Working Paper: CEPR ID: DP7082
Authors: 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.
Keywords: firm structure; foreign markets; family firms; exports
JEL Codes: F1; F14; L2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Family-controlled firms (L22) | Export performance (E23) |
| Risk aversion of family shareholders (G32) | Export performance (E23) |
| Family-controlled firms (L22) | Domestic market sales (L19) |
| Larger and more productive family firms (L25) | Negative impact on exports (F69) |
| Smaller, less productive family firms (L25) | Greater barrier to exporting (F14) |
| Family firms' reluctance to enter foreign markets (F23) | Independent of productivity and size (O49) |