Skip to main content
SpringerLink
Log in

Family businesses from emerging markets and choice of entry mode abroad: insights from Indian firms

  • Original Article
  • Published:
Asian Business & Management Aims and scope Submit manuscript

Abstract

Internationalization of family businesses (FBs) is an interesting topic that has received extensive attention in the literature during the last decades. Prior studies emphasized the conservative attitude toward risk of FBs. However, studies addressing international decisions of emerging-market FBs (EMFBs) are still scarce. We investigate whether home and host countries matter when EMFBs choose the entry mode abroad. By doing so, we discern whether they follow the same behavioral pattern as developed-country multinational enterprises (MNEs) or they show a distinctive strategic behavior. Drawing on a sample of 298 foreign market entries carried out by Indian MNEs, our results show that Indian FBs prefer acquisitions instead of greenfield investments. Moreover, host country factors matter, since outward foreign direct investment (OFDI) of Indian FBs in developed markets is associated with a preference for acquisitions, whereas OFDI in developing countries is associated with greenfield investments.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Abdellatif, M., Amann, B., & Jaussaud, J. (2010). Family versus nonfamily business: A comparison of international strategies. Journal of Family Business Strategy, 1, 108–116.

    Article  Google Scholar 

  • Aggarwal, A. (2000). Deregulation, technology imports and in-house R&D efforts: An analysis of the Indian experience. Research Policy, 29(9), 1081–1093.

    Article  Google Scholar 

  • Barkema, H. G., & Vermeulen, F. (1998). International expansion through start-up or acquisitions: A learning perspective. Academy of Management Journal, 41(1), 7–26.

    Google Scholar 

  • Berry, H., Guillen, M., & Zhou, N. (2010). An institutional approach to cross-national distance. Journal of International Business Studies, 41(9), 1460–1480.

    Article  Google Scholar 

  • Boellis, A., Mariotti, S., Minichilli, A., & Piscitello, L. (2016). Family involvement and firms’ establishment mode choice in foreign markets. Journal of International Business Studies, 47, 929–950.

    Article  Google Scholar 

  • Boermans, M. A., & Roelfsema, H. (2013). The effects of managerial capabilities on export, FDI and innovation: Evidence from Indian firms. Asian Business & Management, 12(4), 387–408.

    Article  Google Scholar 

  • Brouthers, K. D., & Hennart, J.-F. (2007). Boundaries of the firm: Insights from international entry mode research. Journal of Management, 33(3), 395–425.

    Article  Google Scholar 

  • Buckley, P. J., Clegg, L. J., Cross, A. R., Liu, X., Voss, H., & Zheng, P. (2007). The determinants of Chinese foreign direct investment. Journal of International Business Studies, 38(4), 499–518.

    Article  Google Scholar 

  • Buckley, P. J., Forsans, N., & Munjal, S. (2014). The influence of host-source country linkages in explaining foreign acquisitions by Indian firms. In P. J. Buckley (Ed.), The multinational enterprise and the emergence of the global factory (pp. 173–199). Houndsmill: Palgrave McMillan.

    Google Scholar 

  • Buckley, P. J., & Munjal, S. (2017). The role of local context in the cross-border acquisitions by emerging economy multinational enterprises. British Journal of Management, 28(3), 372–389.

    Article  Google Scholar 

  • Buckley, P. J., Munjal, S., Enderwick, P., & Forsans, N. (2016a). Cross-border acquisitions by Indian multinationals: Asset exploitation or asset augmentation? International Business Review, 25(4), 986–996.

    Article  Google Scholar 

  • Buckley, P. J., Munjal, S., Enderwick, P., & Forsans, N. (2016b). Do foreign resources assist or impede internationalization? Evidence from internationalisation of Indian multinational enterprises. International Business Review, 25(1), 130–140.

    Article  Google Scholar 

  • Buckley, P. J., Munjal, S., Enderwick, P., & Forsans, N. (2016c). The role of experiential and non-experiential knowledge in cross-border acquisitions: The case of Indian multinational enterprises. Journal of World Business, 51(5), 675–685.

    Article  Google Scholar 

  • Buckley, P. J., Munjal, S., Enderwick, P., & Forsans, N. (2017). The role of country alliances in reducing the transaction costs of internationalisation: Evidence from Indian multinational enterprises. Cambridge Journal of Economics, 41(3), 807–828.

