1.1 Introduction
In this book, we investigate the internationalisation of family firms (FFs) from a network perspective. The family is the original economic unit, and from it all other economic organisations are derived (Schulze & Gedajlovic, 2010). As recently as the beginning of the twentieth century, all businesses were family-owned: the presence of the family in the business was taken for granted, and there was thus no need to label a business as a FF. FFs have a substantial economic impact worldwide; they account for over two-thirds of all firms and constitute approximately half of the total GDP (Shanker & Astrachan, 1996). A considerable impact is also present in Europe, in which FFs account for more than 60% of all the overall company population (European Commission, 2019). Furthermore, in Finland, the geographical context of the case firms analysed in the current book, FFs are the significantly the most common firm type among small-sized firms with a proportion of 75% (Finnish Family Firm Association, 2017). However, FFs have traditionally been a neglected group of firms attracting very little attention and appreciation both in societal and academic discussion (cf. European Commission, 2019).
Management researchers tend to be particularly positive about family governance (Schulze & Gedajlovic, 2010). The unification of ownership and management enables the CEO to make opportunistic investments and/or rely on intuition (Gedajlovic, Lubatkin, & Schulze, 2004). Hence, FFs have the potential to adapt to changing environments, launch products and enter markets that investor-controlled or managerially led firms are unable to access (Dyer & Whetten, 2006). In adverse economic conditions, FFs have been found to sustain more profitable businesses than firms with different ownership structures (Sirmon & Hitt, 2003).
FFs have been considered different from non-FFs due to the controlling family’s structural, cognitive and relational embeddedness in the business, affecting norms, principles, and social relationships (Bird & Zellweger, 2018; Zellweger, Chrisman, Chua, & Steier, 2019). Social relationships within FFs (i.e. intra- and extra-family relationships, and intra- and extra-firm relationships) become extensively intertwined; the controlling family’s decision-making power affects the development of family and firm resources and also influences the latitude given to family members, nonfamily members and external stakeholders for achieving economic and noneconomic goals in the FF (Zellweger et al., 2019). Indeed, the value FFs attach to noneconomic, family-centric goals differentiate them from non-FFs. These goals are often referred to as socioemotional wealth (SEW), which encompasses the preservation of family control , identification, emotional attachment , binding social ties and the renewal of family bonds through dynastic succession , in addition to, or even beyond, economic business goals (Berrone, Cruz, & Gómez-Mejía, 2012; Chrisman & Patel, 2012; Gómez-Mejía, Haynes, Núñez-Nickel, Jacobson, & Moyano-Fuentes, 2007; Nason, Mazelli, & Carney, 2018).
With regard to internationalisation, it has been recognised that substantial numbers of FFs and other entrepreneurial firms are active in the international arena (Casillas & Acedo, 2005). FFs still dominate the global economic landscape and their business has become more and more international, FF internationalisation becoming a significant research area (Fernandez & Nieto, 2005, 2006; Graves & Thomas, 2006, 2008), which has eventually developed into a research niche of its own (Kontinen & Ojala, 2010; Pukall & Calabrò, 2014; Reuber, 2016). Nevertheless, despite the substantial growth of research in the area, scholars still disagree about whether the influence of family ownership on internationalisation is positive or negative (Kontinen & Ojala, 2010; Pukall & Calabrò, 2014).
However, we are still not close to a state of knowing how FFs’ internationalisation differs from the internationalisation of firms with other ownership structures. Chrisman, Chua, Pearson, and Barnett (2012, p. 267) noted that ‘a theory of the family firm must be able to … explain variations among family businesses’. In a similar manner, Arregle, Hitt, and Mari (2019) and Hennart, Majocchi, and Forlani (2019) recently called for studies on FF internationalisation through their heterogeneity. Therefore, in the empirical study presented later in this book, we intend to study family-controlled firms with high family ownership and involvement in the business, which differ from family-influenced firms with lower family ownership and involvement (Arregle, Naldi, Nordqvist, & Hitt, 2012; Sirmon, Arregle, Hitt, & Webb, 2008; Westhead & Howorth, 2007). We then discuss perspectives attached to family-controlled firms , such as SEW (e.g. Kotlar, Signori, De Massis, & Vismara, 2018), in relation to the international networking of FFs, the main topic of this book.
Regarding the international networking activity of FFs (Kampouri, Plakoyiannaki, & Leppäaho, 2017; Kontinen & Ojala, 2010, 2012; Pukall & Calabrò, 2014), we know very little. We do know that FFs typically possess network ties with a high level of trust, closeness, and long-term commitment (Arregle, Hitt, Sirmon, & Very, 2007; Roessl, 2005; Salvato & Melin, 2008; Zellweger et al., 2019); however, little work has been done on the process and the strategic approach of FFs to conduct their international networking, manage the foreign network ties, and use their FF-specific features as possible advantages for international networking and internationalisation. Recent calls for research on FF internationalisation have noted the heterogeneity of FFs (Arregle et al., 2019; De Massis, Frattini, Majocchi, & Piscitello, 2018; Hennart et al., 2019) as a possible key to understanding their differing internationalisation strategies (Hennart et al., 2019) based on differing family structures (Arregle et al., 2019). Therefore, in addition to providing a general overview of the current state of research on FF internationalisation and international networking, our aim with this book is to conduct an in-depth empirical investigation of our own, using a large case firm sample of 24 Finnish FFs that are mostly family-controlled (cf. family-influenced), small-sized, and highly international. Our main research questions are as follows:
- How do FFs build and maintain network ties to foreign markets?
- How do FFs embrace their FF-specific features for successful international networking?
The contents of the book are divided as follows. In this chapter, we introduce readers to the theoretical foundations behind FF as a firm type as well as the internationalisation and international networking of firms in general and FFs in particular. In Chapter 2, we describe the methodology of our empirical study in the book and present case firm descriptions in relation to internationalisation history and SEW endowments. In Chapter 3, we present the findings of the empirical study, focusing on two main topics: (i) international networking t...