The family as a platform for FSA development: Enriching new internalization theory with insights from family firm research

This research note links insights from the family firm literature with extant internalization theory-based studies on family firm internationalization to explain how family-owned multinational enterprises (MNEs) can leverage family resources for successful internationalization, and why some family firms are unable to do so. We identify examples of internationally relevant resources contributed by the founding family, namely, social capital, long-term orientation, and reputation. We then differentiate between pre-existing resources that reside at the family level, and firm-specific advantages (FSAs) that reside at the firm level. In order to derive FSAs from family resources, and to profitably exploit those across borders, family MNEs must engage in two types of recombination. First, family and non-family resources are recombined to create actionable FSAs. Second, family-derived FSAs are recombined with location-specific resources in order to respond to differences between home and host country environments. We discuss complementary resources required for each type of recombination and specific mechanisms utilized by family MNEs to integrate those resources. By investigating a potential functional contribution of a family to successful internationalization, we extend prior internalization theory-based work, which focuses predominantly on family firms’ propensity toward bifurcation bias and the constraining effect of this bias on efficient international governance.