The role of family management and ownership on semi-globalization pattern of globalization: The case of family business groups

International Business Review 23 (2014) 260–271

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The role of family management and ownership on semi-globalization pattern of globalization: The case of family business groups§ Hsi-Mei Chung * Department of Business Administration, I-Shou University, Kaohsiung 840, Taiwan

A R T I C L E I N F O

A B S T R A C T

Article history: Received 18 May 2012 Received in revised form 17 March 2013 Accepted 29 April 2013

Employing a multi-level with longitudinal concern data analysis this research examines the impact from family management and ownership on semi-globalization pattern of globalization in family business groups from an integrated framework. The results reveal that the more likelihood that the controlling family utilize family management in the subsidiary, and the higher degree of pyramidal ownership in the subsidiary, the more likelihood that the family business group will choose to engage in the host regions. Additionally, family management and pyramidal ownership is positively related with the choice to engage in a higher difference region instead of a lower difference region in family business groups. The theoretical and future research implications of these findings for family enterprises and globalization research are discussed. ß 2013 Elsevier Ltd. All rights reserved.

Keywords: Agency theory Family business group Family management Pyramidal ownership Resource-based theory Semi-globalization Transaction cost theory

1. Introduction Location is one of the key aspects of the globalization decision (Dunning, 1988, 1998). In the past two decades development in international business field, the prominent phenomenon is that the focus of location shifted from the country level to the firm level (Dunning, 1998). In that, whether and why the location choice will exert impacts on a multinational company’s competitive advantage is a key issue (Buckley & Ghauri, 2004; Cantwell, 2009). Moreover, the multinational company can have a great potential to benefit from a synergistic locational portfolio of complementary sources of knowledge (Cantwell, 2009), or even get benefit from a regional dimension of location choices (Arregle, Beamish, & He´bert, 2009; Enright, 2003). Therefore, rather thinking of location choices as a dichotomous choice of globalization or non-globalization, it has been argued that a third option should also be considered – semi-globalization, or regionalization (Ghemawat, 2001, 2003; Rugman, 2000). Historically, transaction cost theory and the resource-based theory have been employed to explain the semiglobalization pattern of globalization. In that, transaction cost viewpoint provides an ex post analysis of the contractual

§ The current author greatly appreciates the comments from editor and reviewers. The author also appreciates the sponsorship provided to this study by grants from National Science Council, Taiwan, R.O.C., under Grant Numbers: NSC 101-2410-H-214-021-MY2, 2012/08-2014/07. * Corresponding author. Tel.: +886 7 6577711x5911. E-mail addresses: [email protected], [email protected]

0969-5931/$ – see front matter ß 2013 Elsevier Ltd. All rights reserved. http://dx.doi.org/10.1016/j.ibusrev.2013.04.005

conditions on the multinational company’s internationalization decision (Rugman, 1981; Rugman & Verbeke, 1992) while from the resource-based viewpoint the multinational company’s resources will provide firm-specific advantages in semi-globalization pattern of globalization (Rugman & Verbeke, 2001, 2004). However, either transaction cost or resource-based theory do not provide rich understanding on whether the multinational company’s ex ante contractual natures may influence its internationalization decision (Carney, 2005) as to what kinds of multinational companies exist the semi-globalization pattern of globalization (Enright, 2003; Ricart, Enright, Ghemawat, Hart, & Khanna, 2004). Specifically, in addressing the internationalization issues of family enterprises, family involvement is good or detrimental in cross-border decision is inconclusive (Go´mez-Mejı´a, Makri, & Kintana, 2010; Tsang, 2002; Zahra, 2003). The family involvement nature in a family enterprise exerts a distinctive ex ante condition in strategic decisions (Miller & Le-Breton-Miller, 2005). Thus, the consideration of agency theory to analyze the ex ante contractual problems will provide a balance for the transaction costs theory (which emphasizes the ex post contractual problems) and the complementary resource arguments from the resource-based theory (Tan & Mahoney, 2006). This research will examine the semiglobalization pattern of globalization in large family business group from the integrated approach of agency, transaction cost, and the resource-based theory. A family business group is the typical family enterprise in Asian region and most economics outside of the United States (Morck, Wolfenzon, & Yeung, 2005; Yiu, Lu, Bruton, & Hoskisson, 2007).

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Like other kinds of family enterprises, a family business group is characterized with the family involvement on strategic decisions. However, whether family management and ownership will generate impact on the internationalization decision is more complex in a family business group since this kind of family enterprise is composed with multiple affiliate firms achieve for the mutual goals (Granovetter, 1995; Yiu et al., 2007). The concentrated and pyramidal ownership and the desire to control in family business groups may cause them deciding to have less investment in global markets (Bhaumik, Driffield, & Pal, 2010) or choosing to invest in the nearby locations (Carney, 2005). Others indicate that the distinctive family management and family capital would be helpful for family business groups in cross border expansion (Erdener & Shapiro, 2005; Tsang, 2002). We are hardly to explain whether family involvement will generate incentive or entrenchment influence on the internationalization decision from one single lens since a family business group is a complex network that may be correlated with the environments in multiple dimensions (Yiu et al., 2007). In addressing the semi-globalization pattern of globalization issue, we also can find evidences from family business groups expand to those far-geographic locations to achieve competitive advantages (Ramamurti & Singh, 2009; Tsang, 2002). Thus, utilizing an integrated approach to explain the impact from family involvement on semi-globalization pattern of globalization will be helpful to understand the internationalization decision in family business groups. This research will contribute to both theory development and expanding our research understanding of internationalization in a number of ways. First, this research integrates the theoretical underpinnings of agency, resource-based, and transaction cost theory by providing insights in analyzing family impact on semiglobalization pattern of globalization in large family business groups (Bhaumik et al., 2010; Go´mez-Mejı´a et al., 2010). The integrated approach will provide both ex ante and ex post wisdoms in addressing the internationalization issues in family business groups (Wright, Filatotchev, Hoskisson, & Peng, 2005; Yiu et al., 2007). Recognizing of the contextual and the composition differences between a family business group and other singlebusiness family enterprise, this research contributes to the existing theories by contextualizing general knowledge in family enterprise field (Reay & Whetten, 2011). Second, agency, transaction cost, and resource-based theory all provides generalized wisdom in explaining the underlying structures and mechanisms of organizational behavior in terms on distinctive concerns. This research does not provide novel theoretical contributions to challenge the underlying assumptions and arguments conducted from agency, resource-based, or transaction cost theory. In contrast, this research contributes to the application of theories through critical construction and testing of theories, thus complements the explanatory or interpretive part of reality conducted by distinctive theoretical viewpoint (Tsang & Kwan, 1999). The network structure in a family business group provides a good venue to future answer the ‘‘why’’ and ‘‘how’’ does family involvement exert impact on internationalization decision in a family business group (Lubatkin, Lane, Collin, & Very, 2007). Third, this research contributes to the semi-globalization issues by providing evidences from family business enterprises outside the Western societies (Ghemawat, 2001, 2003; Rugman, 2000). The limited evidences from Asian enterprises imply that their globalization pattern is in fact characterized by regionalization (Collinson & Rugman, 2007). Moreover, the Japanese multinational company’s global expansion exits regional pattern, thus supports the regional arguments (Arregle et al., 2009). However, we can find lots of evidences from Asian enterprises to indicate their ambitions in internationalization (Ghemawat & Hout, 2008; Ramamurti & Singh, 2009). Family business groups are the typical governance

