Even if conservative behavior can be justified in case of extreme uncertainties or abnormal risks weighing on the economic environment, it is, nevertheless, criticisable. Conservatism establishes an attitude and a thinking hostile to renewal. Yet, the theories of organizational learning stress that the commitment of management team is an essential condition to the trigger and success of internationalization. A strong and committed management is necessary in order to motivate the organization and to help it overcome the difficulties. Since human capital of the familyfirms shows positive characteristics of strong commitment, cordial, friendly and close ties, and the potential allowing for a deep specific tacit knowledge, we can suppose that this organization can be favored (compared to its counterparts) during organizational learning. A condition is that family SME could draw from its human resources, the necessary commitment to struggle against the forces of conservatism. In order to obtain human resources commitment, it is necessary to involve all levels of direction and management during the reflection and planning of international activities and to sensitize them to the importance of their implication for the success of this orientation. The presence of a strong personality (generally the founder or the owner-manager) who motivates the employees and bring them together to achieve the organizational goals is essential. In particular, the owner-manager should realize the benefits of internationalization, supports and encourages the process. He also could transmit the knowledge accumulated through his personal commitment to other family members (Tsang, 1999). Thus, in spite of a rigid organizational structure, the owner-manager can lead his organization towards flexibility and change. More generally, the organization must change posture and adopt a positive attitude and open-mindedness.
The crucial role of double-loop learning in developing the firms’ knowledge base, particularly during internationalization, needs interestingly to be questioned in the case of familyfirms. Generally, this type of firm has a tendency to be conservative and independence- oriented. The literature suggests that the family system attempts to create and maintain a cohesiveness that supports the family "paradigm" which is described as the core assumptions, beliefs, and convictions that the family holds in relation to its environment (Gudmundson et al., 1999). Information that is not consistent with this paradigm is resisted or ignored (Davis, 1983). Family firm conservatism limits “variation” and accordingly the extent of knowledge developed by the firm. Indeed, variation, i.e. the diversity of environments to which the firm is exposed, is strongly correlated with the amount of knowledge accumulated and developed (Eriksson et al., 2000). Thus, organizations exposed to a variety of business and institutional actors are likely to develop knowledge of an important set of events and thus learn more than poorly exposed ones. They are more capable to define problems, errors and opportunities than firms whose horizon of action is narrower (Eriksson et al., 2000). Indeed, weak variation implies a limited number of customers, competitors and other institutional actors. Accordingly, conservative organizations carry out only a simple loop learning which does not reform their theories-in-uses since they accumulate little knowledge. In brief, the probable conservative attitude of the family firm could inhibit double-loop learning especially during internationalization. Besides, firms’ independence orientation may limit the accumulation of internationalizationknowledge because, on the one hand, the firm’s horizons will also be limited and little varied, and on the other hand, the potential valuable knowledge contribution of outsiders is excluded.
Familyfirms are defined as those organizations owned and usually also managed by a controlling family (Shanker and Astrachan, 1996; Lansberg, 1999). They represent the most common type of organization around the world (La Porta et al., 1999; Morck & Yeung, 2003; Gomez-Mejia et al., 2011) and are major contributors to economic growth, wealth creation, job generation, and competitiveness (Westhead & Cowling, 1998). The importance of familyfirms in developed and emerging markets as well as among top MNEs is progressively growing (Birley, 2001; Carr and Bateman, 2009). Accordingly, the internationalization of family business is receiving increasing attention by scholars and developing into a significant research area (Pukall and Calabrò, 2014). Prior research has demonstrated that when familyfirms go international they show a peculiar behavior compared to firms with different ownership structures and related to the distinctive character of the family business (Thomas and Graves, 2005; Fernandez and Nieto, 2006; Claver et al., 2009): given the duality of economic and non-economic goals, a growing body of research has demonstrated that family involvement in ownership and/or management deeply affects firms’ strategic decisions, including internationalization. Nevertheless this field of inquiry is still in its infancy and the distinctive features of familyfirms’ international behavior have been only partially addressed (Kontinen and Ojala, 2010).