    Article  Google Scholar 

  • Cantwell, J. A., & Barnard, H. (2008). Do firms from emerging markets have to invest abroad? Outward FDI and the competitiveness of firms. In K. P. Sauvant (Ed.), The rise of transnational corporations from emerging markets: Threat or opportunity? (pp. 55–85). Cheltenham: Edward Elgar.

    Google Scholar 

  • Caves, R. E. (1996). Multinational enterprise and economic analysis. Cambridge, MA: Cambridge University Press.

    Google Scholar 

  • Chang, J. (2007). International expansion path, speed, product diversification and performance among emerging-market MNEs: Evidence from Asia-Pacific multinational companies. Asian Business & Management, 6(4), 331–353.

    Article  Google Scholar 

  • Chen, V. Z. (2012). Puzzles and truths about Indian outward FDI: Toward a more relevant and nuanced research agenda on emerging market MNEs. AIB Insights, 12(3), 11–14.

    Google Scholar 

  • Chen, R., Cui, L., Li, S., & Rolfe, R. (2017). Acquisition or greenfield entry into Africa? Responding to institutional dynamics in an emerging continent. Global Strategy Journal, 7(2), 212–230.

    Article  Google Scholar 

  • Chen, Y.-R., Huang, Y.-L., & Chen, C.-N. (2009). Financing constraints, ownership control, and cross-border M&As: Evidence from nine East Asian economies. Corporate Governance: An International Review, 17(6), 665–680.

    Article  Google Scholar 

  • Chiu, D.-F. (2015). The influences of formal and informal institutions on Taiwanese family-owned firms’ entry mode choice. Advances in Economics and Business, 3(9), 383–389.

    Article  Google Scholar 

  • Choudhury, P., & Khanna, T. (2014). Toward resource independence: Why state-owned entities become multinationals: An empirical study of India’s public R&D laboratories. Journal of International Business Studies, 45(8), 943–960.

    Article  Google Scholar 

  • Claver, E., Rienda, L., & Quer, D. (2009). Family firms’ international commitment: The influence of family-related factors. Family Business Review, 22(2), 125–135.

    Article  Google Scholar 

  • Cuervo-Cazurra, A. (2012). Extending theory by analyzing developing country multinational companies: Solving the Goldilocks debate. Global Strategy Journal, 2(3), 153–167.

    Article  Google Scholar 

  • Cuervo-Cazurra, A., & Genc, M. (2008). Transforming disadvantages into advantages: Developing-country MNEs in the least developed countries. Journal of International Business Studies, 39(6), 957–979.

    Article  Google Scholar 

  • Cui, L., & Jiang, F. (2012). State ownership effect on firms’ FDI ownership decisions under institutional pressure: A study of Chinese outward-investing firms. Journal of International Business Studies, 43(3), 264–284.

    Article  Google Scholar 

  • Delios, A., & Beamish, P. W. (1999). Ownership strategy of Japanese firms: Transactional, institutional and experience influences. Strategic Management Journal, 20(10), 915–933.

    Article  Google Scholar 

  • Demirbag, M., Tatoglu, E., & Glaister, K. W. (2008). Factors affecting perceptions of the choice between acquisition and greenfield entry: The case of western FDI in an emerging market. Management International Review, 48(1), 5–38.

    Article  Google Scholar 

  • Dikova, D., & Van Witteloostuijn, A. (2007). Foreign direct investment mode choice: Entry and establishment modes in transition economies. Journal of International Business Studies, 38(6), 1013–1033.

    Article  Google Scholar 

  • Dunning, J. H. (2006). Comment on dragon multinationals: New players in 21st century globalization. Asia Pacific Journal of Management, 23(2), 139–141.

    Article  Google Scholar 

  • Eden, L., & Miller, S. (2004). Distance matters: liability of foreignness, institutional distance and ownership strategy. In M. A. Hitt & J. Cheng (Eds.), Advances in international management (Vol. 16, pp. 187–221). New York, NY: Elsevier.

    Google Scholar 

  • Elango, B., & Pattnaik, C. (2007). Building capabilities for international operations through networks: A study of Indian firms. Journal of International Business Studies, 38(4), 541–555.