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structure in Asia, thus examining the antecedents of semiglobalization pattern of globalization in family business groups will be contributed to the internationalization issues of Asian enterprises. Finally, this research provides a systematic evaluation of the impact of family management and ownership on organizations. The understanding of family control in large enterprises outside of North America is limited (Schulze & Gedajlovic, 2010; Yiu et al., 2007). This research will help to fill these gaps by bringing fresh insight to the understanding of their cross-border expansion. 2. Theory and hypothesis development 2.1. An integrated approach in addressing internationalization issue in a family business group A family business group is an inter-linked network in management and ownership among affiliate firms that each affiliate firm will be corrected with its engaged environments in different manners (Granovetter, 1995; Yiu et al., 2007). Like other kinds of family enterprises, a family business group is characterized with the impact from family management and ownership on strategic decisions (Anderson & Reeb, 2003; Arregle, Hitt, Sirmon, & Very, 2007). Family business groups are posited as focusing on increasing economic value creation and maintaining socialemotional wealth, and thus these groups will deploy their ˜ ezresources to achieve their goals (Go´mez-Mejı´a, Haynes, Nu´n Nickel, Jacobson, & Moyano-Fuentes, 2007). Resource-based theory provides an incentive argument that a family business group will be likely to expand to those similar institutional environments or operate on an intra-regional basis to facilitate its relational advantage in intra-group transactions and knowledge sharing among the affiliate firms (Carney, 2005; Collinson & Rugman, 2007). From the transaction cost perspective, a family business group can be viewed as a kind of network governance that is between market and hierarchy (Williamson, 1991), and this kind of network will provide economic cost saving advantages in uncertainty environments (Standifird & Marshall, 2000; Wright et al., 2005). The agency theory suggests a either incentive or entrenchment argument in accessing family impact (Claessens, Djankov, Fan, & Lang, 2002). In that, a family business group can reduce economic costs by choosing family governance that the firm incurs comparatively lower contractual costs in influencing managerial behaviors in emerging markets (Bhaumik et al., 2010). However, the controlling family seems likely to be self-serving and exploit the minority shareholder’s interests in a family business group (Morck et al., 2005). Therefore, diversified viewpoints, such as resource-based, transaction cost, and agency theory all provide arguments toward different aspects of the external environment in terms of the business group subject (Wright et al., 2005; Yiu et al., 2007). Whether family involvements generate incentive or entrenchment effect on internationalization decision in a family business group (Go´mez-Mejı´a et al., 2010; Zahra, 2003) will be argued from an integrated wisdom to future specifically consider the network structure in a family business group (Yiu et al., 2007). In addressing the location choice issues in multinational companies, whether there exists the regional dimension except the country or firm dimension has paid substantial attentions recently (Arregle et al., 2009; Enright, 2003). Previous researches highlight that the focus of location in multinational company is not totally global or even on a specific location (Buckley & Ghauri, 2004; Ricart et al., 2004). The choices of agglomeration of locations may possibly generate portfolio sources of knowledge that contribute to a multinational company’s competitive advantage (Arregle et al., 2009; Cantwell, 2009). Thus, scholars indicate a semi-globalization pattern of globalization to referring the

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incomplete cross-border integration of multinational companies (Ghemawat, 2001, 2003). Observing the semi-globalization pattern of globalization, the most prominent one is the regionalization versus engagement in host regions debate (Enright, 2003). In that, if a regionalization pattern exists, a multinational company will choose nearby nations closer to its home nation in crossborder decision (Rugman, 2000; Rugman & Verbeke, 2004). However, besides the regionalization pattern, we can find lots of multinational companies choose to invest in those highly different nations that are located at the host regions besides the home region (Ghemawat & Hout, 2008; Ramamurti & Singh, 2009). It can be called ‘‘engagement in the host regions’’ to indicate another kind of semi-globalization pattern of globalization (Rugman, 2000; Rugman & Verbeke, 2005). According to the literatures, there are trial regions in a multinational company’s cross-border expansion, i.e., the Asian, European Union, and the North American region (Rugman, 2000; Rugman & Verbeke, 2005). In the case of family business groups, the trade-off between incentive and entrenchment impact from family involvement will achieve desirable end with more distinctive semi-globalization pattern concern in family enterprises (Ghemawat, 2003; Rugman & Verbeke, 2004). For those family business groups in Asian region, choosing to engage in other two host regions, i.e., North American or European Union region, would be linked with their resource deployment, control and coordination, and transaction uncertainty concern (Arregle et al., 2009; Collinson & Rugman, 2007). Furthermore, investing in the American versus European region will imply differential resource, agency, and transaction consideration for family business groups in Asia (Bhaumik et al., 2010; Ramamurti & Singh, 2009). Therefore, the following this research will argue first the impact of family involvement on engagement in host regions, and then illustrate whether family involvement will influence the decision to engage in different host region in a family business group. 2.2. Family management impact on semi-globalization pattern of globalization A subsidiary located in a nation that is belonging to host regions compared with the home region will imply that the geographic, economic and the cultural distances in this nation is higher than the one in the home region (Ghemawat, 2001, 2003). Thus, the hard reality to expand to those nations in the host regions is that not every multinational company can conquer the challenges from resource deployment, transaction cost saving and the control and coordination problems when this multinational company decides to engage to host regions (Enright, 2003; Ricart et al., 2004). Moreover, looking deeply inside the two host regions, there are fundamentally differences in terms of economic or cultural dimensions as well as the geographic distances (Ghemawat, 2001). Generally, higher economic or cultural distances will increase the difficulty in making strategic decision and create difficulty in predictability for multinational companies (CuervoCazurra, Maloney, & Manrakhan, 2007). Thus, we need to evaluate whether the possible incentive or entrenchment effect from distinctive viewpoints will outweigh each other to access the impact of family management on semi-globalization of globalization in a family business group. First, resource-based theory argues that family management will be helpful to accumulate the distinctive family resources, and thus configures rare, imperfectly imitable, and non-substitutable resources that lead to sustainable competitive advantage in family enterprises (Arregle et al., 2007; Barney, 1991). Compared with the professional management, family management have implied trusted relationships that do not need closely monitor (Cruz, Go´mez-Mejı´a, & Becerra, 2010). For those multinational companies that have distinctive culture or communication consideration,

