Internationalization and performance of Chinese family firms: The moderating role of corporate governance

Abstract

This study investigates the differential effects of internationalization on two dimensions of family firms' performance: Growth and profitability. Drawing on the contingency theory, we argue that the successful implementation of internationalization strategy requires an appropriate organization structure, which is usually absent in Chinese family firms. To the extent that such a structure is established, these firms can realize greater benefits from internationalization. From a sample of 225 family firms in China, our predictions receive empirical support. We find that internationalization has a positive impact on growth but a negative impact on profitability. The negative internationalization-firm profitability relationship highlights the challenges internationalizing Chinese family firms face. The positive moderating effect of corporate governance, a critical component of organization structure, underscores the need for appropriate corporate governance to support the implementation of strategy. The findings have important practical implications for the internationalization of Chinese family firms.