Success and failure in family firm internationalization: The case of Rothschild

Abstract

In this study, we examine over 100 years of Rothschild’s international activity: we analyze this multinational enterprise’s (MNE’s) cross-border transfer of family-derived firm-specific advantages (FSAs) and the challenges of recombination thereof with novel resources. Family-derived FSAs hinge on the resources and features of the owning and controlling family. During the period of Rothschild’s international success in 19th-century Europe, the family itself served as a recombination mechanism for linking family-derived FSAs with complementary resources across borders. However, deploying family-derived FSAs in the American market and recombining these with nonfamily resources was hindered by bifurcation bias (a dysfunctional, affect-based heuristic characterizing family firms). We trace the manifestations of bifurcation bias over time and investigate its multifaceted impact on Rothschild’s internationalization. We suggest that effective resource recombination in host markets can be constrained by a two-stage authentication process. Here, the bifurcation bias in a first stage can influence which complementary resources in foreign markets will be accessed and how these will be integrated inside the firm. In a second stage, bifurcation bias can affect the functioning of the very actors supposed to be linking the complementary resources to be utilized and the extant, family-derived FSAs.