such as those Japanese multinational companies case, the assignment of a parent country national, i.e., the Japanese staff, in the subsidiary, will be helpful to maintain the distinctive culture and facilitate the communication (Gong, 2003; Guar, Delios, & Singh, 2007). Similar with the case of Japanese multinational companies, a family enterprise emphasizes the distinctive family attachment and social-emotional wealth (Go´mez-Mejı´a et al., 2007). Therefore, with regarding to cross-border decision, family management will be helpful to coordinate the direction with the subsidiary and the headquarter (Erdener & Shapiro, 2005; Zahra, 2003), or accordingly is good to engage in host regions that is characterized with higher distances in geographic, economic and cultural distances. Second, transaction cost theory contends that family management compared with the professional management will provide a distinctive basic for the control that the family enterprise can have ex ante over its employees to determining the transaction cost trade-off in family governance (Williamson, 1991). The trustworthy family management in managing a family enterprise provides advantages in terms of transaction cost saving in those uncertainty environments (Steier, 2009). Moreover, the quanxi-based family governance structure will be helpful to conquer with the uncertainty in the environments (Standifird & Marshall, 2000; Wright et al., 2005). In generalization, if a nation located in the host regions relatively to the home region, the economic, cultural distances or even the transaction rules will be more dissimilar with the nation in the home region (Ghemawat, 2001, 2003). Therefore, in terms of transaction cost, the transaction cost will be higher in those subsidiaries located in the host regions versus ones in the home region (Rugman & Verbeke, 1992). Accordingly, the transaction cost will be higher in a host region that has higher distances in geographic, economic, or cultural dimensions compared with the other region that has less distances in these dimensions (Ghemawat, 2001, 2003). From transaction cost viewpoint, if family management is good for transaction cost saving in those highly uncertain locations, family management will provide incentive for a family business group to engage in host regions, or in a host region that is highly different from the home region in geographic, economic and cultural dimension. Third, agency theory indicates that family management is beneficial for family attachment and family goal achievement and thus has incentive effect on a firm’s decision or performance (Anderson & Reeb, 2003; Fama & Jensen, 1983). However, further evidence regarding agency concerns within family enterprises indicates that family management can produce family entrenchment problems. If these problems arise, family management can generate a serious agency problem and may negatively impact ˇ ez-Nickel, & Gutierdecision or performance (Go´mez-Mejı´a, Nun rez, 2001; Schulze, Lubatkin, Dino, & Buchholtz, 2001). The critical point is that whether the incentive effect outweighs the entrenchment effect when a family business group utilizes family management in those subsidiaries in the host regions. Following the logic of agency theory, it is argued that if family business groups expand to those host regions they may need to develop suitable contractual arrangements to control and coordinate the behavior of subsidiary’s leaders that is situated in different environments (Belderbos & Heijltjes, 2005; Gong, 2003). The family owners have to consider the situation that the sensemaking frames that guide the actors’ actions as appropriate will be different, and then design suitable agency arrangement to guide the actions of the subsidiary’s leaders. As we know, the higher distances in geographic, economic or cultural dimensions between the headquarter and those subsidiaries in the host regions will increase the difficulties in evaluation and strategic decisions (Cuervo-Cazurra et al., 2007). Little evidence illustrates the possibilities of entrenchment effect happens when assigning a

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family leader in a subsidiary located in a highly different nation. However, evidences indicates that the family capital embedded in the closed family management will lower the possible monitor cost associated with the non-family managers in those highly institutional differences regions which have totally different sense-making and norms (Erdener & Shapiro, 2005; Tsang, 2002). Thus, agency theory provides an incentive argument in accessing the family management impact on engagement in the host regions in family business groups. Examining the family management impact on semi-globalization pattern of globalization, the key is that as distances increase, whether and how family management will provide incentive or entrenchment effect in those highly different regions. From an integrated approach, we can draw from tentative conclusion that family management will provide incentive effect in those highly different regions with regarding to geographic, economic or cultural dimensions. Therefore, in terms of regionalization versus engagement in host regions consideration, the more likely that a family business group utilizes family management in subsidiaries, the more likely that this group will choose to engage in host regions compared with the home region. Moreover, the more likely a family business group utilizes family management in subsidiaries, the more likely that this group will choose to engage in a higher difference host region compared with a lower difference host region. Hypotheses are indicated below. H1. Family business groups are more likely to engage in host regions than home region when they utilize family management in subsidiaries. H2. Family business groups are more likely to engage in a higher difference host region than a lower difference host region when they utilize family management in subsidiaries. 2.3. Family ownership impact on semi-globalization pattern of globalization In addressing internationalization issues with regarding to ownership concern, previous studies do not get inconclusive consensus. Some results indicate that the concentrated ownership in family enterprises may reduce their cross-border expansion (Bhaumik et al., 2010; Go´mez-Mejı´a et al., 2010). However, others highlight that family ownership may generate positive impact on internationalization (Erdener & Shapiro, 2005; Zahra, 2003). We have argued before the impact of family management on the semiglobalization pattern of globalization in family business groups from the resource-based, transaction cost, and agency theory viewpoint. Whether family ownership may influence semiglobalization pattern of globalization in family business groups deserves future examination. The family ownership in family business groups presents a unique set of issues that are not encountered in widely held and non-family enterprises (Young, Peng, Ahlstrom, Bruton, & Jiang, 2008). Like other kinds of family enterprises, a family business group is definitely characteristic with concentrated ownership (Levy, 2009; Morck et al., 2005). Furthermore, the controlling family can exercise control over affiliate firms by cross-holding among affiliate firms while retaining only a small fraction of the equity claims on an affiliate firm’s cash flows in a family business group (Claessens, Djankov, & Lang, 2000; La Porta, Lopez-deSilanes, & Shleifer, 1999). One result of this type of cross-holding is that the family can control a range of affiliate firms despite maintaining relatively low direct ownership of the firm (Bebchuk, Kraakman, & Triantis, 2000). We call it pyramidal ownership to identify this specific concentrated ownership in a large family business group (Almeida & Wolfenzon, 2006; Bebchuk et al., 2000).

