Internationalization Decisions in Family Firms: The Impact of Bifurcation Bias



Family firms possess unique features that shape their international strategies. These features include family-based asset specificity and associated resource constraints when embarking on internationalization, as well as an inherent propensity towards bifurcation bias: a dysfunctional decision rule that de facto favours family-based (“heritage”) assets and routines over those assets and routines that do not have a direct connection to the family (“commodity”). Bifurcation bias creates affect-based governance practices that may clash with (boundedly) rational economic considerations to guide international strategy. Using internalization theory as our conceptual lens, we explore the impact of bifurcation bias on governance-related aspects of international strategy. We argue that in the long run, the internalization theory prediction holds, whereby only efficient governance structures will be retained. In the short- to medium-term, bifurcation-biased family firms may deviate from efficient international governance choices, which will negatively affect their success in host markets. We explore factors that influence the firm’s propensity toward bifurcation bias and the magnitude of the bias’s dysfunctional effect on international strategy These factors include: macro- and micro-level cultural characteristics, the firm’s ability to implement anticipative and corrective safeguards, and the firm’s recombination capability.


Internalization theory Bifurcation bias Family firm internationalization International governance 


  1. Alessandri, T. M., Cerrato, D., & Eddleston, K. A. (2018). The mixed gamble of internationalization in family and nonfamily firms: The moderating role of organizational slack. Global Strategy Journal, 8(1), 46–72.CrossRefGoogle Scholar
  2. Arregle, J.-L., Duran, P., Hitt, M. A., & van Essen, M. (2017). Why is family firm’s internationalization unique? A meta-analysis. Entrepreneurship Theory and Practice, 41(5), 801–831.CrossRefGoogle Scholar
  3. Arregle, J.-L., Hitt, M. A., & Mari, I. (2019). A missing link in family firms’ internationalization research: Family structures. Journal of International Business Studies, 50(5), 809–825.CrossRefGoogle Scholar
  4. Arregle, J.-L., Hitt, M. A., & Sirmon, D. G. (2007). The development of organizational social capital: Attributes of family firms. Journal of Management Studies, 44(1), 73–95.CrossRefGoogle Scholar
  5. Banalieva, E. R., & Eddleston, K. A. (2011). Home-region focus and performance of family firms: The role of family vs non-family leaders. Journal of International Business Studies, 42(8), 1060–1072.CrossRefGoogle Scholar
  6. Banfield, E. C. (1958). The moral basis of a backward society.. Glencol.Google Scholar
  7. Bauweraerts, J., Sciascia, S., Naldi, L., & Mazzola, P. (2019). Family CEO and board service: Turning the tide for export scope in family SMEs. International Business Review, 28(5), 101583.CrossRefGoogle Scholar
  8. Bennedsen, M., & Foss, N. (2015). Family assets and liabilities in the innovation process. California Management Review, 58(1), 65–81.CrossRefGoogle Scholar
  9. Berta, G. (2006). La Fiat dopo la Fiat. Mondadori.Google Scholar
  10. 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(8), 929–950.CrossRefGoogle Scholar
  11. Bricco, P. (2017). Quarta acquisizione in due anni: Se il “made in Italy” non e solo una preda. Il Sole 24 Ore-Digital Replica Edition. March 2017.Google Scholar
  12. Buckley, P. J., & Casson, M. (1976). The future of the multinational enterprise. London: Palgrave Macmillan.CrossRefGoogle Scholar
  13. Carney, M. (2005). Corporate governance and competitive advantage in family-controlled firms. Entrepreneurship Theory and Practice, 29(3), 249–265.CrossRefGoogle Scholar
  14. Carney, M., Dieleman, M., & Taussig, M. (2016). How are institutional capabilities transferred across borders? Journal of World Business, 51(6), 882–894.CrossRefGoogle Scholar
  15. Carney, M., Gedajlovic, E., & Strike, V. M. (2014). Dead money: Inheritance law and the longevity of family firms. Entrepreneurship Theory and Practice, 38(6), 1261–1283.CrossRefGoogle Scholar
  16. Cerrato, D., & Piva, M. (2012). The internationalization of small and medium-sized enterprises: the effect of family management, human capital and foreign ownership. Journal of Management & Governance, 16(4), 617–644.CrossRefGoogle Scholar
  17. Chrisman, J. J., Chua, J. H., De Massis, A., Frattini, F., & Wright, M. (2015). The ability and willingness paradox in family firm innovation. Journal of Product Innovation Management, 32(3), 310–318.CrossRefGoogle Scholar
  18. Chrisman, J. J., Memili, E., & Misra, K. (2014). Nonfamily managers, family firms, and the winner’s curse: The influence of noneconomic goals and bounded rationality. Entrepreneurship Theory and Practice, 38(5), 1103–1127.CrossRefGoogle Scholar
  19. Ciravegna, L., Kano, L., Rattalino, F., & Verbeke, A. (2020). Corporate diplomacy and family firm longevity. Entrepreneurship theory and practice, 44(1), 109–133.CrossRefGoogle Scholar
  20. Clark, A. (2008, May 2). Life in Mars: reclusive dynasty behind one of world’s most famous brands. The Guardian. Retrieved November 18, 2019, from
  21. Collinson, S., & Narula, R. (2014). Asset recombination in international partnerships as a source of improved innovation capabilities in China. Multinational Business Review, 22(4), 394–417.CrossRefGoogle Scholar
  22. Cruz, C., Larraza-Kintana, M., Garcés-Galdeano, L., & Berrone, P. (2014). Are family firms really more socially responsible? Entrepreneurship Theory and Practice, 38(6), 1295–1316.CrossRefGoogle Scholar
  23. Davis, J. (2019, January 3). Why family businesses matter so much to the world economy. Family Capital. Retrieved October 20, 2019, from
  24. De Massis, A., Di Minin, A., & Frattini, F. (2015). Family-driven innovation: Resolving the paradox in family firms. California Management Review, 58(1), 5–19.CrossRefGoogle Scholar
  25. De Massis, A., Kotlar, J., Chua, J. H., & Chrisman, J. J. (2014). Ability and willingness as sufficiency conditions for family-oriented particularistic behavior: Implications for theory and empirical studies. Journal of Small Business Management, 52(2), 344–364.CrossRefGoogle Scholar
  26. De Massis, A., Kotlar, J., Mazzola, P., Minola, T., & Sciascia, S. (2018). Conflicting selves: Family owners’ multiple goals and self-control agency problems in private firms. Entrepreneurship Theory and Practice, 42(3), 362–389.CrossRefGoogle Scholar
  27. Duran, P., Kammerlander, N., van Essen, M., & Zellweger, T. (2015). Doing more with less: Innovation input and output in family firms. Academy of Management Journal, 59(4), 1224–1264.CrossRefGoogle Scholar
  28. Duran, P., Kostova, T., & van Essen, M. (2017). Political ideologies and the internationalization of family-controlled firms. Journal of World Business, 52(4), 474–488.CrossRefGoogle Scholar
  29. Dyer, W. G. (2006). Examining the “family effect” on firm performance. Family Business Review, 19(4), 253–273.CrossRefGoogle Scholar
  30. Eddleston, K. A., Sarathy, R., & Banalieva, E. R. (2019). When a high-quality niche strategy is not enough to spur family-firm internationalization: The role of external and internal contexts. Journal of International Business Studies, 50(5), 783–808.CrossRefGoogle Scholar
  31. Erdener, C., & Shapiro, D. M. (2005). The internationalization of Chinese family enterprises and Dunning’s eclectic MNE paradigm. Management and Organization Review, 1(3), 411–436.CrossRefGoogle Scholar
  32. EY & University of St. Gallen. (2019, February 18). EY and University of St. Gallen global family business index. How the world’s largest family businesses are responding to the Transformative Age. Retrieved October 20, 2019, from
  33. Fainsilber, D. (2014, February 19). Les difficiles relations des patrons du groupe avec la famille Peugeot. Les Echos. Retrieved November 18, 2019, from
  34. Ferguson, N. (1998). The House of Rothschild: Money's Prophets, 1798-1848. London: Penguin.Google Scholar
  35. Fernández, Z., & Nieto, M. J. (2006). Impact of ownership on the international involvement of SMEs. Journal of International Business Studies, 37(3), 340–351.CrossRefGoogle Scholar
  36. Ferrero Italia. (2017). Storia. Retrieved March 25, 2017, from
  37. Ghemawat, P. (2001). Distance still matters. Harvard Business Review, 79(8), 137–147.Google Scholar
  38. Glemser, A.-C., & Leleux, B. (2011). The Mercks of Darmstadt: What a family can do (A). Lausanne, Switzerland: IMD International.Google Scholar
  39. Gomez-Mejia, L. R., Haynes, K. T., Núñez-Nickel, M., Jacobson, K. J. L., & Moyano-Fuentes, J. (2007). Socioemotional wealth and business risks in family-controlled firms: Evidence from Spanish olive oil mills. Administrative Science Quarterly, 52(1), 106–137.CrossRefGoogle Scholar
  40. Gomez-Mejia, L. R., Makri, M., & Larraza-Kintana, M. L. (2010). Diversification decisions in family-controlled firms. Journal of Management Studies, 47(2), 223–252.CrossRefGoogle Scholar
  41. Graves, C., & Thomas, J. (2006). Internationalization of Australian family businesses: A managerial capabilities perspective. Family Business Review, 19(3), 207–224.CrossRefGoogle Scholar
  42. Graves, C., & Thomas, J. (2008). Determinants of internationalization pathways of family firms: An examination of family influence. Family Business Review, 21(2), 151–167.CrossRefGoogle Scholar
  43. Grøgaard, B., & Verbeke, A. (2012). Twenty key hypotheses that make internalization theory the general theory of international strategic management. In Handbook of research in international strategic management (pp. 7–30). Cheltenham: Edward Elgar.CrossRefGoogle Scholar
  44. Hennart, J.-F. (2009). Down with MNE-centric theories! Market entry and expansion as the bundling of MNE and local assets. Journal of International Business Studies, 40(9), 1432–1454.CrossRefGoogle Scholar
  45. Hennart, J.-F., Majocchi, A., & Forlani, E. (2019). The myth of the stay-at-home family firm: How family-managed SMEs can overcome their internationalization limitations. Journal of International Business Studies, 50(5), 758–782.CrossRefGoogle Scholar
  46. Hennart, J.-F., & Park, Y. R. (1993). Greenfield vs. acquisition: The strategy of Japanese investors in the United States. Management Science, 39(9), 1054–1070.CrossRefGoogle Scholar
  47. Hofstede, G. (1980). Culture’s consequences: International differences in work-related values. London: Sage.Google Scholar
  48. Holt, D. T., & Daspit, J. J. (2015). Diagnosing innovation readiness in family firms. California Management Review, 58(1), 82–96.CrossRefGoogle Scholar
  49. Ilias, N. (2006). Families and firms: Agency costs and labor market imperfections in Sialkot's surgical industry. Journal of Development Economics, 80(2), 329–349.CrossRefGoogle Scholar
  50. Jennings, J. E., Dempsey, D., & James, A. E. (2018). Bifurcated HR practices in family firms: Insights from the normative-adaptive approach to stepfamilies. Human Resource Management Review, 28(1), 68–82.CrossRefGoogle Scholar
  51. Johanson, J., & Vahlne, J. E. (2009). The Uppsala internationalization process model revisited: From liability of foreignness to liability of outsidership. Journal of International Business Studies, 40(3), 1411–1431.CrossRefGoogle Scholar
  52. Kano, L., Ciravegna, L., & Rattalino, F. (2021). The family as a platform for FSA development: Enriching new internalization theory with insights from family firm research. Journal of international Business Studies, 52(1), 148–160.Google Scholar
  53. Kano, L., & Verbeke, A. (2015). The three faces of bounded reliability: Alfred Chandler and the micro-foundations of management theory. California Management Review, 58(1), 97–122.CrossRefGoogle Scholar
  54. Kano, L., & Verbeke, A. (2018). Family firm internationalization: Heritage assets and the impact of bifurcation bias. Global Strategy Journal, 8(1), 158–183.CrossRefGoogle Scholar
  55. Kano, L., Verbeke, A., & Ciravegna, L. (2020). Internationalization of family firms: When is a managerial focus on socio-emotional wealth effective? In K. Mellahi, K. Meyer, R. Narula, I. Surdu, & A. Verbeke (Eds.), The Oxford handbook of international business strategy. Oxford: Oxford University Press, forthcoming.Google Scholar
  56. Kao, M. S., Kuo, A., & Chang, Y. C. (2013). How family control influences FDI entry mode choice. Journal of Management & Organization, 19(4), 367–385.CrossRefGoogle Scholar
  57. Kaplan, D. (2013, January 17). Mars Incorporated: A pretty sweet place to work. Fortune. Retrieved November 18, 2019, from
  58. Kets de Vries, M. F. (1996). Family business: Human dilemmas in the family firm. London: International Thomson Business Press.Google Scholar
  59. König, A., Kammerlander, N., & Enders, A. (2013). The family innovator’s dilemma: How family influence affects the adoption of discontinuous technologies by incumbent firms. Academy of Management Review, 38(3), 418–441.CrossRefGoogle Scholar
  60. Kontinen, T., & Ojala, A. (2010). The internationalization of family businesses: A review of extant research. Journal of Family Business Strategy, 1(2), 97–107.CrossRefGoogle Scholar
  61. Lee, K. S., Lim, G. H., & Lim, W. S. (2003). Family business succession: Appropriation risk and choice of successor. Academy of Management Review, 28(4), 657–666.CrossRefGoogle Scholar
  62. Lehrer, M., & Celo, S. (2017). Boundary-spanning and boundary-buffering in global markets: A German perspective on the internationalization of family firms. Review of International Business and Strategy, 27(2), 161–179.CrossRefGoogle Scholar
  63. Lubatkin, M. H., Schulze, W. S., Ling, Y., & Dino, R. N. (2005). The effects of parental altruism on the governance of family-managed firms. Journal of Organizational Behavior, 26(3), 313–330.CrossRefGoogle Scholar
  64. Majocchi, A., D’Angelo, A., Forlani, E., & Buck, T. (2018). Bifurcation bias and exporting: Can foreign work experience be an answer? Insight from European family SMEs. Journal of World Business, 53(2), 237–247.CrossRefGoogle Scholar
  65. Majocchi, A., & Strange, R. (2012). International diversification: The impact of ownership structure, the market for corporate control and board independence. Management International Review, 52(6), 879–900.CrossRefGoogle Scholar
  66. Mars. (2017). About Mars: History timeline. Retrieved March 28, 2017, from
  67. Memili, E., Chrisman, J. J., & Chua, J. H. (2011). Transaction costs and outsourcing decisions in small- and medium-sized family firms. Family Business Review, 24(1), 47–61.CrossRefGoogle Scholar
  68. Memili, E., Chrisman, J. J., Chua, J. H., Chang, E. P., & Kellermanns, F. W. (2011). The determinants of family firms’ subcontracting: A transaction cost perspective. Journal of Family Business Strategy, 2(1), 26–33.CrossRefGoogle Scholar
  69. Metsola, J., Leppäaho, T., Paavilainen-Mäntymäki, E., & Plakoyiannaki, E. (2020). Process in family business internationalisation: The state of the art and ways forward. International Business Review.
  70. Miller, D., Wright, M., Le Breton-Miller, I. L., & Scholes, L. (2015). Resources and innovation in family businesses: The Janus-face of socioemotional preferences. California Management Review, 58(1), 20–40.CrossRefGoogle Scholar
  71. Murray Brown, J. (2017). Ferrero appoints first non-family CEO. The Financial Times-Online. Retrieved May 31, 2017, from
  72. Mustafa, M., & Chen, S. (2010). The strength of family networks in transnational immigrant entrepreneurship. Thunderbird International Business Review, 52(2), 97–106.CrossRefGoogle Scholar
  73. Narula, R. (2014). Exploring the paradox of competence-creating subsidiaries: Balancing bandwidth and dispersion in MNEs. Long Range Planning, 47(1-2), 4–15.CrossRefGoogle Scholar
  74. Narula, R., & Verbeke, A. (2015). Making internalization theory good for practice: The essence of Alan Rugman’s contributions to international business. Journal of World Business, 50(4), 612–622.CrossRefGoogle Scholar
  75. Neumann, A., & Tapies, J. (2007). Balancing family and business needs at Merck KGaA. IESE.Google Scholar
  76. Patel, P. C., & Chrisman, J. J. (2014). Risk abatement as a strategy for R&D investments in family firms. Strategic Management Journal, 35(4), 617–627.CrossRefGoogle Scholar
  77. Pinho, J. C. (2007). The impact of ownership: Location-specific advantages and managerial characteristics on SME foreign entry mode choices. International Marketing Review, 24(6), 715–734.CrossRefGoogle Scholar
  78. Podolny, J. M. (1994). Market uncertainty and the social character of economic exchange. Administrative Science Quarterly, 39(3), 458–483.CrossRefGoogle Scholar
  79. Pukall, T. J., & Calabrò, A. (2014). The internationalization of family firms: A critical review and integrative model. Family Business Review, 27(2), 103–125.CrossRefGoogle Scholar
  80. Reuber, A. R. (2016). An assemblage-theoretic perspective on the internationalization processes of family firms. Entrepreneurship Theory and Practice, 40(6), 1269–1286.CrossRefGoogle Scholar
  81. Rugman, A. M., & Verbeke, A. (2003). Extending the theory of the multinational enterprise: Internalization and strategic management perspectives. Journal of International Business Studies, 34(2), 125–137.CrossRefGoogle Scholar
  82. Rugman, A. M., Verbeke, A., & Nguyen, Q. T. K. (2011). Fifty years of international business theory and beyond. Management International Review, 51(6), 755–786.CrossRefGoogle Scholar
  83. Schwartz, S. H. (1992). Universals in the content and structure of values: Theoretical advances and empirical tests in 20 countries. In Advances in experimental social psychology (pp. 1–65). London: Academic Press.Google Scholar
  84. Schwartz, S. H. (2006). A theory of cultural value orientations: Explication and applications. Comparative sociology, 5(2–3), 137–182.CrossRefGoogle Scholar
  85. Schwartz, S. H. (2010). Values: Individual and cultural. In S. M. Breugelmans, A. Chasiotis, & F. J. R. van de Vijver (Eds.), Fundamental questions in cross-cultural psychology (pp. 463–493). Cambridge: Cambridge University Press.Google Scholar
  86. Schwartz, S. H. (2011). Studying values: Personal adventure. future directions. Journal of Cross-Cultural Psychology, 42(2), 307–319.CrossRefGoogle Scholar
  87. Schwartz, S. H., & Rubel, T. (2005). Sex differences in value priorities: Cross-cultural and multimethod studies. Journal of Personality and Social Psychology, 89(6), 1010–1028.CrossRefGoogle Scholar
  88. Sestu, M. C., & Majocchi, A. (2018). Family Firms and the Choice Between Wholly Owned Subsidiaries and Joint Ventures: A Transaction Costs Perspective. Entrepreneurship Theory and Practice, 1042258718797925.Google Scholar
  89. Simon, H. (1961). Administrative behavior (2nd ed.). New York: Palgrave Macmillan.Google Scholar
  90. Singh, D. A., & Gaur, A. S. (2013). Governance structure, innovation and internationalization: Evidence from India. Journal of International Management, 19(3), 300–309.CrossRefGoogle Scholar
  91. Spoerer, M. (2016). C&A: Ein Familienunternehmen in Deutschland, den Niederlanden und Großbritannien. CH Beck.Google Scholar
  92. Tagliabue, J. (2003). Giovanni Agnelli, Fiat patriarch and a force in Italy dies at 81. The New York Times-Online. Retrieved March 25, 2017, from
  93. Verbeke, A. (2013). International business strategy. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
  94. Verbeke, A., & Fariborzi, H. (2019). Managerial governance adaptation in the multinational enterprise: In honour of Mira Wilkins. Journal of International Business Studies, 50(8), 1213–1230.CrossRefGoogle Scholar
  95. Verbeke, A., & Greidanus, N. S. (2009). The end of the opportunism vs trust debate: Bounded reliability as a new envelope concept in research on MNE governance. Journal of International Business Studies, 40(9), 1471–1495.CrossRefGoogle Scholar
  96. Verbeke, A., & Kano, L. (2012). The transaction cost economics theory of the family firm: Family-based human asset specificity and the bifurcation bias. Entrepreneurship Theory and Practice, 36(6), 1183–1205.CrossRefGoogle Scholar
  97. Verbeke, A., & Kenworthy, T. P. (2008). Multidivisional vs metanational governance of the multinational enterprise. Journal of International Business Studies, 39(6), 940–956.CrossRefGoogle Scholar
  98. Verbeke, A., Yuan, W., & Kano, L. (2019). A values-based analysis of bifurcation bias and its impact on family firm internationalization. Asia Pacific Journal of Management. Retrieved October 20, 2019, from
  99. Ward, J. L. (2004). Perpetuating the family business: 50 lessons learned from long-lasting, successful families in business. London: Palgrave Macmillan.CrossRefGoogle Scholar
  100. Williamson, O. E. (1981). The modern corporation: Origins, evolution. attributes. Journal of Economic Literature, 19, 1537–1568.Google Scholar
  101. Williamson, O. E. (1985). The economic institutions of capitalism: Firms, markets, relational contracting. New York: Free Press.Google Scholar
  102. Williamson, O. E. (1996). The mechanisms of governance. Oxford: Oxford University Press.Google Scholar
  103. Wright, M., Chrisman, J. J., Chua, J. H., & Steier, L. P. (2014). Family enterprise and context. London: SAGE Publications Sage CA.CrossRefGoogle Scholar
  104. Xu, K., Hitt, M. A., & Dai, L. (2020). International diversification of family-dominant firms: Integrating socioemotional wealth and behavioral theory of the firm. Journal of World Business, 55(3).
  105. Yamin, M. (2011). A commentary on Peter Buckley’s writings on the global factory. Management International Review, 51(2), 285–293.CrossRefGoogle Scholar
  106. Zahra, S. A. (2003). International expansion of US manufacturing family businesses: The effect of ownership and involvement. Journal of Business Venturing, 18(4), 495–512.CrossRefGoogle Scholar
  107. 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.CrossRefGoogle Scholar

Copyright information

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2021

Authors and Affiliations

  1. 1.Haskayne School of BusinessUniversity of CalgaryCalgaryCanada
  2. 2.Vrije Universiteit Brussel (VUB)BrusselsBelgium
  3. 3.Henley Business SchoolUniversity of ReadingReadingUK

Personalised recommendations