    Article  Google Scholar 

  • Faccio, M., Marchica, M.-T., & Mura, R. (2011). Large shareholder diversification and corporate risk-taking. The Review of Financial Studies, 24(11), 3601–3641.

    Article  Google Scholar 

  • Feito-Ruiz, I., & Menendez-Requejo, S. (2010). Family firm mergers and acquisitions in different legal environments. Family Business Review, 23(1), 60–75.

    Article  Google Scholar 

  • Fernández, Z., & Nieto, M. J. (2005). Internationalization strategy of small and medium-sized family businesses: Some influential factors. Family Business Review, 18(1), 77–89.

    Article  Google Scholar 

  • Gao, L., Liu, X., & Lioliou, E. (2015). A double-edged sword: The impact of institutions and political relations on the international market expansion of Chinese state-owned enterprises. Journal of Chinese Economic and Business Studies, 13(2), 105–125.

    Article  Google Scholar 

  • Gómez-Mejia, L. R., Cruz, C., Berrone, P., & De Castro, J. (2011). The bind that ties: Socioemotional wealth preservation in family firms. The Academy of Management Annals, 5(1), 653–707.

    Article  Google Scholar 

  • Gómez-Mejia, L. R., Makri, M., & Larraza, M. (2010). Diversification decisions in family-controlled firms. Journal of Management Studies, 47(2), 223–252.

    Article  Google Scholar 

  • Gubbi, S. R., Aulakh, P. R., Ray, S., Sarkar, M. B., & Chittoor, R. (2010). Do international acquisitions by emerging-economy firms create shareholder value? The case of Indian firms. Journal of International Business Studies, 41(3), 397–418.

    Article  Google Scholar 

  • Guler, I., & Guillen, M. F. (2010). Home-country networks and foreign expansion. Academy of Management Journal, 53(2), 390–410.

    Article  Google Scholar 

  • Haasis, T. I., Liefner, I., & Garg, R. (2018). The organization of knowledge transfer in the context of Chinese cross-border acquisitions in developed economies. Asian Business & Management, 17(4), 286–311.

    Article  Google Scholar 

  • Habbershon, T. G., & Williams, M. L. (1999). A resource-based framework for assessing the strategic advantages of family firms. Family Business Review, 12(1), 1–25.

    Article  Google Scholar 

  • Haleblian, J., Devers, C. E., McNamara, G., Carpenter, M. A., & Davison, R. B. (2009). Taking stock of what we know about mergers and acquisitions: A review and research agenda. Journal of Management, 35(3), 469–502.

    Article  Google Scholar 

  • Hennart, J. H., & Park, Y. R. (1993). Greenfield vs. acquisitions: The strategy of Japanese investors in the United States. Management Science, 39(9), 1054–1070.

    Article  Google Scholar 

  • Hernández, V., Nieto, M. J., & Boellis, A. (2018). The asymmetric effect of institutional distance on international location: Family versus nonfamily firms. Global Strategy Journal, 8(1), 22–45.

    Article  Google Scholar 

  • Hoskisson, R. E., Wright, M., Filatotchev, I., & Peng, M. W. (2013). Emerging multinationals from mid-range economies: The influence of institutions and factor markets. Journal of Management Studies, 50(7), 1295–1321.

    Google Scholar 

  • Jiang, Y., & Peng, M. W. (2011). Are family ownership and control in large firms good, bad, or irrelevant? Asia Pacific Journal of Management, 28(1), 15–39.

    Article  Google Scholar 

  • Kahneman, D., & Lovallo, D. (1993). Timid choices and bold forecasts: A cognitive perspective on risk taking. Management Science, 39(1), 17–31.

    Article  Google Scholar 

  • Kaufmann, D., Kraay, D., & Mastruzzi, M. (2009). Governance matters VIII: Aggregate and individual governance indicators 1996–2008. The World Bank. Policy Research Working Paper 4978.

  • Kogut, B., & Singh, U. (1988). The effect of national culture on the choice of entry mode. Journal of International Business Studies, 19(3), 411–432.