International business experience is an important an- tecedent in the context of international performance (Ca- vusgil & Zou, 1994; Gray & McNaughton, 2010; Madsen, 1988; Miesenböck, 1988; Nielsen & Nielsen, 2010; Rocha, Cotta de Mello, Pacheco, & Farias, 2012). Individuals with international experience have the ability to systematize and generalize their knowledge of the internationalization process and transfer their experience to other cases and environments (Blomstermo, Eriksson, Lindstrand, & Shar- ma, 2004). This reduces the level of uncertainty and risk re- lated to foreign market decision-making (Armario, Ruiz, & Armario, 2008). Overall, familyfirms are equipped with less advanced management skills than non-familyfirms (Graves & Thomas, 2008) and typically have lower levels of inter- national business experience than non-familyfirms (e.g., Banalieva & Eddleston, 2011; George, Wiklund, & Zahra, 2005; Kuo, Kao, Chang, & Chiu, 2012). According to Boellis, Mariotti, Minichilli, and Piscitello (2016), this may be the result of a lower and less diversified shareholder and man- agerial base that makes a family firm per se less informed compared with non-familyfirms. Gallo and Pont (1996) have suggested that familyfirms also tend to hire manag- ers without international experience. Gómez-Mejía, Makri, and Larraza Kintana (2010) have demonstrated that familyfirms are less internationally diversified than non-familyfirms, and assume that this is a result of the family leaders’ lack of international experience. From the SEW perspec- tive, the family’s desire to maintain control of the firm and avoid risk leads familyfirms not to hire internationally ex- perienced non-family managers, resulting in lower levels of international performance (Banalieva & Eddleston, 2011).
From the data analysis emerged that innovation and internationalisation are perceived as very important goals for the growth of the businesses and that they were both pursued by many types of firms (the only exceptions are A3 and C3). In particular, all the firms have implemented organisational innovation; only two do not mention the processes of innovation and 9 have innovated their products. In the past, 13 firms have focused their efforts on internationalisation. In the majority of the case studies (A2, A4, B1, B2, B4, C2, C4, C5) the international sales volume accounts for more than 60% of national sales and in 5 case studies (A4, B1, B2, B4, C5) it exceeds 90%. All the companies have adopted internationalisation strategies targeting the European market and others, with one exception. For B5 the choice of countries followed an assessment related to logistic costs linked to the characteristics of the product so that the sales mainly targeted the European market, in particular Spain and other countries that possessed advantages from the logistic point of view. In all the case studies, there has been an international focus by following a very similar rationale. The firms indeed started to target markets which were geographically and culturally proximate, then those that were gradually more distant. For example, C2 (whose international revenues represent 80% of total sales), targeted Europe first, then Latin America and only later the Arab countries and North Africa. In two cases, however, the situation was exactly the opposite. B1, whose international revenues account for 90% of the total sales, made its first entry in foreign markets by targeting Japan and the United States, then Western Europe and later more distant countries such as Russia, Middle East and China. A similar pattern can be detected in relation to B3 which targeted North America first, then Europe and later the more distant markets of West Africa, Middle East and Japan. Only for two firms was there a strong interest in the context of Italian business (for both past and future growth goals). The interviewee from B4 says explicitly that he would maintain the production in Italy, even though the industry trend is for implanting offshoring, focusing on internationalisation and innovation. This is also explained in the report of Unioncamere (2014, p. 4) whereby “firms that do not consider moving their production abroad to take full advantage of lower
Furthermore, trying to maintain family harmony also influenced the families’ willingness to commit financial resources for internationalisation. Firms (A, B, E) in this study all indicated that pooled funds of family members both in Singapore and abroad and internally generated revenue were the main sources of financial capital for internationalisation. Accordingly, in such cases, family managers were not willing to risk the family members’ investments in the firm and hence a cautious approach was adopted to how and such funds could be used for internationalisation. For instance, in the case of firm E, the family had initially planned to enter the Burmese market through direct exporting in 2009, were stalled because poor financial performances between 2005-2008. This poor performance had caused considerable tension between several family members as they lost a considerable amount of their initial investment in the firm. Rather than risk further tensions, the family agreed to abandon future attempts at expanding into the market and instead focus on domestic operations.
