic initiatives (Bennedsen, Pérez-González, & Wolfenzon, 2010; Chua, Chrisman, &

Sharma, 1999).

FANG ET AL.137