    Article  Google Scholar 

  • Kraus, S., Mensching, H., Calabrò, A., Cheng, C.-F., & Filser, M. (2016). Family firm internationalization: A configurational approach. Journal of Business Research, 69(11), 5473–5478.

    Article  Google Scholar 

  • Kumar, N. (2007). Emerging TNCs: Trends, patterns and determinants of outward FDI by Indian enterprises. Transnational Corporations, 16(1), 1–26.

    Google Scholar 

  • Kutner, M., Nachtsheim, C., & Neter, J. (2004). Applied linear regression models (4th ed.). New York, NY: McGraw-Hill/Irwin.

    Google Scholar 

  • Liang, X., Wang, L., & Cui, Z. (2014). Chinese private firms and internationalization: Effects of family involvement in management and family ownership. Family Business Review, 27(2), 126–141.

    Article  Google Scholar 

  • Lu, Z., & White, H. (2014). Robustness checks and robustness tests in applied economics. Journal of Econometrics, 178(1), 194–206.

    Article  Google Scholar 

  • Luo, Y., & Bu, J. (2018). Contextualizing international strategy by emerging market firms: A composition-based approach. Journal of World Business, 53(3), 337–355.

    Article  Google Scholar 

  • Luo, Y., & Peng, M. E. (1999). Learning to compete in a transition economy: Experience, environment, and performance. Journal of International Business Studies, 30(2), 269–296.

    Article  Google Scholar 

  • Luo, Y., & Tung, R. L. (2007). International expansion of emerging-market enterprises: A springboard perspective. Journal of International Business Studies, 38(4), 481–498.

    Article  Google Scholar 

  • Majumdar, S. K., Vora, D., & Nag, A. K. (2012). Legal form of the firm and overseas market choice in India’s software and IT industry. Asia Pacific Journal of Management, 29(3), 659–687.

    Article  Google Scholar 

  • Mathews, J. A. (2002). Competitive advantages of the latecomer firm: A resource-based account of industrial catch-up strategies. Asia Pacific Journal of Management, 19(4), 467–488.

    Article  Google Scholar 

  • Mathews, J. A. (2006). Dragon multinationals: New players in 21st century globalization. Asia Pacific Journal of Management, 23(1), 5–27.

    Article  Google Scholar 

  • Mensching, H., Calabrò, A., Eggers, F., & Kraus, S. (2016). Internationalization of family and non-family firms: A conjoint experiment among CEOs. European Journal of International Management, 10(5), 581–604.

    Google Scholar 

  • Meyer, K. E., Estrin, S., Bhaumik, S. K., & Peng, M. W. (2009). Institutions, resources, and entry strategies in emerging economies. Strategic Management Journal, 30(1), 61–80.

    Article  Google Scholar 

  • Miller, D., Le Breton-Miller, I., & Lester, R. H. (2010). Family ownership and acquisition behavior in publicly-traded companies. Strategic Management Journal, 31(2), 201–223.

    Google Scholar 

  • Miller, D., Le Breton-Miller, I., & Scholnick, B. (2008). Stewardship vs. stagnation: An empirical comparison of small family and non-family businesses. Journal of Management Studies, 45(1), 51–78.

    Article  Google Scholar 

  • Morosini, P., Shane, S., & Singh, H. (1998). National cultural distance and cross-border acquisition performance. Journal of International Business Studies, 29(1), 137–158.

    Article  Google Scholar 

  • North, D. C. (1990). Institutions, institutional change and economic performance. Cambridge, MA: Cambridge University Press.

    Book  Google Scholar 

  • Ojala, A., & Tyrväinen, P. (2007). Market entry and priority of small and medium sized enterprises in the software industry: An empirical analysis of cultural distance, geographical distance, and market size. Journal of International Marketing, 15(3), 123–149.

    Article  Google Scholar 

  • Peng, M. W., & Jiang, Y. (2010). Institutions behind family ownership and control in large firms. Journal of Management Studies, 47(2), 253–273.

    Article  Google Scholar 

  • Pukall, T. J., & Calabrò, A. (2014). The internationalization of family firms: A critical review and integrative model. Family Business Review, 27(2), 103–125.

    Article  Google Scholar 

  • Purkayastha, S., Manolova, T. S., & Edelman, L. F. (2018). Business group effects on the R&D intensity-internationalization relationship: Empirical evidence from India. Journal of World Business, 53(2), 104–117.