communication, sharing, and integration of knowledge, leading to greater value creation (Chirico & Salvato, 2008; 2016). Moreover, to the extent that the founding generation acts with future generations in mind, their motivation to create value by exploring alternative uses of knowledge‐ based resources should be greater. Because family bonds are generally stronger in a single family than an extended family, this long‐term orientation is more common in founder‐generation familyfirms than nonfamily firms or later generation familyfirms. Hence, compared to later generation family owners, firms run by the founding generation are more likely to pursue strategic initiatives such as internationalization as knowledge‐based resources increase. Thus, although less willing to internationalize in general, firms run by the founder generation should be more willing to utilize knowledge‐based resources for that purpose as the level of those resources increases. In addition, shared experiences through working together in the entrepreneurial and adolescence stages of the firm help build high levels of cohesiveness and emotional attachment among family members that contribute to their capacity to utilize knowledge‐based resources (Chirico & Salvato, 2016; Gersick, Davis, Hampton, & Lansberg, 1997).
Researches in the area of knowledge-basedview suggest the importance of transferring through generations the tacit knowledge, networking and social capital, passion and entrepreneurship and how these transfers mean competitive advantages for familyfirms (Navarro de Granadillo, 2008; González-Loureiro & Figueroa, 2012). In fact, the ability to manage knowledge is currently regarded as the greatest strength in achieving competitiveness (Añez & Nava, 2009). However, the overwhelming majority of publications that have been influential in establishing knowledge management as an important field refer to the practices of large companies. In contrast, there is a notable lack of research into knowledge practices of small and medium-sized enterprises (Hutchinson & Quintas, 2008; Albizu, Olazaran, Lavía & Otero, 2011). Besides, existing studies on knowledge management in family businesses are scarce (Mazzola, Marchisio & Astrachan, 2008; Giovannoni, Maraghini & Riccaboni, 2011; Trevinyo-Rodríguez & Tàpies, 2010); actually, there is a gap in the understanding to transfer of an effective way these resources across generations.
On a practical level, our findings have implications for family business owners, non-family executives within listed familyfirms, and family business advisors. First, this study highlights the important role of family ownership along with governance control, which emphasizes long-term vision and fosters effective decision-making and enhanc‐ es dominant powers and legitimacy through the unity of ownership and governance control; which in turn assists a firm’s ability to organize firm-specific resources to compete in the international marketplace. Second, our findings sug‐ gest that the overseas assignment/work experience diver‐ sity of TMTs provides as a strong predicator of internation‐ al expansion. Business linkages such as industry networks, joint ventures, and subsidiaries play an important role in increasing the probability of international expansion (Bose, 2016). Therefore, TMT oversea related resources and com‐ petencies play an important role in the decision of inter‐ nationalization, for owners and managers in familyfirms, invest in building a heterogeneous top executive team in terms of its overseas industry experience will benefit inter‐ national market expansion.
