Family firms, internationalization, and national competitiveness: Does family firm prevalence matter?

Abstract

We revisit the question of family firms (FFs) and their capacity for internationalization, and link it to the literature on national competitiveness. We draw widely on the FF competitive advantage and internationalization literature to argue that FFs’ organizing preferences and capabilities will typically support exporting and that these same organizing preferences will mitigate against outward FDI, two dimensions of national competitiveness. Using the logic of aggregation, we hypothesize that family firm prevalence (FFP), measured at the country level, negatively moderates a series of country-level variables associated with country outward FDI, and positively moderates a series of variables associated with country exports.We develop a unique dataset on FFP across countries using a novel method in which we extract estimates from from both published and unpublished academic studies. We develop empirical tests that are rooted in Porter's Competitive Advantage of Nations (Porter, 1990), and its extensions in the Global Competitiveness Index (GCI). Our results provide consistent confirmation of the positive moderator effect of FFP on country export performance hypothesis, but contrary to expectation, higher FFP in a country has a null or positive effect on outward FDI at the country level, thus suggesting a more nuanced view of FF strengths and weaknesses. We conclude by discussing the implications of these results for both the competitiveness and the FF literatures.