    Article  Google Scholar 

  • PwC. (2016). PwC India Family Business Survey 2016. Aligning with India’s growth story. PwC India

  • Quer, D., Claver, E., & Rienda, L. (2012). Political risk, cultural distance, and outward foreign direct investment: Empirical evidence from large Chinese firms. Asia Pacific Journal of Management, 29(4), 1089–1104.

    Article  Google Scholar 

  • Ramamurti, R. (2012). What is really different about emerging market multinationals? Global Strategy Journal, 2(1), 41–47.

    Article  Google Scholar 

  • Ray, S., Mondal, A., & Ramachandran, K. (2018). How does family involvement affect a firm’s internationalization? An investigation of Indian family firms. Global Strategy Journal, 8(1), 73–105.

    Article  Google Scholar 

  • Rienda, L., Claver, E., & Quer, D. (2011). Doing business in India: A review of research in leading international journals. Journal of Indian Business Research, 3(3), 192–216.

    Article  Google Scholar 

  • Rienda, L., Claver, E., & Quer, D. (2013). The internationalisation of Indian multinationals: Determinants of expansion through acquisitions. Journal of the Asia Pacific Economy, 18(1), 115–132.

    Article  Google Scholar 

  • Rienda, L., Claver, E., & Quer, D. (2018). Institutional distance, establishment mode choice and international experience: The case of Indian MNCs. Journal of Asia Business Studies, 12(1), 60–80.

    Article  Google Scholar 

  • Sirmon, D. G., Hitt, M. A., & Ireland, R. D. (2007). Managing firm resources in dynamic environments to create value: Looking inside the black box. Academy of Management Review, 32(1), 273–292.

    Article  Google Scholar 

  • Strike, V. M., Berrone, P., Sapp, S. G., & Congiu, L. (2015). A socioemotional wealth approach to CEO career horizons in family firms. Journal of Management Studies, 52(4), 555–583.

    Article  Google Scholar 

  • Williams, D. W., & Grégoire, D. A. (2015). Seeking commonalities or avoiding differences? Re-conceptualizing distance and its effects on internationalization decisions. Journal of International Business Studies, 46(3), 253–284.

    Article  Google Scholar 

  • Witt, M. A., & Lewin, A. Y. (2007). Outward foreign direct investment as escape response to home country institutional constraints. Journal of International Business Studies, 38(4), 579–594.

    Article  Google Scholar 

  • Wright, M., Filatotchev, I., Hoskisson, R. R., & Peng, M. W. (2005). Strategy research in emerging economies: Challenging the conventional wisdom. Journal of Management Studies, 42(1), 1–33.

    Article  Google Scholar 

  • Yamanoi, J., & Asaba, S. (2018). The impact of family ownership on establishment and ownership modes in foreign direct investment: The moderating role of corruption in host countries. Global Strategy Journal, 8(1), 106–135.

    Article  Google Scholar 

  • Zellweger, T. M., Kellermanns, F. W., Chrisman, J. J., & Chua, J. H. (2012). Family control and family firm valuation by family CEOs: The importance of intentions for transgenerational control. Organization Science, 23(3), 851–868.

    Article  Google Scholar 

  • Zhang, L., & Xu, Z. (2017). How do cultural and institutional distance affect China’s OFDI towards the OBOR countries? Baltic Journal of European Studies, 7(1), 24–42.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Department of Management, University of Alicante, Campus of San Vicente del Raspeig, P.O. Box 99, 03080, Alicante, Spain

    Laura Rienda, Enrique Claver, Diego Quer & Rosario Andreu

Authors
  1. Laura Rienda
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Enrique Claver
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Diego Quer
    View author publications

    You can also search for this author in PubMed Google Scholar

  4. Rosario Andreu
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Laura Rienda.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Rienda, L., Claver, E., Quer, D. et al. Family businesses from emerging markets and choice of entry mode abroad: insights from Indian firms. Asian Bus Manage 18, 6–30 (2019). https://doi.org/10.1057/s41291-018-00053-z

Download citation

  • Received:

  • Revised:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1057/s41291-018-00053-z

Keywords

Search

Navigation