economies tend to endorse family firm professionalization because the majority of market players in developing economies are non-professionalized familyfirms. Thereby, professionalization may yield first-mover advantage and above-average-returns that no other approaches can match and substitute. Using an institutional theory and resource-based framework, we intend to reconcile these two perspectives by claiming that differences in institutional context, such as developed versus developing economies, may impact both antecedents and consequences of professionalization in familyfirms. Institutional theory suggests that a family firm’s tendency to professionalize is initially impacted by the prevalence of professional norms in its environment (DiMaggio & Powell, 1983; Oliver, 1991; Scott, 1995). A family firm is less likely to professionalize in developing economies than developed economies where the family norm is less prevalent and professional norm is more prevalent (Stewart & Hitt, 2012). One the other hand, the central question addressed by the resource-basedview (RBV) concerns how heterogeneity of organizational resources may differentiate firms from their competitors (Barney, 1991; Penrose, 1959). Thus, the question of whether professionalization can lead to competitive advantages in familyfirms is contingent upon the value, rarity, imitability, and substitutability of professional norms under a specific institutional context (Barney, 1991). Although familyfirms are prone to professionalize to a greater extent in developed economies than developing economies as predicted by the institutional theory, professionalized familyfirms are less likely to obtain competitive advantages because non-familyfirms are also likely to be professionalized and hence professionalization would not be rare and valuable. In contrast, family norms, such as family social capital and family identity, may be valuable to familyfirms, and rare, inimitable, and non-substitutable (Chrisman, Chua, Pearson, & Barnett, 2012a; Habbershon & Williams, 1999; Habbershon, Williams, & MacMillan, 2003; Pearson et al., 2008; Pearson & Marler, 2010; Sirmon & Hitt, 2003). These resources are more likely to become the source of sustainable competitive advantages for familyfirms in developed economies (Barney, 1991; Peteraf, 1993).
Different theories have been proposed to understand a firm’s internationalisation decision. Early economic literature stresses factor-based advantages of regions to understand international trade. Rational decision-making is emphasized to understand a firm’s foreign direct investments, taking into account for example transportation costs, trade barriers, relative wages and market sizes (Hymer, 1960). Johanson and Vahlne (1977) see internationalisation as a learning process, stressing the internal information gathering and previous experience to explain further gradual steps in international commitment. Knowledge of foreign markets through experience is important for international development. Meyer and Shao (1995) stress that cultural and geographic distance may create problems in cross-border VC investments. This explains why many firms first target foreign countries that are close to their home country and then further internationalise gradually.
Although PA conflicts are less prevalent in familyfirms, family control gives rise to PP conflicts, leading to expropriation of the wealth of minority shareholders by family owners particular in legal regimes where the protection of minority shareholders is low (Maury, 2006). Family ownership is the predominant mode of governance in emerging and developing economies, and the weakness of legal system and judicial enforcement make family ties highly significant (Steier, 2009). In family group, the controllers of subsidiaries or sister companies belongs to the same family group, and interlocking networks among family controllers can allow funds to flow quickly into promising new businesses. Hence, the PP conflicts of MLS will let the private benefits of control becomes easier to obtain. The collusions of MLS will give the family controlling group sufficient voting power to control the firm. Maury and Pajuste (2005) suggest that in family-controlled firms there are coalitions among family owners. The incentive to collude or not depends on the type of large shareholders. They assume that the coalition between family members is easy to create and sustain, but a coalition between a family and non-family members might not be that interested in private benefit extraction. Hence, it is important to consider the identities of non-controlling large shareholders when examining the influence of MLS on corporate governance (Cheng et al., 2013).
Mathew (2006) introduced a brand new LLL (linkage, leverage, learning) model based on Dunning’s OLI paradigm, which could better explain why firms in developing countries managed to accelerate internalization without ownership advantages, internalization advantages and location advantages. “First, it is by linkage and leverage, that internationalization is accelerated. It is the reaching out to sources of knowledge in the markets into which the firm is expanding that actually facilitates the accelerated expansion itself. It allows the learning process to be greatly speeded up. Thus linkage and leverage facilitates accelerated international expansion. Secondly, these strategies of linkage are perfectly adapted to the interconnected character of the global economy itself. Whereas earlier patterns of expansion sought to make all trans-border connections through the firm’s own internal procedures, Many of the most successful latecomers from the Asia Pacific have begun their international career as a contractor to an incumbent MNE and then been drawn by this MNE to supply its regional operations across regional borders. This is a quite different pattern of international expansion and one which helps to account for the speed of the arrival of the latecomers. Thus linkage and leverage is well adapted to the interlinked character of the global economy. Third, the LLL framework of outward-oriented, resource-seeking internationalization via linkage and leverage, is an approach to internationalization that is eminently suited to the needs of latecomers and newcomers which initially lack resources in foreign countries.” (Mathew, 2006) The model has laid theoretical groundwork for developing countries firms’ accelerated internationalization. The theory means in principle that any firm which lacks resources in foreign countries can take advantage of the new features of the global economy, particularly its global interconnected character, to become an international player as well.
