Do Family-Owned Businesses Behave Differently in International Expansion?
In fundraising, international expansion, or exit strategies, the behavior patterns of family-owned firms are known to be different from non-family firms, likely because the motivations of family firms extend beyond economic gains. For example, founders often make choices that preserve family control of the business or employ family members rather than simply maximizing economic growth, causing their business to grow differently from non-family firms.
Because the behavior of family-owned businesses differs from that of non-family firms, the factors that predict success for these companies also vary. A recent study by Stieg, Cesinger, Apfelthaler, Kraus, and Cheng looked at international expansion in family firms and non-family firms, focusing on four factors that traditionally predict success:
- collaboration within the firm;
- international market knowledge;
- education level of the firm’s management; and
- international business experience.
The study used a sample of 1062 firms from Germany, Switzerland, Austria, and Liechtenstein. International performance was measured by comparing the firm’s international revenue and profit growth, international employment growth, and international market share growth to competitors’.
Stieg et al. found that the pathways to international performance were different between family and non-family firms. They found that family firms with only one of the four predictors (collaboration, international market knowledge, international experience, or education) may report having higher growth of international revenue, profit, employees, and market share than competitors, though having more predictors did increase chances of success. Non family-owned firms, by contrast, need more predictors in order to report similar success: either international market experience and one other predictor or the specific combination of education and international business experience.
The authors suggest that the difference may be due to the fact that family firms have access to fewer resources and are motivated to protect family control of the business. Since resources are limited, family firms are strategic about developing competencies. Additionally, to maintain control of the company, many firms hire management based on familial relationships rather than qualifications such as education and international business experience. They then expand more gradually than non-family businesses. By contrast, non-family firms that succeed internationally often do so because they hired more qualified management to begin with.
The authors do mention that the larger firms are, the more alike family-owned and non-family firms become – but the paths these firms follow to reach that size are not the same.
Source: “Antecedents of successful internationalization in family and non-family firms: How knowledge resources and collaboration intensity shape international performance” Journal of Small Business Strategy. To access the full article, please click here.
Contributed by Alicia Weinstein.