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Does Family Control Affect Trade Performance? Evidence for Italian Firms

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Author Info
Giorgio Barba Navaretti
Riccardo Faini
Alessandra Tucci

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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. Theunderlying assumption is that family firms are risk averse. Risk aversion may be an obstacle toentering foreign markets, as far as these are perceived as more volatile and risky than the domesticone, particularly when such choice entices bearing relatively high sunk costs. We develop anillustrative theoretical model that shows how the combination between high risk aversion and lowinitial productivity may hinder family firms' decision to enter foreign markets, particularly distantones. The empirical analysis, based on a detailed panel data set of Italian firms covering the yearsfrom 1995 to 2003, confirms such predictions by showing that family controlled firms do indeedexport less than other type of companies even after controlling for firm heterogeneity in productivity,size, technology and access to credit.

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

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Find related papers by JEL classification:
F1 - International Economics - - Trade
F14 - International Economics - - Trade - - - Country and Industry Studies of Trade
L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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  1. Leech, Dennis & Leahy, John, 1991. "Ownership Structure, Control Type Classifications and the Performance of Large British Companies," Economic Journal, Royal Economic Society, vol. 101(409), pages 1418-37, November. [Downloadable!] (restricted)
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  2. William Greene, 2004. "Interpreting Estimated Parameters and Measuring Individual Heterogeneity in Random Coefficient Models," Working Papers 04-08, New York University, Leonard N. Stern School of Business, Department of Economics. [Downloadable!]
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  3. Tversky, Amos & Kahneman, Daniel, 1991. "Loss Aversion in Riskless Choice: A Reference-Dependent Model," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 1039-61, November. [Downloadable!] (restricted)
  4. 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. [Downloadable!] (restricted)
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  5. Luigi Guiso & Giuseppe Parigi, 1999. "Investment And Demand Uncertainty," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 185-227, February. [Downloadable!] (restricted)
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  1. Marco Cucculelli, 2008. "Owner Identity and Firm Performance: Evidence from European Companies," Rivista di Politica Economica, SIPI Spa, vol. 98(2), pages 149-178, March-Apr. [Downloadable!]
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