The impact of family ownership on establishment and ownership modes in foreign direct investment: The moderating role of corruption in host countries

Abstract

Research Summary: In this study, we adopt a socioemotional wealth perspective to examine the influence of family ownership on foreign direct investment. When establishing foreign subsidiaries, firms with greater degrees of family ownership are more likely to engage in greenfield investment and full equity ownership in order to maintain family owners’ socioemotional wealth. Additionally, these relationships are more pronounced in countries with higher levels of corruption. In corrupt countries, greater control over foreign subsidiaries is necessary to restrict their corrupt behaviors, which can seriously damage the firm’s socioemotional wealth and destroy the reputation of the family owners. By using a dataset of foreign market entries by Japanese listed firms in the electronic machinery industry, we find general support for our hypotheses. Managerial Summary: We find evidence that Japanese listed electronic machinery manufacturers with larger family ownership are more likely to choose greenfield investment and full ownership when entering foreign countries. This result suggests that family owners prefer to maintain strong control on local subsidiaries, possibly for preserving their socioemotional wealth. Additionally, this tendency of family firms’ regarding the choice of greenfield investment is stronger when they enter countries with higher levels of corruption. Managers and investors of family firms might need to pay attention to family owners’ entry mode choices, which could be incentivized excessively for the preservation of socioemotional wealth, possibly at the expense of economic wealth.

Family firms in the global economy: Toward a deeper understanding of internationalization determinants, processes, and outcomes

“…Yamanoi and Asaba () investigate the influence of family ownership on a particular aspect of the internationalization process—choice of entry mode in foreign markets. They distinguish between greenfield investments versus acquisitions and focus on full equity as an ownership mode.…”

“…Through an empirical analysis on a longitudinal panel dataset of 303 family-owned Indian firms listed on the S&P Bombay Stock Exchange (BSE) 500 Index covering a six-year period from 2007-08 to 2012-13, this article uncovers some interesting facets of how heterogeneity in ownership and management influences family firms' internationalization, especially in under-represented regions, such as Asia. Yamanoi and Asaba (2018) investigate the influence of family ownership on a particular aspect of the internationalization process-choice of entry mode in foreign markets. They distinguish between greenfield investments versus acquisitions and focus on full equity as an ownership mode.…”

Riding the waves of family firm internationalization: A systematic literature review, integrative framework, and research agenda

“…Conducting a meta-analysis of 76 studies covering 41 countries, the authors underlined the influence that the home institutional context – in terms of the level of protection of minority shareholders and the generalized level of trust toward people from other nations – exerts on the relationship between FFs and internationalization. In a similar vein, Yamanoi and Asaba (2018) measured the effect of the degree of corruption in the host country on entry mode choice, highlighting the importance of the institutional context as a moderator of the relationship between family governance and internationalization. Moreover, Hernandez, Nieto, and Boellis (2018) studied the moderating role of institutional distance in the international location choices of FFs and non-FFs.…”

“…Nevertheless, research has mostly focused on the institutional context of the home country, for instance, exploring the influence of country of origin pro-market development ( Eddleston et al, 2020 ; Eddleston et al, 2019 ). Some studies have also explored the presence of institutional voids ( Miller, Lee, Chang, & Le Breton-Miller, 2009 ) and level of corruption ( Yamanoi & Asaba, 2018 ) in emerging markets that act as host countries. Scholars have also considered multiple dimensions of compounded distance in terms of cultural, institutional, geographic, and economic distance between the home and the host country as drivers of FF entry mode decisions ( Del Bosco and Bettinelli, 2020 ; Hernandez, Nieto, & Boellis, 2018 ; Ilhan-Nas et al, 2018 ).…”

Determinants of Equity Ownership Stake in Foreign Entry Decisions: A Systematic Review and Research Agenda

“…1997), resource dependence theory (Gubbi 2015), organizational ecology theory (Peng 2012; Xie 2017), the ownership–location–internalization model (Erramilli et al. 1997; Talay & Cavusgil 2009), the socio‐emotional wealth perspective (Yamanoi & Asaba 2018), the springboarding perspective (Demirbag et al. 2009), structuration theory (Dutta et al.…”