Abstract
This study aims to identify the key success factors of the two dominant types of family firm diversification strategies: product and international diversification. Drawing on the extant family business literature, we study how factors at the firm level—performance vulnerability, generational stage, and management professionalization—combine to determine the choice and, more importantly, the success of the family firm’s diversification strategy. Our empirical study is conducted on a new proprietary dataset collected for 102 unrelated product and international diversification decisions of large, closely held German family firms. While both theory and practice often regard product and international diversification strategies as two means to the same end (such as growth, risk diversification, firm survival, and family employment opportunities), we find that they are anything but perfect substitutes. In fact, the results of the fuzzy-set qualitative comparative analysis highlight that the conditions leading to successful product diversification differ significantly from those for successful international diversification, particularly with regard to the family’s involvement in the management of the firm. Based on our results, we derive practical recommendations for family business owners considering product and/or international diversification strategies.
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