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The distinctiveness of pyramidal ownership is that this kind of concentrated ownership creates a situation to let the controlling family owns a chain of affiliate firms by relatively lower financial input (Bebchuk et al., 2000). The ownership decision is related closely to the control issue under a reasonable risk consideration (Fama & Jensen, 1983). Therefore, the family owners have to consider resource deployment, contractual arrangement and the transaction cost to make the suitable ownership decision in strategic decisions. This research proposes that pyramidal ownership is a favorable ownership choice when family business groups choose to engage in host regions in three regards. First, the resource-based theory argues that pyramidal ownership creates an internal financial market to facilitate affiliate firm’s asset restructuring or revenue creation advantage in a family business group (Chang & Hong, 2000). This kind of ownership creates an opportunity in which the controlling family can satisfy safety and financial requirements by relatively low investment (Almeida & Wolfenzon, 2006). The relatively low investment by family owners implies relatively low risk and lower resource commitments for the family in a pyramidal ownership structure (Levy, 2009). In a setting where low levels of resources are committed and the family faces low risk from decisions, family owners can expand the existing business domains quickly since the potential rewards are great given the risk level (Almeida & Wolfenzon, 2006; Morck et al., 2005). Previous study highlighted that family enterprises may utilize the minority ownership to enter a highly uncertain location (Filatotchev, Strange, Piesse, & Lien, 2007). As we argue before, there will be more difficult for a multinational company in decision making when it invests to those nations in the highly different host regions (Cuervo-Cazurra et al., 2007). Utilizing a relative low ownership in those highly different nations is helpful to control the risk and the resource commitment for multinational companies (Sundaram & Black, 1992). Therefore, in the case of family business groups, pyramidal ownership is a suitable ownership choice in subsidiaries located in host regions compared with the ones in the home region. Moreover, pyramidal ownership is better for the family business group to control the invest risk in a subsidiary located in a higher difference region compared with a one in a lower difference region. Second, from the transaction cost theory, the cross-holding nature in a pyramidal ownership provides intra-group financial advantage to reduce the transaction cost associated with environment during expansion (Ghemawat & Khanna, 1998; Granovetter, 1995). The family business group is initially located in an institutional environment characterized by relatively poor investor protections or under-development in institutional supports (Claessens et al., 2000; La Porta et al., 1999; Young et al., 2008). Thus, the family business group’s internalization to initiate more than one affiliate firm can generate scale and scope advantages by intra-group transactions stemming from institutional voids (Chung, 2012; Morck et al., 2005). Accordingly, family business groups cannot be easier to get the financial requirement in those countries located in the host regions since the financial rules and the transaction norms are usually different from the one in the home region (Wright et al., 2005). In the case of family business groups, the controlling family can utilize pyramidal ownership to meet the financial requirement and solve the uncertainty in those highly different nations with regarding to geographic, economic, or cultural dimensions. Third, from the agency theory, the incentive and entrenchment argument conducted by agency theory provide an opportunity to examine whether family owners exhibit self-serving behavior under a pyramidal ownership in a family business group (Claessens et al., 2002). Previous research argued that ownership

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chains in a pyramidal ownership represent a strategic choice that family owners can leverage financial and payoff risks within a family business group (Morck et al., 2005). Without losing majority control, the controlling family can use the pyramidal ownership to meet the financial requirements stemming from the family business group’s expansion (Almeida & Wolfenzon, 2006; Levy, 2009). Furthermore, within such pyramidal ownership chains, indirect ownership by other affiliate firms allows family owners both to meet financial requirements related to growth and to endow their family with control over the affiliate firms through smaller financial inputs (Morck et al., 2005; Young et al., 2008). The entrenchment argument from agency theory is happened in those public affiliate firms with other minority shareholders instead of the controlling family (Claessens et al., 2000; La Porta et al., 1999). However, subsidiary is hardly the case of public situation as those affiliate firms in domestic market. In those higher different nations located in the host regions, to establishing a subsidiary by utilizing pyramidal ownership allows family owners both to meet financial requirements related to growth and to endow their family with control over this subsidiary through smaller financial inputs (Morck et al., 2005). Thus, from the viewpoint of agency theory, the pyramidal ownership structure is associated with a relatively lowrisk ownership choice that a family business group can use to meet the financial requirements pertaining to expansion (Almeida & Wolfenzon, 2006; Chung, 2012). Ownership design is definitely a major decision with resource, transaction cost and control design consideration. From an integrated approach, this research argues that pyramidal ownership is a proper ownership design when a family business group chooses to invest in those higher different nations in the host regions relatively to ones in the home region. Furthermore, a family business group is more likely to engage in a higher difference host region compared with a lower difference host region if this family business group utilizes pyramidal ownership in subsidiaries. From this, this research proposes the following hypotheses: H3. Family business groups are more likely to engage in host regions than home region when they have higher degree of pyramidal ownership in subsidiaries. H4. Family business groups are more likely to engage in a higher difference host region than a lower difference host region when they have higher degree of pyramidal ownership in subsidiaries. 3. Research method 3.1. Sample Family business groups are a kind of typical governance structure in Asia and around the world besides the U.S.A. (Chang, 2006; Granovetter, 1995). This research employs a sample of family business groups in Taiwan to examine business engagement outside of their home island. It is determined to use business groups in Taiwan since it is one of the world’s 25 largest economies despite having a relatively small population of less than 30 million (IMD, 2006). The fact that Taiwan is an island also pressures enterprises located there to invest abroad to the point that exports grew more than 90% in the decade 1994–2004 (Bureau of Foreign Trade, 2004). The island also has well-established legal traditions that help to ensure that the public data reported by the business groups is reliable (IMD, 2006). Taiwan is recognized as representative of a number of other newly industrialized economies such as South Korea, Hong Kong and Singapore that family business groups are contributed to economy development (Chang, 2006; Lasserre & Schu¨tte, 2006).

This research conducts an examination of family business group’s international activities sampled from the top-100 business groups in Taiwan. The data for the top-100 largest business groups in Taiwan from 1999 to 2003 is derived from the China Credit Information Service dictionary (China Credit Information Service, 2001, 2002, 2003, 2004, 2005). It is determined to examine this time period since it is a period without major economic shifts such as the IMF crisis that occurred during the early 1990s. Furthermore, during this time period, these largest family business groups have significant trend to invest outside the island. This research focuses on family business groups choice to engage in host region in cross-border decisions. Thus, the level of analysis in this research is subsidiary-level to future considering the influence from the characteristics of subsidiaries and the nested family business group. To ensure that the impact of family involvement on the cross-border decisions in a family business group is not a temporary fluke this research requires that only those family business groups have at least one subsidiary in foreign markets during the 5-years time-periods. The definition of family business group is justified as following in this research. First, the dictionary published by China Credit Information Service defines the leading members in the decisionmaking group (or the inner circle) in each business group. Since the relationships among the leading members are disclosed in the dictionary, the dictionary identifies future whether a business group is characteristic by family-owned, accordingly. Researches can follow the information illustrated in the dictionary to identify which is a family business group or not (Chung, 2003, 2012; Luo & Chung, 2005). Second, this research future refers the previous family enterprise definitions to examine whether the family business groups identified in the dictionary fulfill the generalized family enterprise definition or not. In that, an enterprise is defined as family-owned when this enterprise is currently managed and controlled by a specific family (or set of families) and if there is more than one family member involved in this enterprise (Cruz et al., 2010; Miller & Le-Breton-Miller, 2005). The result was a sample of 51 family business groups. 3.2. Data analysis & sample size The location choice and the family management and ownership in subsidiaries are strategic decisions that occur at the subsidiary level; however, the character of the nested family business group will influence each subsidiary decision. Thus, the multi-level and longitudinal nature of the data for the family business groups examined by this study makes appropriate the use of a version of a hierarchical linear model (Bryk & Raudenbush, 1992) to consider the growth pattern of the data, and also deal with the possibly intra-level correlation problem occurs in multi-level data. Researchers consider the growth pattern data to combine with the possible level of analysis concern can overcome the biased inference and the implicit assumption that the cross-sectional analysis in the single level may occurs (Dansereau, Yammarino, & Kohles, 1999). Thus, the examination of the 51 family business groups over the 5 years provided the opportunity to investigate a total of 3544 subsidiary-level data points operating in more than 30 countries. 3.3. Variables 3.3.1. Dependent variable (Y): engagement in host regions Rugman et al. (e.g., Rugman, 2000; Rugman & Verbeke, 2004; Rugman & Verbeke, 2005) argue that when multinational companies expand to overseas markets they focus their internationalization in the region from which they originate. To demonstrate this they segment the world into a triad of regions

