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Does family control affect trade performance?: evidence for Italian firms

Listed author(s):
  • Navaretti, Giorgio Barba
  • Faini, Riccardo
  • Tucci, Alessandra

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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File URL: http://eprints.lse.ac.uk/28509/
File Function: Open access version.
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Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 28509.

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Length: 38 pages
Date of creation: Nov 2008
Handle: RePEc:ehl:lserod:28509
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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. repec:hrv:faseco:30747162 is not listed on IDEAS
  3. 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.
  4. 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.
  5. 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.
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