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Does Family Control Affect Trade Performance? Evidence for Italian Firms

Author

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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.

Suggested Citation

  • Giorgio Barba Navaretti & Riccardo Faini & Alessandra Tucci, 2008. "Does Family Control Affect Trade Performance? Evidence for Italian Firms," CEP Discussion Papers dp0896, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp0896
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    References listed on IDEAS

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    1. Luigi Guiso & Giuseppe Parigi, 1999. "Investment and Demand Uncertainty," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 185-227.
    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, April.
    3. repec:hrv:faseco:30747162 is not listed on IDEAS
    4. Amos Tversky & Daniel Kahneman, 1991. "Loss Aversion in Riskless Choice: A Reference-Dependent Model," The Quarterly Journal of Economics, Oxford University Press, vol. 106(4), pages 1039-1061.
    5. 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 1418-1437, November.
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    Cited by:

    1. 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 "Giovanni Anania" - DESF.
    2. Alex Bryson & Harald Dale-Olsen & Trygve Gulbrandsen, 2016. "Family ownership, Workplace Closure and the Recession," DoQSS Working Papers 16-06, Department of Quantitative Social Science - UCL Institute of Education, University College London.
    3. Baronchelli, Gianpaolo & Bettinelli, Cristina & Del Bosco, Barbara & Loane, Sharon, 2016. "The impact of family involvement on the investments of Italian small-medium enterprises in psychically distant countries," International Business Review, Elsevier, vol. 25(4), pages 960-970.
    4. 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.
    5. 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.
    6. Pier Francesco Asso & Vito Pipitone, 2013. "Ostacoli e determinanti dell’innovazione: un’analisi sulle imprese siciliane di successo," Rivista di Politica Economica, SIPI Spa, issue 3, pages 157-193, July-Sept.
    7. Damiani, Mirella & Ricci, Andrea, 2015. "Gender earnings differentials and pay structure of Italian family managers," MPRA Paper 61429, University Library of Munich, Germany.
    8. Bianco, Madga & Golinelli, Roberto & Parigi, Giuseppe, 2009. "Family firms and investments," MPRA Paper 19247, University Library of Munich, Germany.
    9. 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.
    10. 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.
    11. Holger Breinlich & Alessandra Tucci, 2011. "Foreign market conditions and export performance: does `crowdedness' reduce exports?," Canadian Journal of Economics, Canadian Economics Association, vol. 44(3), pages 991-1019, August.

    More about this item

    Keywords

    firm structure; foreign markets; family firms; exports;

    JEL classification:

    • F1 - International Economics - - Trade
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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