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– North America, European Union (EU), and Asia. Thus, if a firm is from North America they argue it will invest in North American region while EU members invest mostly in other EU nations. They indicate the region that a firm is not from as this firm’s host region while the region a firm is from is the home region. Building on Rugman’s work here this research also segments the world into three regions – North America, EU, and Asia. We only examine those efforts of the Taiwanese family business groups to expand outside of the island. Thus the Asian region is a home region for family business groups examined here, while expansion to the North America and EU regions are referred to as expansion to host regions. According to the location distribution table indicated in Appendix, here we can find that above 98% of total subsidiaries in those 51 family business groups are engaged in the triad of regions – North America (NA), European Union (EU), and Asia. This phenomenon fulfills the arguments of Rugman and his colleagues. Additionally, those subsidiaries engaged in the NA region versus those in the EU region are larger and younger. We also can find that the averaged economic distances between the countries in the NA region and the home country (in this research is Taiwan) are larger than the ones in the EU region and the home country. However, the averaged cultural and geographic distances for those subsidiaries engaged in the NA versus EU region are similar. Therefore, we can find that there are differences as well as similarity for those subsidiaries engaged in these two host regions. Thus, in measuring the dependent variable, this research first utilize a dummy-coded variable to identify whether the subsidiary is located in the country engaged in the two host regions outside of Asia based on the total sample. Additionally, observing the differences in geographic, economic and cultural dimensions between NA, EU, and the Asian region as indicated in Appendix, this research future utilizes a dummy-coded variable to separate the subsidiaries located in nations engaged in the NA versus EU region based on the sub-sample of subsidiaries. 3.3.2. Independent variable 1 (X1): family management This research uses the family business groups’ assignment of family members in key leadership positions in subsidiaries as the proxy of family management (Cruz et al., 2010). We identify the subsidiary’s CEO is the family member according to the information obtained from multiple secondary databases, including the business group directories described above, public reports in newspapers or magazines, website information, and journal papers et al. In this study, Family management is a dummy-coded variable to identify whether a subsidiary’s CEO is the family member of the controlling family of this family business group or not. 3.3.3. Independent variables (X2): pyramidal ownership To calculate the pyramidal ownership in each affiliate firm in a family business group, this research employs data from the China Credit Information Service year by year (1999, 2000, 2001, 2002, and 2003). The concept of indicating pyramidal ownership comes from Claessens et al. (2000), Claessens et al. (2002) and La Porta et al. (1999). In order to define control, they compute the voting and cash-flow ownership of the controlling shareholder (or family) by accounting for his or her direct and indirect rights. However, information about the actually ultimate owner’s voting rights, cash-flow rights and the pyramidal ownership structure is limited since previous research only examines the public affiliate firms in family business groups (Claessens et al., 2000; Claessens et al., 2002; La Porta et al., 1999). Thus, this approach may create a bias in terms of ownership structure and firm valuation and thus underestimate the effect of ownership on firm valuation (Claessens et al., 2002, p. 2747). Here, we extend the concept to divide the family’s ownership of affiliate firms into direct and indirect approaches to running a family business group.

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In making these necessary calculations, this study first identifies each affiliate firm’s major shareholders and their shares by using multiple sources of secondary databases, such as the data from the China Credit Information Service and other public publications. The data from the China Credit Information Service identifies most of each affiliate firm’s major shareholders and shares they owned. An affiliate firm’s major shareholders possibly are individuals, firms, or the two concurrently. If there are missing data on how many shares the main shareholders have, we seek the relevant information from annual reports. In the case of family business groups, family members can exert ultimate control over their group by following not only direct but also pyramidal ownership types. As with the calculation methods used by prior research (Claessens et al., 2000; Claessens et al. 2002; La Porta et al., 1999), we say that a controlling shareholder has x percent indirect control over firm A if (1) the shareholder directly controls firm B, which, in turn, directly controls x percent of the votes of firm A; or (2) the shareholder directly controls firm C, which, in turn, controls x percent of the votes of firm B, and firm B directly controls x percent of the votes of firm A. When multiple shareholders have different percentages of the votes in the control chain, we pick the one with the highest minimum voting stake along the chain (La Porta et al., 1999) which is also the weakest link in the chain (Claessens et al., 2000; Claessens et al. 2002). Therefore, the measurement of ‘‘pyramidal ownership’’ is the sum of shares pertaining to cross-shareholding that involves more than one public affiliate firm in the same family business group. This is an affiliate-level (both domestic and foreign) variable indicating the degree of pyramidal ownership in each affiliate firm in a family business group. For example, suppose that family members have directly 25% of the voting rights for subsidiary A, and subsidiary A owns 100% of subsidiary B. On the other hand, subsidiary B in turn owns 17% of firm A. Thus, in this simple case, the controlling family has 42% (17% + 25% = 42%) of the control rights in subsidiary A, 25% directly and 17% through a pyramidal chain. 3.3.4. Control variables Since the database used is characterized by a cross-sectional dominant data (e.g., N > T, N = 3417, T = 5), thus the possible contemporaneous correlation (i.e., the residuals of the units observed in each time period being correlated) from the year impact has to be controlled. Following Khanna and Rivkin (2001), this research used 5 dummy-coded year variables (y1999, y2000, y2001, y2002, and y2003). Because of collinearity, some year effect is dropped from the statistical model. This research is conducted at the subsidiary level, and each subsidiary is nested in a specific business group. Thus, we are obliged to control for the influence of group-level variables. In this paper, we control for business group size and age (Khanna & Rivkin, 2001). Furthermore, we control the level of international diversification (Hitt, Tihanyi, Miller, & Connelly, 2006), and the relative sales percentage in host regions (Rugman, 2000) to control the impact from the expansion scope of a family business group from the years 1999 to 2003, respectively. In addition, we control two variables related to the influence of the family at the group level. One variable, named ‘‘founding family leadership,’’ indicates whether the founder still holds a key leadership position in the family business group (e.g., Anderson & Reeb, 2003; Cruz et al., 2010). This variable is dummy-coded, with ‘‘1’’ indicating that the founder still served as the CEO or chair of the family business group’s core company during the time period examined. Additionally, we also control for ‘‘percentage of family members in the inner circle’’ to address whether each family controlled the strategic direction of the business group (Chung, 2003; Luo & Chung, 2005). Family members in the inner circle were identified based on whether they had ties to the particular family.

