1. Introduction
Research efforts on family firm internationalization in developed economies are increasingly focusing on the influence of family involvement on a firm’s internationalization [
1]. However, empirical evidence on this question is inconclusive. For example, is there a positive relationship [
2,
3], negative relationship [
4,
5], curvilinear relationship [
6], or no relationship [
7,
8]? One plausible reason for the mixed results is that most studies use different measures for family involvement and internationalization, and another reason might be the diverse country contexts that existed across previous studies [
9].
We observe that emerging economies such as China have a ubiquitous presence of family firms. A distinguishing characteristic of these family firms is the strong presence of a family that controls a large percentage of the firm’s equity and management. Therefore, it is evident that the family will exert an important impact on the internationalization of Chinese family firms. However, little research has analyzed the influence of family involvement variables such as family ownership and/or management on the internationalization of Chinese family firms. Furthermore, the very limited research on Chinese family firms ignores the effects of industrial and institutional environments on relative relationships [
10,
11].
As proposed in numerous previous studies, it is essential to consider the effects of environment on family firm internationalization. For example, Debick [
12] noted that the industrial environment (i.e., environmental munificence) can affect the relationship between socioemotional wealth and family firm internationalization. Emerging economies such as China are typically characterized by poorer governance, as well as weaker and less efficient formal institutions. These profound differences in institutional frameworks between emerging and developed economies have led scholars to pay more attention to how the institutional environment impacts the internationalization of Chinese private firms, which are mostly family firms. In this stream of research, there have emerged two contrasting arguments, which can be summarized as an escape view and a fostering view. The escape view suggests that the internationalization of Chinese private firms seems to be an escape from the institutional constraints in the home country [
13,
14], whereas the fostering view contends that the government is fostering a favorable institutional setting to promote internationalization of Chinese private firms [
14]. Moreover, Chinese private firms have a strong tendency to establish close ties with government agencies and officials. Therefore, scholars are also interested in questions such as how informal institutions such as political ties [
15,
16] affect the internationalization of Chinese firms [
14].
The resource-based view assumes that family ownership is a special resource that can provide Chinese family firms with the necessary resources for internationalization. Agency theory holds that family management can effectively reduce the agency costs between family owners and managers in the internationalization process of family firms. Therefore, family ownership and management can influence the internationalization of Chinese family firms.
An institution-based perspective contends that formal and informal institutions influence firms’ internationalization in emerging economies. In China, the government is fostering a favorable institutional setting to promote family firm internationalization. Furthermore, political ties, as an important substitute for informal institutions [
15,
16], may help Chinese family firms to receive regulatory resources and policy support. Therefore, formal and informal institutions might impact the relationship between family involvement and Chinese family firm internationalization.
The contributions of this paper are as follows: First, this paper extends current research on antecedents of family firm internationalization in emerging economies to research linkage among family involvement, industrial environment, institutional environment (i.e. formal institution), and political ties (i.e., informal institution). More specifically, we examine the effects of family ownership and management on Chinese family firm internationalization (i.e., internationalization depth and internationalization breadth), as well as the moderating effects of environmental munificence, the institutional environment, and political ties in this relationship. Internationalization depth is often conceptualized as the extent of its foreign operations and investments, and is calculated as the ratio of export sales to total sales [
17]. Internationalization breadth is defined as the firm’s scope of international operations, and is often calculated as the number of countries in which the firm operates [
17]. Drawing upon the data of family firms in eastern and western China, our results highlight the importance of family characteristics and the external environment on the internationalization of Chinese family firms.
Second, this paper demonstrates the importance of institutional environment on the internationalization of Chinese family firms. Different from traditional analysis of institution, which emphasizes formal institution, this paper considers both formal and informal institutions by highlighting the moderating effects of the degree of marketization and political ties. Furthermore, we find that entrepreneurs’ political ties can weaken the positive effect of family management on the depth of internationalization, but intensify the positive effect of family ownership on the breadth of internationalization. Thus, our findings confirm the positive and negative effects of political ties on Chinese firms. Most previous research has focused on the positive effect of political ties on Chinese firms [
18,
19]. Therefore, this study also adds novel insights into the research on entrepreneurs’ political ties in emerging economies.
Third, this paper distinguishes two different types of internationalization strategies (i.e., internationalization depth and internationalization breadth), as well as two different types of family involvement variables (i.e., family ownership and family management), thus providing a more nuanced understanding of the impact of family involvement on Chinese family firm internationalization.
