Bonding and bridging social capital in family firm internationalization

Abstract

Purpose of the paper: This paper aims to study how family firms manage their Global Value Chain (GVC). In particular, we investigate how family firms are able to keep control over operations outsourced to foreign partners. Prior research focused on understanding how firms control their GVC has mainly concentrated on large multinational enterprises. However, while large multinational enterprises can overcome transaction cost complexities by exploiting their superior legitimacy and power control over weaker firms, family SMEs often do not have that amount of power due to financial and managerial constrains. In this study, we thus conceptually examine a unique characteristic that can help family SMEs to overcome resource limits and gain control over the GVC: their distinctive social capital. Methodology: Conceptual Findings: Family SMEs can exploit their superior social capital in order to build long-term relationships based on trust with foreign partners, thereby being able to control their GVC without legally owning it. Research limits: The study is conceptual, future research should test the model and empirically examine the theorized mechanisms. Social capital is only grasped according to its positive side and in relation to cohesion, future research should examine the negative side of social capital and the role of conflict in our model. Finally, family firm heterogeneity is currently neglected. Practical implications: Our study offers insightful managerial suggestions to family firm executives and their foreign partners in terms of design and governance of their GVC. Originality of the paper: Our study offers theoretical and managerial contributions to the current understanding of family firm internationalization beyond exports.