on trade dynamics and incomplete information is Rauch and Watson (2003). They de- scribe a model with costly search in which a buyer from a developed country is uncertain about whether exporters from developing countries are able to fill a large scale order. In this setting, trade relations start small because importers “test” exporters by placing small orders that reveal their type. Eaton et al. (2010) develop a model where produc- ers learn about the appeal of their products by devoting resources to finding consumers and by observing the experiences of competitors. Freund and Pierola (2010) focus on the incentives of firms to develop new export products in the face of uncertainty about export costs. Their analysis of the frequency of entry and exit from foreign markets for Peruvian firms in the non-traditional agricultural sector in Peru shows a process of “trial and errors”. Arkolakis (2008) builds a model in which firms face convex costs of advertising and are thus forced to slowly build market share in export markets. An alternative explanation for why export relations start small and grow if the relationship is successful is provided by Aeberhardt et al. (2009). Their paper builds on the idea that exporting firms must find a local distributor in each market; initially, the quality of the distributor is unknown but exporters learn it as they acquire experience. Most related to our analysis is the recent work by Albornoz et al. (2010), which our theoretical model builds on. They develop a tractable model based on learning and experimentation in which firms discover their profitability in foreign markets only after actually engag- ing in exporting. Their analysis is focused on firms’ export dynamics across different destinations and shows that firms experiment their products in one market before even- tually expanding in other markets (“sequential exporting”). Our focus is instead on how learning and experimentation within a given destination can lead firms to switch from exports to FDI (“internationalization process”). To the best of our knowledge, none of the recent studies on export dynamics has examined the relationship between exports and FDI and whether export experience can lead firms to open subsidiaries in foreign countries.
considering whether conventional theories of internationalization were appropriate for the study of PSFs. We highlighted how initial efforts to explore the applicability of these theories to PSFs were useful but fell short because they did not take sufficient account of governance issues, of client types and requirements, and of knowledge characteristics. Incorporating these insights, we also identified four main forms of PSF internationalization: project, network, federal, and transnational. We thus argued for the need to take into account not only the distinctive nature of PSFs in general but also the heterogeneity that exists amongst PSFs themselves. In terms of organizational implications, we argued that scholarly interest has focused most strongly on the federal and transnational models. We highlighted how the transnational model, which implies high levels of transnational resource integration and transfer as well as a clear guiding strategic center associated with universal standards, methods, and processes, forms a core aspect of the identity of the largest international PSFs. However, we pointed out that recent research suggests that the extent to which PSFs have adopted the transnational model has been over-stated and that there in fact remain significant barriers to the implementation of such a model. These barriers reflect the interaction of various countervailing forces, including the national embeddedness of much professional knowledge, the continued influence of the partnership mode of governance, and the fragmented nature of career and reward systems inside the organization. Thus, from some perspectives, international PSFs are less “transnational” and more “federal” in form, with the constitutive entities retaining significant power and autonomy, particularly those based in the world’s largest economies. We also highlighted how some parts of the firm are more powerful than others due to their embeddedness in dominant nations and, in particular, how such embeddedness leads to the (re-)production of quasi-imperial power relations within the firm.
