When do family firms avoid culturally distant FDI? The role of ownership concentration and economic threats

Purpose – This study investigates the relationship between ownership concentration in family firms and their propensity to establish foreign direct investments (FDI) in locations with significant cultural distance from their home country. It also examines how this relationship is influenced by the contingent role of internal (i.e. performance below target) and external (i.e. the global financial crisis) threats. Design/methodology/approach – The hypotheses are tested using a panel of 730 medium- to large-sized Italian family firms over the period 2004–2014. Findings – We find that firms with high family ownership concentration are less likely to establish FDI in culturally distant countries. However, this tendency diminishes when firms experience performance below target or during a global economic downturn. Originality/value – This study offers a more comprehensive understanding of family firms’ strategic behaviors in international markets by unveiling the dual impact of family ownership concentration on FDI location choices. It shows that while concentrated ownership often leads to an overreliance on family-centric priorities, it also provides the governance flexibility needed to recalibrate these biases in response to economic threats. This finding challenges the conventional views of family firms as either consistently risk-averse due to BB or as risk-seeking to safeguard their socioemotional wealth. Instead, it portrays family firms as adept at balancing their family priorities with the demands of the global market, adeptly shifting strategies in response to both internal and external economic pressures.