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In addition to controlling for the influence of group-level variables, we also control for the possible influence of subsidiarylevel variables, including each foreign affiliate’s industry, age, assets, family direct sharing, and the characteristics from the engaged host country. Whether a firm engages in manufacturing or provides services can influence the characteristics of that firm’s resources, which in turn can influence the firm’s staffing decisions or even performance (e.g., Cruz et al., 2010). Furthermore, the foreign affiliate’s assets and age influence the firm’s accumulation of experience and the process of knowledge transfer from the core company to the affiliate firm, thus also impacting the location choice (e.g., Filatotchev et al., 2007). Therefore, we controlled for these characteristics. Moreover, we also control the impact from the family direct sharing on the location choice of a family business group. The identification of family direct ownership is the sum of the following two types of ownership (Claessens et al., 2000; La Porta et al., 1999): (a) the shares directly owned by family members; (b) the shareholdings of the nominal agents controlled by the family, for example, through non-profit organizations such as universities, hospitals and so on. This is also an affiliate-level variable to indicate the family direct ownership in each foreign affiliate firm in a family business group. We also control for a variety of subsidiary’s host country characteristics that can potential impact semi-globalization pattern of globalization in family business groups. We control the host country’s average labor cost to consider the average cost to hire a professional manager in the host country (Gong, 2003). The average labor cost information is from the OECD country statistical profile. Furthermore, we control the R&D expenditure in the host country since searching for R&D knowledge is one of the key concerns of multinational companies to expand to those countries in the host regions (Ghemawat & Hout, 2008; Ramamurti & Singh, 2009). We control the economic distances as well as the cultural distances that may influences the multinational company’s semiglobalization choice (Ghemawat, 2001, 2003). In that, the economic distances are measured as the absolute GDP distances between the host country and the home country. Cultural distances are measured by the index suggested by Hofstede (1980). Lastly, this study also controls the regional market size to future control the potential influences from the embedded region of each host country on the family business group’s semiglobalization pattern of globalization (Arregle et al., 2009). The regional market size is measured by the population size in the five regions (North America (NA), European Union (EU), Asian, African, and the Great Ocean region) (United Nations, 2010). 3.4. Data analysis The data in this research is characterized as a kind of multi-level data with the longitudinal concern, thus, the statistics model must concern this data character to get an unbiased estimation. This research employs the Multilevel Mixed-effects Maximum Likelihood Model (ML model) by STATA 9.0 software. Researchers use the ML model in regression when the data are characterized by both influences from the nested group-level variables and by influences from the subsidiary-level variables (Dansereau et al., 1999; Rabe-Hesketh & Skrondal, 2008). The repeated subsidiary observations from the same family business group may result in subsidiary observations nested in the same group. Therefore, we selected this model to account for the effects from the group-level influence and the effects from the subsidiary-level influence. The ML model is a kind of variance-components model to handle over the possible nested effects that occur between the variables with 2 levels or more. In that, the variables in the subsidiary level are allowed to have an effect on the dependent variable only via the residual term which takes on a different value for each combination of a subsidiary

and a family business group (Bryk & Raudenbush, 1992; RabeHesketh & Skrondal, 2008). We utilize some criteria to select this model to account for the effects from the group-level influence and the effect from the subsidiary-level influence. Firstly, we use the test conducted by Brown and Forsythe (1974) to test the null hypothesis of equality of variances across groups. The test reject the null assumption that homoskedasticity across the panel. Therefore, the OLS model is not fitted. Next, since the data is characterized by multi-level term with a longitudinal concern, thus the model selected have to consider the growth pattern of the data, and also deal with the possibly intra-level correlation problem occurs in multi-level data (Bryk & Raudenbush, 1992; Dansereau et al., 1999). Moreover, in order to solve the contemporaneous correlation – that is, when the residuals of units observed in each time period are correlated, the model selected needs to consider the observation from each year can be treated as a separate data point (Rabe-Hesketh & Skrondal, 2008). The Multilevel Mixed-effects Maximum Likelihood Model (ML model) selected in this research is a proper choice to deal with the possible heteroskedasticity, intra-correlation, and the contemporaneous correlation problem in the data. 4. Results 4.1. Correlation analysis As seen in Table 1 the dependent variable, i.e., the engagement in the host regions, and also the North American versus European Union region in this case, reveals significant correlation with family management in subsidiaries in family business groups. Moreover, the subsidiary’s industrial traits, size, and age, and the host country’s characteristics, i.e., the R&D expenditure in the host country, and the economic or cultural distances between the home country and the host country, are all significantly correlated with the family business group’s choice of engagement in host regions. The possible causal effect by Multilevel Mixed-effects Maximum Likelihood Model is showed after. 4.2. Causal analysis This research tests first the impact from family management and ownership on the family business group’s engagement in the host regions by utilizing total subsidiaries to illustrate the impact of family involvement on engagement in the host regions instead of the home region in family business groups. The models are M1-1 and M1-2 in Table 2. Additionally, observing the differences in geographic, economic and cultural dimensions between NA, EU, and the Asian region, this research future utilizes a dummy-coded variable to separate the subsidiaries located in nations engaged in the NA versus EU region by creating a sub-sample of subsidiaries. The models are M2-1 and M2-2 in Table 2. The Wald chi-square values to be significant for all models. Therefore, we infer that the four models reasonably satisfied the model-of-fitness and model settings. Regarding the control variables, the present results indicate that, in general, family business groups’ characteristics and their international diversification indicate significant impact on the groups’ respective semi-globalization decisions. Additionally, referring the subsidiary-level variables impact, M1-1 in Table 2 indicates that the subsidiary’s industrial trait, assets, age, and the host country’s characteristics all have significant influence on the semi-globalization pattern of globalization in family business groups. Specifically, it appears that the manufacturing subsidiary and the smaller subsidiaries are more likely to engage in those countries in the host regions. Moreover, with regarding to the NA versus EU region in M2-1, the average labor cost in the host

Table 1 Mean, standard deviation, and correlation. Mean

S.D.

