The impact of family ownership on establishment and ownership modes in foreign direct investment

The moderating role of corruption in host countries

Research output: Contribution to journalArticle

3 Citations (Scopus)

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.

Original languageEnglish
Pages (from-to)106-135
Number of pages30
JournalGlobal Strategy Journal
Volume8
Issue number1
DOIs
Publication statusPublished - 2018 Feb 1

Fingerprint

Host country
Foreign direct investment
Ownership
Family ownership
Corruption
Socioemotional wealth
Owners
Greenfield investment
Family firms
Foreign subsidiaries
Machinery
Subsidiaries
Foreign market entry
Wealth
Damage
Entry mode choice
Industry
Economics
Investors
Expenses

Keywords

  • corruption
  • entry mode
  • family business
  • family ownership
  • foreign direct investment

ASJC Scopus subject areas

  • Business and International Management
  • Strategy and Management

Cite this

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title = "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.",
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N2 - 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.

AB - 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.

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