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Does Family Control Affect Trade Performance? Evidence for Italian Firms

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  • Giorgio Barba Navaretti
  • Riccardo Faini
  • Alessandra Tucci

Abstract

This paper examines whether the export decision of firms is affected by their ownership structure, specifically it looks at whether family control is an obstacle to entering foreign markets. The underlying assumption is that family firms are risk averse. Risk aversion may be an obstacle to entering foreign markets, as far as these are perceived as more volatile and risky than the domestic one, particularly when such choice entices bearing relatively high sunk costs. We develop an illustrative theoretical model that shows how the combination between high risk aversion and low initial productivity may hinder family firms' decision to enter foreign markets, particularly distant ones. The empirical analysis, based on a detailed panel data set of Italian firms covering the years from 1995 to 2003, confirms such predictions by showing that family controlled firms do indeed export less than other type of companies even after controlling for firm heterogeneity in productivity, size, technology and access to credit.

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Bibliographic Info

Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0896.

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Date of creation: Nov 2008
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Handle: RePEc:cep:cepdps:dp0896

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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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Keywords: firm structure; foreign markets; family firms; exports;

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  1. Leech, D. & Leahy, J., 1989. "Ownership Structure, Control Type Classifications And The Performance Of Large British Companies," The Warwick Economics Research Paper Series (TWERPS) 345, University of Warwick, Department of Economics.
  2. Rafael La Porta & Florencio Lopez-De-Silanes & Andrei Shleifer, 1999. "Corporate Ownership Around the World," Journal of Finance, American Finance Association, vol. 54(2), pages 471-517, 04.
  3. Guiso, L. & Parigi, G., 1996. "Investment and Demand Uncertainty," Papers, Banca Italia - Servizio di Studi 289, Banca Italia - Servizio di Studi.
  4. Tversky, Amos & Kahneman, Daniel, 1991. "Loss Aversion in Riskless Choice: A Reference-Dependent Model," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 106(4), pages 1039-61, November.
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Cited by:
  1. Breinlich, Holger & Tucci, Alessandra, 2010. "Foreign Market Conditions and Export Performance: Does 'Crowdedness' Reduce Exports?," CEPR Discussion Papers 7975, C.E.P.R. Discussion Papers.
  2. Pier Francesco Asso & Vito Pipitone, 2013. "Ostacoli e determinanti dell’innovazione: un’analisi sulle imprese siciliane di successo," Rivista di Politica Economica, SIPI Spa, SIPI Spa, issue 3, pages 157-193, July-Sept.
  3. Marco Cucculelli, 2008. "Owner Identity and Firm Performance: Evidence from European Companies," Rivista di Politica Economica, SIPI Spa, SIPI Spa, vol. 98(2), pages 149-178, March-Apr.
  4. Holger Breinlich & Alessandra Tucci, 2008. "Foreign Market Conditions and Export Performance: Evidence from Italian Firm-Level Data," Development Working Papers 258, Centro Studi Luca d\'Agliano, University of Milano.
  5. Magda Bianco & Maria Bontempi & Roberto Golinelli & Giuseppe Parigi, 2013. "Family firms’ investments, uncertainty and opacity," Small Business Economics, Springer, vol. 40(4), pages 1035-1058, May.
  6. Matteo Bugamelli & Luigi Cannari & Francesca Lotti & Silvia Magri, 2012. "The innovation gap of Italy’s production system: roots and possible solutions," Questioni di Economia e Finanza (Occasional Papers) 121, Bank of Italy, Economic Research and International Relations Area.
  7. Lidia Mannarino & Valeria Pupo & Fernanda Ricotta, 2011. "Family Involvement In Management And Firm Performance: Evidence From Italy," Working Papers 201103, Università della Calabria, Dipartimento di Economia, Statistica e Finanza (Ex Dipartimento di Economia e Statistica).
  8. Giorgio Barba Navaretti & Matteo Bugamelli & Riccardo Cristadoro & Daniela Maggioni, 2012. "Are firms exporting to China and India different from other exporters?," Questioni di Economia e Finanza (Occasional Papers) 112, Bank of Italy, Economic Research and International Relations Area.
  9. Bianco, Madga & Golinelli, Roberto & Parigi, Giuseppe, 2009. "Family firms and investments," MPRA Paper 19247, University Library of Munich, Germany.

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