N

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

5021 5021 5021 5020 5039 5030 4869 4782 5039 4739

0.91** 0.26** 0.14** 0.01 0.38** 0.02 0.05** 0.01 0.01

0.18** 0.14** 0.01 0.41** 0.04** 0.07** 0.02 0.02

0.01 0.04** 0.04** 0.05** 0.03* 0.01 0.01

0.03* 0.02 0.19** 0.13** 0.02 0.01

4704

0.08

**

**

**

**

4841 4991 5021 5027 5031 5031

0.43** 0.06** 0.70** 0.02 0.09** 0.01

0.47** 0.05** 0.71** 0.04 0.06** 0.02

0.07** 0.02 0.22** 0.05* 0.06** 0.05**

5028

0.04*

0.03*

5021

0.12**

5021

0.13**

0.06

0.06

0.08

0.01 0.03* 0.03* 0.02 0.02

0.17** 0.03* 0.02 0.03*

0.01 0.04**

0.06**

0.09** 0.08** 0.06** 0.08** 0.16** 0.02

0.01 0.01 0.01 0.01 0.01 0.02

0.02 0.01 0.01 0.09** 0.11 0.06**

0.03* 0.07** 0.08** 0.05** 0.12** 0.10**

0.01 0.45** 0.06** 0.03* 0.02

0.06** 0.04** 0.06** 0.04**

0.02 0.09** 0.07 0.01 0.16**

0.07**

0.01

0.01

0.02

0.04**

0.09**

0.01

0.06**

0.04** 0.02

0.02

0.03*

0.03

0.02

0.01

0.01

0.01

0.02

0.07**

0.09**

0.13** 0.07**

0.07**

0.02

0.04**

0.03

0.04**

0.06**

0.01

0.01

0.01

0.10**

0.06**

0.12** 0.25**

0.27**

0.15**

0.15** 0.46**

0.07

0.01

0.03

0.02 0.01 0.13** 0.05** 0.03* 0.10**

0.03** 0.14** 0.01 0.09** 0.03* 0.08**

0.05** 0.02 0.40** 0.04** 0.09** 0.12**

0.01 0.01 0.06** 0.05** 0.01 0.10**

0.01

0.20**

0.02

0.02

0.06**

0.15**

0.04*

0.25

0.08**

0.11**

0.06**

0.01

*

0.01 0.02

0.01

**

0.17** 0.02 0.01

H.-M. Chung / International Business Review 23 (2014) 260–271

1. Engagement in 0.43 0.50 host regions 2. American region 0.38 0.49 3. European region 0.05 0.21 4. Family management 0.45 0.50 5. Pyramidal ownership 0.12 0.31 6. Manufacturing subsidiary 0.34 0.47 7. Foreign subsidiary’s asset 45.80 170.12 8. Foreign subsidiary’s age 5.83 5.18 9. Family direct sharing 0.90 1.42 10. Average labor cost 483.86 1431.09 in host country 11. R&D expenditure 16.86 40.38 in host country 12. Economic distances 1614.17 2685.72 13. Cultural distances 2.15 1.23 14. Regional market size 2,325,168 1,626,066 15. Group’s assets 10,327.01 12,013.63 16. Group’s age 39.53 13.89 17. Founding family 0.54 0.49 leadership in the group 18. Percentage of family 0.79 0.27 member in inner circle 19. Level of international 0.55 0.31 diversification 0.39 0.30 20. Relative sales percentage in host regions (%)

Subsidiary assets, R&D expenditure, and group assets are all indicated by U.S. billion dollars, average labor cost is indicated by U.S. dollars, and regional market size is indicated in thousand persons. The dummy-coded year effect is excluded in the correlation table. * P < 0.05 (2-tailed). ** P < 0.01 (2-tailed).

267

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Table 2 Family management and ownership impact on the engagement in host regions in family business groups. Sample

Total sample: subsidiaries engaged in either home region or host regions

Sub-sample: subsidiaries engaged in two host regions

Dependent variable

Y = engagement in host regions

Y = American region

Models

M1-1 0.29 (0.02)**

M1-2

M2-1

0.30 (0.02)**

0.23 (0.09)*

M2-2 0.03 (0.07)

Constant Independent variables X1: Family management X2: Family pyramidal ownership Control variables – affiliate level Year 1999 Year 2000 Year 2001 Year 2002 Year 2003 Manufacturing subsidiary Subsidiary’s assets Subsidiary’s age Family direct sharing Average labor cost in host country R&D expenditure in host country Economic distances between home country and host country Cultural distances between home country and host country Regional market size Control variables – Group level

(dropped) 0.01 (0.01) 0.02 (0.01)* 0.03 (0.01)* 0.05 (0.01)* 0.04 (0.01)** 0.01 (0.01)** 0.01 (0.01)* 0.01 (0.01) 0.01 (0.01)** 0.01 (0.02) 0.01 (0.01)

0.02 (0.01) 0.02 (0.01)* (dropped) 0.01 (0.02) 0.03 (0.01)** 0.04 (0.01)** 0.01 (0.01)** 0.01 (0.01)* 0.01 (0.01) 0.01 (0.01)** 0.01 (0.02) 0.01 (0.01)

0.07 (0.03)** 0.10 (0.03)** 0.06 (0.02)** 0.05 (0.02)* (dropped) 0.17 (0.02)** 0.01 (0.02)** 0.01 (0.01)** 0.02 (0.03) 0.01 (0.01)** 0.01 (0.02)** 0.02 (0.01)

0.08 (0.03)** 0.11 (0.03)** 0.06 (0.02)** 0.05 (0.02)* (dropped) 0.17 (0.02)** 0.01 (0.01)** 0.01 (0.01)** 0.01 (0.03) 0.01 (0.01)** 0.01 (0.01)** 0.01 (0.01)

0.32 (0.01)**

0.32 (0.01)**

0.01 (0.02)**

0.01 (0.01)**

0.01 (0.01) 0.01(0.01)**

0.01 (0.01) 0.01(0.01)**

0.01 (0.01) 0.01(0.01)**

0.01 (0.01) 0.01(0.01)**

Wald chi-square Number of observations Number of groups

22,287.98** 3426 51

22,425.17** 3425 48

569.72** 1687 46

583.74** 1687 46

*

0.04 (0.02)** 0.02 (0.02)*

0.02 (0.01) 0.05 (0.01)**

Standard deviation data given in parentheses. P 2 0.10. * P 2 0.05. ** P 2 0.01. The random effect contains group’s size, group’s age, founding family leadership, percentage of family member in inner circle, international diversification, and relative sales percentage in host regions. +

country, the R&D expenditure, and the higher cultural distances between the home country and the host country all have significant impact on the family business group’s choice to engage in the NA versus EU regions. Since the countries in the NA region demonstrates higher difference in terms of cultural and economic dimensions with the family business groups in Taiwan, thus the impact from host country’s characteristics indicates the distinctive differences in those countries of these two host regions. With regarding to impact from family management, M1-2 and M2-2 in Table 2 indicate that, in general, the likelihood of a family business group’s engagement in the host regions increases as the likelihood that the family management in subsidiaries increases. Moreover, the utilization of family management in subsidiaries will be positively related with the choice to engage in the NA region, i.e., the higher difference region, compared with choice to engage in the EU region, i.e., the lower difference region. The results support Hypothesis 1 and Hypothesis 2. The present findings therefore support the argument advanced from the viewpoint of agency, resource-based, transaction theory that the family management in a family business group is more likely to provide incentive effect in those highly differences regions. Therefore, family management may provide positive family social capital for family business group’s expanding to those higher difference countries, such as the ones located in the host regions instead of the home region. Furthermore, family management is good for family business groups to expand to those countries located in a higher difference region instead of a lower difference region, such as the NA region and the EU region in this sample. M1-2 in Table 2 shows evidence pointing to the possibility that, in general, a family business group will choose to engage in the host regions as the degree of pyramidal ownership increases in this