5. Discussions and Conclusions
Internationalization is widely acknowledged as an important strategy for a family firm’s long-term survival and sustainable growth. Currently, a growing number of studies have investigated the effect of family involvement on family firm internationalization [
1]. However, these studies focus on family firms in developed countries; there has been little research into the effect of family involvement on Chinese family firm internalization. In this study, we explored the effects of two dimensions of family involvement (i.e, family ownership and family management) on Chinese family firm internationalization (i.e., internationalization depth and internationalization breadth), examining the moderating effects of environmental munificence, institutional environment, and political ties in this relationship. Drawing on the data of 274 family firms in 8 provinces or municipalities of China, the study yields 4 major conclusions:
First, family ownership and management positively impacted internationalization depth and breadth. This result was in line with previous research [
2,
3,
26], but it did not support the viewpoint that family management negatively influences family firm internationalization [
5,
8,
25]. Second, environmental munificence weakened the effect of family ownership on internationalization depth, as well as the effect of family management on internationalization breadth, whereas environmental munificence intensified the effect of family management on internationalization depth. That is, as environmental munificence increased, the positive effect of family ownership on internationalization depth, as well as the positive effect of family management on internationalization breadth, became weaker, whereas the positive effect of family management on internationalization depth became stronger. Third, the institutional environment intensified the effects of family management on internationalization depth and breadth. That is, as institutional environment in the home country improved, the positive effects of family management on internationalization depth and breadth became stronger. Fourth, political ties weakened the effect of family management on internationalization depth, but intensified the effect of family ownership on internationalization breadth. That is, as political ties increased, the positive effect of family management on internationalization depth became weaker, whereas the positive effect of family ownership on internationalization breadth became stronger.
This study makes three important contributions to the literature. Firstly, this study extends the literature on the development of family firm internationalization in emerging economies, especially in China. Prior research has largely been conducted in developed economies [
1]. Very limited research on Chinese family firms also ignores the moderating effects of industrial and institutional environments in the above relationship [
10,
11]. This paper has embraced how family ownership and family management influence internationalization, as well as their unique situational mechanism in China. Drawing on a large sample of family firms from eastern and western China, it is indicated that family involvement has a different effect on internationalization in emerging and developed economies. Most empirical studies in developed economies support the negative effect of family involvement on the internationalization of family firms [
4,
8,
23]. Our research highlights the importance of family ownership, family management, environmental munificence, institutional environment, and political ties for the internationalization of Chinese family firms, thus providing a new and more realistic insight for family firms’ motivation for internationalization in emerging economies.
Secondly, this study adds to the empirical evidence with regards to the significant role of institutional environments in Chinese family firm internationalization. Differing from the traditional analysis of institutions that mainly emphasize formal institutions such as law and policy, our study considers both formal and informal institutions by probing into the moderating effects of the degree of marketization and political ties. Furthermore, we find that entrepreneurs’ political ties weaken the positive effect of family management on internationalization depth, but intensify the positive effect of family ownership on internationalization breadth. The weakening role of political ties is reflected in the negative effect of political ties. That is, political ties for political rent-seeking and other non-productive activities [
43] may inhibit internationalization. The strengthening role of political ties is reflected in the positive effect of political ties. That is, political ties for resource supply may facilitate internationalization. Most previous research has emphasized the positive effect of political ties on Chinese firms [
18,
19]. Therefore, this study also adds to prior research on private entrepreneurs’ political ties in emerging economies.
Finally, this paper examined the influence of family ownership and family management on both internationalization depth and breadth, two conceptually different facets of family involvement and internationalization strategy, thereby providing a more fine-grained understanding of the impact of family involvement on Chinese family firm internationalization.
This study also has several practical implications. First, our findings suggest that family has a similar effect in both emerging and developed economies. Therefore, it is necessary to enhance our understanding of how family contributes to Chinese family firm internationalization. Currently, family ownership and management are still important governance mechanisms for the internationalization of Chinese family firms. Therefore, Chinese family firms should carefully implement reforms of corporate governance, for example, in avoiding prematurely or excessively diluting family equity and considering the hiring of nonfamily professionals. Second, our study shows that political ties are not always productive. Accordingly, Chinese family firms should rationally maintain the autonomy of political embedding. On the one hand, Chinese family firms should avoid using political ties for political rent-seeking and other non-productive activities, so as to reduce the negative effect of political ties on internationalization. On the other hand, Chinese family firms should utilize their political ties to acquire scarce resources and establish organizational legitimacy in the international market. Finally, our findings encourage government agencies in emerging economies to establish industrial and institutional environments in the home country that are fair to different types of enterprises.
Despite the contributions, this study has several limitations that may provide opportunities for future research. First, this study only considered the direct effect of family involvement on internationalization, but did not consider the mediating mechanism through which family involvement influences family firm internationalization. Previous studies assumed that family involvement impacted on the accumulation of resources and capabilities, as well as socioemotional wealth protection, thus influencing family firm internationalization [
1]. Therefore, it would be interesting to expand the model by incorporating some mediating variables that likely impact the internationalization of family firms. Second, the measurement of internationalization only involved the degree of internationalization, but did not consider internationalization speed and mode (e.g., export, OFDIs). The measurement of industrial environment only involved environmental munificence in the home country, and thus ignored environmental dynamics in the home country, as well as the industrial environment in the host country. The measurement of institutional environment only involved the institutional environment in the home country. Specifically, we chose the degree of marketization and political ties as substitute variables for formal and informal institution in the home country, but did not consider the institutional environment in the host country. Therefore, further research might provide additional insights if more sophisticated measurements are conducted for internationalization, industrial, and institutional environments.