The Sustainability of Family Ownership on the Choice of Foreign Market Entry Mode: Empirical Evidence from Listed Family Firms in China

Abstract

Family firms make up the majority of private firms in China and play an important role in China’s national economy. With the deepening development of globalization and the implementation of the “going global” strategy, the overseas investment of family firms in China is increasing day by day. In the process of overseas investment, family firms often face the choice of equity entry mode. And, family strategic decisions may be influenced by family characteristics, in which family ownership is the key. Therefore, this paper discusses how family ownership affects the choice of equity entry mode in the overseas market of family firms. Based on social emotional wealth theory, this paper tries to discuss the relationship between family ownership and equity entry mode of Family firms, bring in external environment and internal governance factors of family firms, and put forward a research hypothesis. In order to verify the hypothesis, this paper takes 623 A-share listed family firms in the Shanghai and Shenzhen stock markets of China from 2010 to 2018 as research samples and tests the data through binomial logistic regression. The findings are as follows: (1) There is a positive correlation between family ownership and the entry mode of family firms in overseas markets. (2) Both the investment uncertainty of a host country and the shareholding ratio of institutional investors negatively moderate the positive correlation between family ownership and the shareholding entry mode of family firms in overseas markets. (3) The quality of home and regional institutions positively moderates the relationship between family ownership and family firms’ equity entry mode in overseas markets. The conclusions expand the empirical research on the relationship between the heterogeneity of Chinese family firms, the strategy of equity entry mode, and their sustainability.