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  • Service: Enterprise, Family business
  • Type: Business and industry issue
  • Date: 7/3/2014

Examining the Ability of Family Firms to go International 

Examining the ability
Although family firms are constantly thought of as conservative about change, especially those evolutions which lead to a dilution of control over the business, most family business models have the perfect ethos to take advantage of the growing globalisation of the business world.

There are several advantages of globalisation for those firms willing to take the plunge:


  • The enlargement of the different business markets, from regional/national to global, offers new entrepreneurial opportunities to the most dynamic and willing-to-grow firms.
  • Businesses are able to evolve into relatively large multi-dimensioned groups.
  • Companies can also remain focused on specific niches, becoming ‘pocket multinationals’ and global leaders in a specific area due to a high degree of specialization.

How ‘Family Character’ aids internationalization

In a recent case study, by Andrea Colli, Esteban García-Canal and Mauro F. Guillén, analysing six family businesses, three Italian and three Spanish, it was found that the ‘family character’, unique to family businesses over other business types, was fundamental in making the internationalisation process successful.

The study found that family character:


  • Granted more freedom to the managers of the companies to develop their business model to best suit the company. This freedom is made possible in family businesses due to the fact that managers typically stay in their positions for longer in family firms, allowing them to take the time to adequately strategise the best possible business plan.
  • Facilitates the transfer to, and exploitation of, this model in foreign markets. This is due to the fact that new family members entering the firm can instead head up branches in foreign markets, rather than all work under the same roof. This process is more seamless than hiring an outside executive to head up international operations, as family members have the correct ideas and company ethos instilled in them from an early age.
  • Make the adoption of governance structure easier since interactions are based on trust. If family ties are strong, then having family members heading up each division of the company allows for optimum communication and co-operation in times of development, such as internationalisation.

‘Open Family Firm’

It is interesting to note that the increased internationalisation of firms has not meant the weakening of family control in most cases.

In the case of Spanish companies, a lot of the family owned companies are still relatively new, being in either their first or second generation, due to the disruptive effects of the Spanish Civil War. This means that it is often the founder who has chosen to internationalise as part of their original strategy for the company. This elicits a higher degree of control than if the company was internationalized further down the line, and for possibly differing reasons. In such cases, even if an outside professional is brought into the company in a key position such as CEO or CFO, the family still remains firmly in control.

Family businesses do not only lend themselves to internationalisation, but recent studies have even linked this business model as the protagonist in the framework of international entrepreneurship. It can be said that the internationalisation of family firms was the ‘outcome of a silent revolution’ through which these family firms adjusted their resource endowments in order to take proper advantage of the opportunities stemming from their growing environment.

Family firms have consistently proven themselves as the historians of business, with the experience and expertise to not only find their way through difficult times, but often to thrive in new circumstances that can be the downfall of other companies.

Christophe Bernard

Christophe Bernard
I am a KPMG partner based in the French firm’s Paris office, responsible for encouraging the growth of our firms’ middle markets practice across Europe, Middle East and Africa, a majority of that market comprises of family businesses.
 

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