subsidiary. Moreover, regarding to the engagement in a higher or lower difference region, M2-2 in Table 2 indicates that pyramidal ownership is positively related with the family business group’s choice to engage in the NA region, i.e., the higher difference region, instead of the EU region, i.e., the lower difference region. Thus, Hypothesis 3 and Hypothesis 4 is supported. The current findings are consistent with the argument advanced by the integrated viewpoints that diversified family business groups’ use of pyramidal ownership can satisfy financial requirements and control implications under low-risk concern. Thus, extending the entrenchment implications of pyramidal ownership highlighted previously (Morck et al., 2005; Young et al., 2008), this research suggests that family business groups’ pyramidal ownership has possible positive effects on semi-globalization pattern of globalization. 5. Conclusion and discussion Family involvement is an important concern in understanding strategic decisions in family enterprises. In addressing the location choices of multinational company (Cantwell, 2009; Dunning, 1988, 1998), semi-globalization phenomenon describes the nature that a multinational company will choose limited expansion scope instead of global expansion (Enright, 2003; Ghemawat, 2001, 2003). In addressing the internationalization issues of family enterprises, whether family involvement will provide incentive or entrenchment effect on semi-globalization pattern of globalization is inconclusive (Go´mez-Mejı´a et al., 2010; Tsang, 2002; Zahra, 2003). This research tries to examine the impact from family involvement on semi-globalization pattern of globalization in family business groups from an integrated approach to future

H.-M. Chung / International Business Review 23 (2014) 260–271

understanding the distinctive family management and ownership influence on the family business group’s cross-border decision. By conducting a multi-level with longitudinal concern data analysis, this research addresses the importance and the distinctiveness of the semi-globalization issue in family business groups. The results reveal that family management and ownership would be likely to influence the likelihood of engagement in the host regions in family business groups. Specifically, it is shown that the more likely that the controlling family utilizes family management in subsidiaries will increase the likelihood of engagement in host regions. Moreover, family management is positively related with the choice to engage in a higher difference region instead of a lower difference region in family business groups. Additionally, the higher degree of pyramidal ownership in a subsidiary, the more likely that controlling family will choose to engage in the host regions instead of the home region in family business groups. Again, a higher degree of pyramidal ownership is positively related with the decision to engage in a higher difference region instead of a lower difference region for those family business groups. From these results several insights can be obtained. First, the positive influence of family management on the family business group’ engagement in host regions can be seen creating capability for the family business group in aligning the values or beliefs of the two regions (Wright et al., 2005). We know that institutional arrangement in the home region and those countries in the host regions may indicate possible barrier on expansion concern. The personal trust established on the inter-personal tie is good for the intra-business or intra-business group coalition; moreover, it may also provide possible advantages in resource deployment or transaction cost saving when seeking to expand internationally into new regions where the shared values between these two countries are different. Second, the positive effects of the pyramidal ownership on the family business group’s engagement in host regions provide different argument compared with previous studies in this domain (Bhaumik et al., 2010; Go´mez-Mejı´a et al., 2010). Family business groups can utilize the pyramidal ownership to solve the possible financial requirements in geographic far countries. As a result the influence of the pyramidal ownership on the pattern of engagement in the host regions for the family business groups not only extend the semi-globalization arguments both from transaction

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cost and resource-based viewpoints, it also indicates the importance of agency viewpoint in discuss the pattern of internationalization in complex environments. The consideration of subsidiaries in triad regions in a family business group provides advantage in addressing semi-globalization issue by examine the family impact in a family business group (Rugman, 2000). However, the exclusion of subsidiaries in nontriad regions also generates limitation in addressing location choice issue (Dunning, 1988, 1998; Enright, 2003). Thus, future researches to advanced investigate the family impact in distinctive location will be helpful to understanding the impact of family involvement in family business groups. Moreover, there is a trend that family enterprises in Asia will invest in those countries in African or the Great Ocean region to serve as the holding companies in financial concern. The linkage between the family involvement and the investment motivation in foreign expansion of family enterprises in Asia also exert examination in the future. Additionally, the Asian family enterprises’ internationalization is the recent trend in the 21 century. In the case of family business groups, although the family business groups are founded early and expand to larger scaled industrial domains, their internationalization pattern and the decision impact is still under-estimated. Future studies can examine the impact of the governance nature in Asian enterprises to future understand the generalized pattern of family enterprises in Asia. Lastly, a family business group is a distinctive family enterprise that developed closely with its embedded environment. Thus, the single institutional environment in this research will generate limitations in addressing family impact issues in family business groups under different institutional environments. Comparative research on family business groups in Asia is another possible direction to advance understanding of coordination and control issues in family enterprises. Moreover, this research examine the family impact on semiglobalization, future research can examine the performance implications of semi-globalization in family business groups. This research has laid an important foundation for the better understanding of internationalization issues in family enterprises, particularly the family enterprises of Asia. Future research should continue to expand our understanding of this issue because the importance and impact of such enterprises is likely to grow as the economic power of this region increases.

Appendix. Region distribution of subsidiaries in family business groups, 1999–2003.

Number of subsidiaries Averaged subsidiary size (U.S. billion dollars) Averaged subsidiary age Likelihood to utilizing family management Averaged degree of pyramidal ownership Averaged geographic distances Averaged economic distances Averaged cultural distances % Year 1999 Year 2000 Year 2001 Year 2002 Year 2003

Asian region (home region)

Host region-engaged in North American or European Union region

North American region

European Union region

African region

Great ocean region

Sum

2792 36.73

2158 58.36

1920 62.50

238 24.82

13 40.91

57 10.67

5020 45.80

6.10 0.40

5.52 053

5.39 0.54

6.51 0.44

1.36 0.25

5.37 0.34

5.83 0.45

0.11

0.13

0.12

0.17

-

0.07

0.12

6680.65 miles 565.56 2.09 55.62 371 520 525 650 726

7394.70 miles 2950.83 2.25 42.99 262 411 449 492 544

7382.77 miles 3216.91 2.25 38.25 229 353 392 451 495

7470.43 miles 798.03 2.22 4.74 33 58 57 41 49

2037.38 miles 1.31 0.26 1 1 1 4 6

7917.67 miles 3339.18 2.39 1.13 4 7 10 15 21

6992.47 miles 1614.17 2.15 100 638 939 985 1161 1297

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