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The Role of Inward FDI and Family Firm Heterogeneity on Foreign Location Choice: Evidence from India

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Abstract

The purpose of this study is to examine the internal and external factors that influence the location choice decision of family firms. Drawing on two streams of literature—family firm and international business—we investigate the role that inward FDI (IFDI) and firm’s heterogeneity (ownership structure and management type) play in the location choice of family firms. Our analysis of a large sample of family firms (N = 278) from India suggests that IFDI is positively associated with a greater likelihood of advanced economy location choice compared to the choice of emerging economies. Our results also reveal that the relationship between IFDI and advanced economy location choice is stronger for family-controlled firms than for family-influenced firms. In addition, results demonstrate that within family-controlled firms, the above positive relationship is stronger for firms that are professionally-managed than for firms that are family-managed. The study concludes by explaining the theoretical and managerial implications of the findings and highlighting avenues of future research.

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Notes

  1. In addition to competition, IFDI can create knowledge spillover and learning opportunities. Examining spillover, learning, and competition on account of IFDI is practically impossible in one study. Following the strategic response literature in the context of EMFs (Ayyagari et al., 2015; Cui et al., 2014; Luo & Tung, 2018; Mondal et al., 2021) we focus only on competition in this paper.

  2. We elaborate on two types of heterogeneity in Sect. 3.2 and 3.3.

  3. The dilemma that family firm actors deal with when simultaneously evaluating various gains / losses of current SEW vis-à-vis prospective financial wealth is known as mixed gamble. Detailed discussion, however, is outside the scope of this study.

  4. We thank an anonymous reviewer for encouraging us to conduct these additional tests. Results will be made available to the readers upon request.

  5. We thank an anonymous reviewer for bringing this important issue to our attention.

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  1. XLRI-Xavier School of Management, Jamshedpur, India

    Arindam Mondal

  2. Illinois State University, Normal, Illinois, USA

    Somnath Lahiri

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Mondal, A., Lahiri, S. The Role of Inward FDI and Family Firm Heterogeneity on Foreign Location Choice: Evidence from India. Manag Int Rev 64, 245–278 (2024). https://doi.org/10.1007/s11575-024-00535-7

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