supports (Boisot and Meyer, 2008, Rugmana and Li, 2007). The findings reveal that the acquisitions can help the Chinese parent firms and the foreign target firms to achieve complementarity. It demonstrates that foreign target firms benefit from the COAs possessed by Chinese firms and, in turn, Chinese parent firms can benefit from the strategic assets possessed by their foreign counterparts to upgrade their capabilities. This is in line with the existing studies, e.g. Buckley et al. (2014), which state that acquisitions allow resource redeployment. That’s, EMNEs can benefit from the knowledge-, marketing- and technology-intensive resources of their DE counterparts，and target firms from DEs can be more cost effective through utilizing EMNEs’ resources thus increasing efficiency. Harrison et al. (2001) share a similar view, and illustrate that high-value front-end capabilities and resources available in DEs, combined with the back-end low-cost capabilities in EEs, can create valuable resource combinations so as to achieve a higher market valuation and globalization realization. Complementarity provides emerging firms “a wider array of business opportunities to develop competencies that could not create alone” (Kim and Finkelstein, 2009, p. 618). Firms with mutually supportive resources are therefore expected add value to both of parent and the target firms. Thus, I propose:
We study how VCs’ value-added activities affect the speed and scope of the internationalization and growth of born global firms using a questionnaire. We generated an initial sample of 699 PFs by manually screening all VC firms in Sweden that were members of the Swedish Venture Capital Association (SVCA) and that listed their PFs on their homepage. Most SVCA members list their active investments, from which we identified the names, addresses, or webpages for the PFs. After the initial screening, we used the Affärsdata database to identify the organizational number of each firm. After this screening, we removed 106 inactive PFs (e.g., the company no longer exists, the VC already exited, or the VC did not finance the firm), leaving 593 active PCs. Using the organizational number, we collected the CEO’s home addresses using another data deliverer, Ratsit. After two reminders, we received 153 responses, a response rate of 26 %.
Notwithstanding that the incremental framework is deemed as the most suitable explanatory model, it lacks clarity on a number of aspects. Chapter 2 highlighted differences in the creative PSF sector relating to local embeddedness, the distinctive client interaction process, and the role of the individual in service delivery. Earlier in this chapter variations across service segments influencing internationalization patterns were identified. These peculiarities influence how firms enter new markets, form relationships and commit resources to internationalization. Describing the process as a path dependent process of learning influencing commitment (Johanson and Vahlne, 1977, Johanson and Vahlne, 2009) where learning mainly comes from mutual relationship based exchanges or experiential learning neglects the requirement that clients want to trust their creative PSF in advance of forming a relationship. Thus the incremental framework does not easily explain how creative PSFs move from being outsiders to insiders within relevant networks and scholarly insights have not been forthcoming exploring this problem. A knowledge gap needs to be addressed therefore to explain this part of the process.
Finally, the new coopetition framework allows looking at strategic networks as effective governance devices of inter-firm relationships, but it must be enriched with other approaches to offer a more eclectic view. In particular, it must take into account the dynamic capabilities approach put forward by Teece, Pisano and Shuen, where the emphasis is on the assets the firm has to available, and on the firm’s ability to integrate, build and reconfigure internal and external competences to address rapidly changing environments; and it must consider the contribution by Zahra, Sapienza and Davidsson that puts ‘managerial choice’ at the centre of their analysis on dynamic capabilities. Moreover, it must take also into account ap- proaches like the “prism methodology”, provided by the sociologist Ama- lya Oliver, to disentangle the complex competition/cooperation duality framework.
Secondly, we categorize multi-generational firms in which innovation activities deliver future value and rewards from cumulative effort, patience, and conscientious behavior as persisting. Persisting firms’ innovation outcomes manifested in new technologies and processes, in addition to mergers and acquisitions (Proposition 2). Persisting firms’ innovative behavior was associated with the perseverance dimension of the LTO framework. Perseverance is based on the belief that efforts made today will be valuable in the future because of their importance in generating long-term rewards (Brigham, Lumpkin, Payne, & Zachary, 2014). While perseverance is needed for a firm’s day-to-day survival, its effect creates value over time (Lumpkin & Brigham, 2011). Perseverance and long-term rewards are common in family businesses, as reflected in their willingness to use patient capital (Sirmon & Hitt, 2003) and make longer-term investments (Zellweger, 2007). Thus, perseverance is associated with an inclination towards making investments in innovations with lengthy payback periods. As such, innovative activities involving long-term investments with benefits that can only be unlocked in the distant future are classified under this category. Hence: