Advertisement

How Do Family Firms Orchestrate Their Global Value Chain?

Chapter
  • 108 Downloads

Abstract

The global value chain (GVC) is a critical determinant for any firm pursuing a competitive advantage in the global arena. The Global Factory model (Buckley & Ghauri, 2004) conceptualizes the way large multinational enterprises (MNEs) orchestrate their GVC, theorizing that firms should minimize their costs by internalizing knowledge-intensive activities and outsourcing their operations. However, as this model is based on a cost-driven approach aimed at maximizing financial goals and often the captive control of suppliers, it scarcely applies to family firms, largely driven by socioemotional considerations that go well beyond a mere efficiency logic. In this study, we thus revisit the Global Factory model by contextualizing it in the family firm domain. We contend that the distinctive characteristics of family firms influence the design and governance of their GVC by fostering vertical integration—limiting outsourcing to those activities that are difficult or impossible to internalize (e.g., due to lack of raw materials)—and relational control. Our conceptual investigation sheds light on the idiosyncrasies of family firms’ international behavior, showing that their approach may be financially counterproductive in the short-term but able to generate benefits in the long term.

Keywords

Family firms Global Value chain Global Factory Social capital Internationalization 

References

  1. Abidi, S., & Joshi, M. (2018). The VUCA learner: Future-proof your relevance. SAGE Publications, Inc.CrossRefGoogle Scholar
  2. 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, 46–72.CrossRefGoogle Scholar
  3. Anderson, R. C., & Reeb, D. M. (2003). Founding-family ownership and firm performance: Evidence from the S&P 500. The Journal of Finance, 58, 1301–1328.CrossRefGoogle Scholar
  4. Arregle, J. L., Batjargal, B., Hitt, M. A., Webb, J. W., Miller, T., & Tsui, A. S. (2015). Family ties in entrepreneurs’ social networks and new venture growth. Entrepreneurship Theory and Practice, 39, 313–344.CrossRefGoogle Scholar
  5. Arregle, J. L., Duran, P., Hitt, M. A., & van Essen, M. (2017). Why is family firms’ internationalization unique? A meta-analysis. Entrepreneurship Theory and Practice, 41, 801–831.CrossRefGoogle Scholar
  6. Arregle, J. L., Hitt, M. A., Sirmon, D. G., & Very, P. (2007). The development of organizational social capital: Attributes of family firms. Journal of Management Studies, 44, 73–95.CrossRefGoogle Scholar
  7. Astrachan, C. B., Botero, I., Astrachan, J. H., & Prügl, R. (2018). Branding the family firm: A review, integrative framework proposal, and research agenda. Journal of Family Business Strategy, 9, 3–15.CrossRefGoogle Scholar
  8. Balachandran, S., & Hernandez, E. (2018). Networks and innovation: Accounting for structural and institutional sources of recombination in brokerage triads. Organization Science, 29, 80–99.CrossRefGoogle Scholar
  9. Baù, M., Chirico, F., Pittino, D., Backman, M., & Klaesson, J. (2019). Roots to grow: Family firms and local embeddedness in rural and urban contexts. Entrepreneurship Theory and Practice, 43, 360–385.CrossRefGoogle Scholar
  10. Belk, R. W. (1988). Possessions and the extended self. Journal of Consumer Research, 15, 139–168.CrossRefGoogle Scholar
  11. Berrone, P., Cruz, C., & Gomez-Mejia, L. R. (2012). Socioemotional wealth in family firms: Theoretical dimensions, assessment approaches, and agenda for future research. Family Business Review, 25, 258–279.CrossRefGoogle Scholar
  12. Berrone, P., Cruz, C., Gomez-Mejia, L. R., & Larraza-Kintana, M. (2010). Socioemotional wealth and corporate responses to institutional pressures: Do family-controlled firms pollute less? Administrative Science Quarterly, 55, 82–113.CrossRefGoogle Scholar
  13. Brinkerink, J., & Rondi, E. (2020). When can families fill voids? Firms’ reliance on formal and informal institutions in R&D decisions. Entrepreneurship Theory and Practice, in press.Google Scholar
  14. Buckley, P. J. (2009a). The impact of the global factory on economic development. Journal of World Business, 44, 131–143.CrossRefGoogle Scholar
  15. Buckley, P. J. (2009b). Internalisation thinking: From the multinational enterprise to the global factory. International Business Review, 18, 224–235.CrossRefGoogle Scholar
  16. Buckley, P. J. (2019). The role of international business theory in an uncertain world. In R. V. Tulder, A. Verbeke, & B. Jankowska (Eds.), International business in a VUCA world: The changing role of states and firms (Progress in International Business Research, vol. 14) (pp. 23–29). Emerald Publishing Limited.CrossRefGoogle Scholar
  17. Buckley, P. J., & Casson, M. (1976). The future of the multinational enterprise. Springer.CrossRefGoogle Scholar
  18. Buckley, P. J., Doh, J. P., & Benischke, M. H. (2017). Towards a renaissance in international business research? Big questions, grand challenges, and the future of IB scholarship. Journal of International Business Studies, 48, 1045–1064.CrossRefGoogle Scholar
  19. Buckley, P. J., & Ghauri, P. N. (2004). Globalisation, economic geography and the strategy of multinational enterprises. Journal of International Business Studies, 35, 81–98.CrossRefGoogle Scholar
  20. Buckley, P. J., & Strange, R. (2011). The governance of the multinational enterprise: Insights from internalization theory. Journal of Management Studies, 48, 460–470.CrossRefGoogle Scholar
  21. Bulboz, M. (2001). Family as source, user, and builder of social capital. Journal of Socio-Economics, 30, 129–131.CrossRefGoogle Scholar
  22. Carney, M. (2005). Corporate governance and competitive advantage in family-controlled firms. Entrepreneurship Theory and Practice, 29, 249–265.CrossRefGoogle Scholar
  23. Chirico, F., Ireland, R. D., & Sirmon, D. G. (2011). Franchising and the family firm: Creating unique sources of advantage through “familiness”. Entrepreneurship Theory and Practice, 35, 483–501.CrossRefGoogle Scholar
  24. Chirico, F., & Salvato, C. (2016). Knowledge internalization and product development in family firms: When relational and affective factors matter. Entrepreneurship Theory and Practice, 40, 201–229.CrossRefGoogle Scholar
  25. Chua, J. H., Chrisman, J. J., & Sharma, P. (1999). Defining the family business by behavior. Entrepreneurship Theory and Practice, 23, 19–39.CrossRefGoogle Scholar
  26. Chua, J. H., Chrisman, J. J., Steier, L. P., & Rau, S. B. (2012). Sources of heterogeneity in family firms: An introduction. Entrepreneurship Theory and Practice, 36, 1103–1113.CrossRefGoogle Scholar
  27. Coleman, J. S. (1988). Social capital in the creation of human capital. American Journal of Sociology, 94, S95–S120.CrossRefGoogle Scholar
  28. Coviello, N., Kano, L., & Liesch, P. W. (2017). Adapting the Uppsala model to a modern world: Macro-context and microfoundations. Journal of International Business Studies, 48, 1151–1164.CrossRefGoogle Scholar
  29. Daspit, J. J., Long, R. G., & Pearson, A. W. (2019). How familiness affects innovation outcomes via absorptive capacity: A dynamic capability perspective of the family firm. Journal of Family Business Strategy, 10, 133–143.CrossRefGoogle Scholar
  30. Debellis, F., De Massis, A., Petruzzelli, A. M., Frattini, F., & Del Giudice, M. (2020). Strategic agility and international joint ventures: The willingness-ability paradox of family firms. Journal of International Management, in press.Google Scholar
  31. Deephouse, D. L., & Jaskiewicz, P. (2013). Do family firms have better reputations than non-family firms? An integration of socioemotional wealth and social identity theories. Journal of Management Studies, 50, 337–360.CrossRefGoogle Scholar
  32. De Massis, A., Frattini, F., Kotlar, J., Petruzzelli, A. M., & Wright, M. (2016). Innovation through tradition: Lessons from innovative family businesses and directions for future research. Academy of Management Perspectives, 30, 93–116.CrossRefGoogle Scholar
  33. De Massis, A., Frattini, F., Majocchi, A., & Piscitello, L. (2018). Family firms in the global economy: Toward a deeper understanding of internationalization determinants, processes, and outcomes. Global Strategy Journal, 8, 3–21.CrossRefGoogle Scholar
  34. 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, 344–364.CrossRefGoogle Scholar
  35. 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, 362–389.CrossRefGoogle Scholar
  36. Debellis, F., Rondi, E., Plakoyiannaki, E., & De Massis, A. (2021). Riding the waves of family firm internationalization: A systematic literature review, integrative framework, and research agenda. Journal of World Business, 56(1), 101–144.Google Scholar
  37. Eddleston, K. A., Jaskiewicz, P., & Wright, M. (2019). Family firms and internationalization in the Asia-Pacific: The need for multi-level perspectives. Asia Pacific Journal of Management, 37, 345–361Google Scholar
  38. Enderwick, P., & Buckley, P. J. (2017). Beyond supply and assembly relations: Collaborative innovation in global factory systems. Journal of Business Research, 103, 547–556.CrossRefGoogle Scholar
  39. Evans, J., & Mavondo, F. T. (2002). Psychic distance and organizational performance: An empirical examination of international retailing operations. Journal of International Business Studies, 33, 515–532.CrossRefGoogle Scholar
  40. Forsgren, M. (2016). A note on the revisited Uppsala internationalization process model—The implications of business networks and entrepreneurship. Journal of International Business Studies, 47, 1135–1144.CrossRefGoogle Scholar
  41. Fryxell, G. E., Dooley, R. S., & Vryza, M. (2002). After the ink dries: The interaction of trust and control in US-based international joint ventures. Journal of Management Studies, 39, 865–886.CrossRefGoogle Scholar
  42. Gargiulo, M., & Benassi, M. (1999). The dark side of social capital, corporate social capital and liability (pp. 298–322). Springer.CrossRefGoogle Scholar
  43. Gargiulo, M., & Benassi, M. (2000). Trapped in your own net? Network cohesion, structural holes, and the adaptation of social capital. Organization Science, 11, 183–196.CrossRefGoogle Scholar
  44. Gedajlovic, E., & Carney, M. (2010). Markets, hierarchies, and families: Toward a transaction cost theory of the family firm. Entrepreneurship Theory and Practice, 34, 1145–1172.CrossRefGoogle Scholar
  45. Gedajlovic, E., Honig, B., Moore, C. B., Payne, G. T., & Wright, M. (2013). Social capital and entrepreneurship: A schema and research agenda. Entrepreneurship Theory and Practice, 37, 455–478.CrossRefGoogle Scholar
  46. Gereffi, G., Humphrey, J., & Sturgeon, T. (2005). The governance of global value chains. Review of International Political Economy, 12, 78–104.CrossRefGoogle Scholar
  47. Gomez-Mejia, L. R., Haynes, K. T., Nuñez-Nickel, M., Jacobson, K. J., & Moyano-Fuentes, J. (2007). Socioemotional wealth and business risks in family-controlled firms: Evidence from Spanish olive oil mills. Administrative Science Quarterly, 52, 106–137.CrossRefGoogle Scholar
  48. Gomez-Mejia, L. R., Neacsu, I., & Martin, G. (2019). CEO risk-taking and socioemotional wealth: The behavioral agency model, family control, and CEO option wealth. Journal of Management, 45, 1713–1738.CrossRefGoogle Scholar
  49. Gomez-Mejia, L. R., Patel, P. C., & Zellweger, T. M. (2018). In the horns of the dilemma: Socioemotional wealth, financial wealth, and acquisitions in family firms. Journal of Management, 44, 1369–1397.CrossRefGoogle Scholar
  50. Graeff, P. (2009). Social capital: The dark side. In G. T. Svendsen & G. L. H. Svendsen (Eds.), Handbook of social capital (pp. 143–161). Edward Elgar.Google Scholar
  51. Habbershon, T. G., & Williams, M. L. (1999). A resource-based framework for assessing the strategic advantages of family firms. Family Business Review, 12, 1–25.CrossRefGoogle Scholar
  52. Håkanson, L., Ambos, B., Schuster, A., & Leicht-Deobald, U. (2016). The psychology of psychic distance: Antecedents of asymmetric perceptions. Journal of World Business, 51, 308–318.CrossRefGoogle Scholar
  53. Hennart, J.-F. (1982). A theory of multinational enterprise. Ann Arbor, MI: University of Michigan Press.Google Scholar
  54. Herrero, I. (2018). How familial is family social capital? Analyzing bonding social capital in family and nonfamily firms. Family Business Review, 31, 441–459.CrossRefGoogle Scholar
  55. Hoffman, J., Hoelscher, M., & Sorenson, R. (2006). Achieving sustained competitive advantage: A family capital theory. Family Business Review, 19, 135–145.CrossRefGoogle Scholar
  56. Humprey, J., & Schmitz, H. (2001). Governance in global value chains. IDS Bulletin, 32(3), 19–29.CrossRefGoogle Scholar
  57. Ivanov, D., Tsipoulanidis, A., & Schönberger, J. (2017). Global supply chain and operations management: A decision-oriented introduction to the creation of value. Springer.CrossRefGoogle Scholar
  58. Jaskiewicz, P., & Dyer, W. G. (2017). Addressing the elephant in the room: Disentangling family heterogeneity to advance family business research. Family Business Review, 30, 111–118.CrossRefGoogle Scholar
  59. 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, 1411–1431.CrossRefGoogle Scholar
  60. Kammerlander, N. (2016). ‘I want this firm to be in good hands’: Emotional pricing of resigning entrepreneurs. International Small Business Journal, 34, 189–214.CrossRefGoogle Scholar
  61. Kano, L. (2018). Global value chain governance: A relational perspective. Journal of International Business Studies, 49, 684–705.CrossRefGoogle Scholar
  62. Kano, L., Tsang, E. W., & Yeung, H. W. C. (2020). Global value chains: A review of the multi-disciplinary literature. Journal of International Business Studies, 51, 577–622.Google Scholar
  63. Kano, L., & Verbeke, A. (2015). The three faces of bounded reliability: Alfred Chandler and the micro-foundations of management theory. California Management Review, 58, 97–122.CrossRefGoogle Scholar
  64. Kellermanns, F. W., & Eddleston, K. A. (2004). Feuding families: When conflict does a family firm good. Entrepreneurship Theory and Practice, 28, 209–228.CrossRefGoogle Scholar
  65. Klijn, E., Reuer, J. J., Van den Bosch, F. A. J., & Volberda, H. W. (2013). Performance implications of IJV Boards: A contingency perspective. Journal of Management Studies, 50, 1245–1266.CrossRefGoogle Scholar
  66. Kogut, B. (1985). Designing global strategies: Comparative and competitive value-added chains. Sloan Management Review, 26, 15.Google Scholar
  67. Kontinen, T., & Ojala, A. (2011). Network ties in the international opportunity recognition of family SMEs. International Business Review, 20(4), 440–453.CrossRefGoogle Scholar
  68. Kontinen, T., & Ojala, A. (2012). Social capital in the international operations of family SMEs. Journal of Small Business and Enterprise Development, 19(1), 39–55.CrossRefGoogle Scholar
  69. Kotlar, J., De Massis, A., Fang, H., & Frattini, F. (2014). Strategic reference points in family firms. Small Business Economics, 43, 597–619.CrossRefGoogle Scholar
  70. Kotlar, J., De Massis, A., Frattini, F., & Kammerlander, N. (2019). Motivation gaps and implementation traps: The paradoxical and time-varying effects of family ownership on firm absorptive capacity. Journal of Product Innovation Management, 37(1), 2–25.Google Scholar
  71. Kwon, S. W., Rondi, E., Levin, D. Z., De Massis, A., & Brass, D. J. (2020). Network brokerage: An integrative review and future research agenda. Journal of Management, in press.Google Scholar
  72. Leana III, C. R., & Van Buren, H. J. (1999). Organizational social capital and employment practices. Academy of Management Review, 24, 538–555.CrossRefGoogle Scholar
  73. Lester, R. H., & Cannella Jr., A. A. (2006). Interorganizational familiness: How family firms use interlocking directorates to build community–level social capital. Entrepreneurship Theory and Practice, 30(6), 755–775.CrossRefGoogle Scholar
  74. Lund, S., Manyika, J., Woetzel, J., Bughin, J., Krishnan, M., Seong, J., et al. (2019). Globalization in transition: The future of trade and value chains. McKinsey Global Institute.Google Scholar
  75. Miller, D., & Le Breton-Miller, I. (2005). Management insights from great and struggling family businesses. Long Range Planning, 38, 517–530.CrossRefGoogle Scholar
  76. Miller, D., & Le Breton-Miller, I. (2006). Family governance and firm performance: Agency, stewardship, and capabilities. Family Business Review, 19, 73–87.CrossRefGoogle Scholar
  77. Mudambi, R. (2008). Location, control and innovation in knowledge-intensive industries. Journal of Economic Geography, 8, 699–725.CrossRefGoogle Scholar
  78. Mudambi, R. (2013). Flatness: The global disaggregation of value creation. In G. Cook & J. Johns (Eds.), The changing geography of international business (pp. 9–16). Palgrave Macmillan.CrossRefGoogle Scholar
  79. Mudambi, R., & Puck, J. (2016). A global value chain analysis of the ‘regional strategy’ perspective. Journal of Management Studies, 53, 1076–1093.CrossRefGoogle Scholar
  80. Nahapiet, J., & Ghoshal, S. (1998). Social capital, intellectual capital, and the organizational advantage. Academy of Management Review, 23, 242–266.CrossRefGoogle Scholar
  81. Payne, G. T., Moore, C. B., Griffis, S. E., & Autry, C. W. (2011). Multilevel challenges and opportunities in social capital research. Journal of Management, 37, 491–520.CrossRefGoogle Scholar
  82. Pearson, A. W., Carr, J. C., & Shaw, J. C. (2008). Toward a theory of familiness: A social capital perspective. Entrepreneurship Theory and Practice, 32, 949–969.CrossRefGoogle Scholar
  83. Pongelli, C., Caroli, M. G., & Cucculelli, M. (2016). Family business going abroad: The effect of family ownership on foreign market entry mode decisions. Small Business Economics, 47, 787–801.CrossRefGoogle Scholar
  84. Poppo, L., & Zenger, T. (2002). Do formal contracts and relational governance function as substitutes or complements? Strategic Management Journal, 23, 707–725.CrossRefGoogle Scholar
  85. Puthusserry, P., Child, J., & Khan, Z. (2019). Social capital development through the stages of internationalization: Relations between British and Indian SMEs. Global Strategy Journal, 10(2), 282–308.Google Scholar
  86. Reuber, A. R. (2016). An assemblage-theoretic perspective on the internationalization processes of family firms. Entrepreneurship Theory and Practice, 40, 1269–1286.CrossRefGoogle Scholar
  87. Reuer, J. J., Klijn, E., van den Bosch, F. A., & Volberda, H. W. (2011). Bringing corporate governance to international joint ventures. Global Strategy Journal, 1, 54–66.CrossRefGoogle Scholar
  88. Rondi, E., Debellis, F., De Massis, A., & Garzoni, A. (2020). Bonding and bridging social capital in family firm internationalization. Sinergie Italian Journal of Management, in press.Google Scholar
  89. Rugman, A. (1981). Inside the multinationals: The economics of the multinational enterprise. New York City: Columbia University Press.Google Scholar
  90. Sanchez-Famoso, V., Maseda, A., & Iturralde, T. (2014). The role of internal social capital in organisational innovation. An empirical study of family firms. European Management Journal, 32, 950–962.CrossRefGoogle Scholar
  91. Schulze, W. S., Lubatkin, M. H., & Dino, R. N. (2003). Toward a theory of agency and altruism in family firms. Journal of Business Venturing, 18, 473–490.CrossRefGoogle Scholar
  92. 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, 44(2), 211–232Google Scholar
  93. Sharma, P. (2008). Commentary: Familiness: Capital stocks and flows between family and business. Entrepreneurship Theory and Practice, 32, 971–977.CrossRefGoogle Scholar
  94. Strange, R., & Humphrey, J. (2019). What lies between market and hierarchy? Insights from internalization theory and global value chain theory. Journal of International Business Studies, 50, 1401–1413.CrossRefGoogle Scholar
  95. Sundaramurthy, C. (2008). Sustaining trust within family businesses. Family Business Review, 21, 89–102.CrossRefGoogle Scholar
  96. Timmer, M. P., Erumban, A. A., Los, B., Stehrer, R., & De Vries, G. J. (2014). Slicing up global value chains. Journal of Economic Perspectives, 28(2), 99–118.CrossRefGoogle Scholar
  97. Verbeke, A., & Kano, L. (2016). An internalization theory perspective on the global and regional strategies of multinational enterprises. Journal of World Business, 51, 83–92.CrossRefGoogle Scholar
  98. Verbeke, A., & Yuan, W. (2005). Subsidiary autonomous activities in multinational enterprises: A transaction cost perspective. Management International Review, 45, 31–52.Google Scholar
  99. Williamson, O. E. (1975). Markets and hierarchies: Analysis and antitrust implications. New York: Free Press.Google Scholar
  100. Williamson, O. E. (1985). The economic institutions of capitalism: Firms, markets, relational contracting. New York: Free Press.Google Scholar
  101. Williamson, O. E. (1993). Transaction cost economics and organization theory. Industrial and Corporate Change, 2, 107–156.CrossRefGoogle Scholar
  102. Zahra, S. A. (2005). Entrepreneurial risk taking in family firms. Family Business Review, 18(1), 23–40.CrossRefGoogle Scholar
  103. Zahra, S. A. (2010). Harvesting family firms’ organizational social capital: A relational perspective. Journal of Management Studies, 47, 345–366.CrossRefGoogle Scholar
  104. Zahra, S. A. (2018). Technological capabilities and international expansion: The moderating role of family and non-family firms’ social capital. Asia Pacific Journal of Management, 37(1), 391–415.Google Scholar
  105. Zellweger, T. M., Chrisman, J. J., Chua, J. H., & Steier, L. P. (2019). Social structures, social relationships, and family firms. Los Angeles, CA: Sage Publications Sage CA.CrossRefGoogle Scholar
  106. Zellweger, T. M., & Dehlen, T. (2012). Value is in the eye of the owner: Affect infusion and socioemotional wealth among family firm owners. Family Business Review, 25, 280–297.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, 851–868.CrossRefGoogle Scholar
  108. Zellweger, T. M., Nason, R. S., Nordqvist, M., & Brush, C. G. (2013). Why do family firms strive for nonfinancial goals? An organizational identity perspective. Entrepreneurship Theory and Practice, 37, 229–248.CrossRefGoogle Scholar

Copyright information

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

Authors and Affiliations

  1. 1.Department of Marketing and International BusinessViennaAustria
  2. 2.Centre for Family Business Management, Free University of Bozen-BolzanoBolzanoItaly
  3. 3.Department of Management, University of BergamoBergamoItaly

Personalised recommendations