The Impact of Family Involvement on Investment of SMEs in Psychically Distant Countries

Abstract

In this paper we investigate a sample of 162 Italian manufacturing small medium family firms, and analyse the effects of the degree of family involvement on the Foreign Direct Investment decision. Our findings indicate that the extent of family involvement tend to reduce the propensity to invest in psychically distant countries. Additionally, family involvement has a moderating effect on the relation between firm age and investments in psychically distant countries . When we analyse family firms with a high degree of family involvement, direct investments in psychically distant countries turn out to be positively associated with age, while this relationship is negative when we consider family firms with low family involvement. These results suggests that firms with a high degree of family involvement tend to mostly follow a traditional, stepwise pathway to internationalisation, and that, on the contrary, the Born Global and the Born Again Global pathways are more frequently followed by firms with low family involvement. These findings allow us to contribute by offering a nuanced view on the role of organizational age in explaining the heterogeneous nature of family firms’ internationalization.