http://www.smallbusinessinstitute.biz Internationalization propensity in family-controlled public firms in emerging markets: The effects of family ownership, governance, and top management Chiung-Wen Tsao1, Miao-Ju Wang2, Chia-Mei Lu3, Shyh-Jer Chen4, Yi-Hsien Wang5 1National University of Tainan, cwtsao@mail.nutn.edu.tw 2National Sun Yat-sen University, mjwang@cm.nsysu.edu.tw 3Tainan University of Technology, t80015@mail.tut.edu.tw 4National Sun Yat-sen University, schen@cm.nsysu.edu.tw 5National Sun Yat-sen University, feynmanw@gmail.com A B S T R A C T Internationalization propensity is a growing issue faced by family firms. This study contributes to the family business literature by developing a conceptual framework that can identify the family and managerial determinants that affect the extensiveness of interna- tionalization. Drawing on the socioemotional wealth and upper echelon perspectives, it empirically examines the association among family heterogeneity (i.e., family participation is heterogeneous in terms of ownership and governance oversight), top management team (TMT) heterogeneity (i.e., the TMT’s background is heterogeneous in terms of its overseas education and industry experience), and internationalization propensity in publicly traded enterprises. The analysis of data collected from 105 public firms in Taiwan shows that active family participation in ownership and governance oversight and TMT overseas industry experience heterogeneity are significantly and positively associated with internationalization propensity. However, family ownership is found to be significantly but negatively associated with internationalization propensity. We finally discuss the implications of the presented findings for prac- titioners and organizational theorists. Keywords: Journal of Small Business Strategy 2018, Vol. 28, No. 01, 28-37 ISSN: 1081-8510 (Print) 2380-1751 (Online) ©Copyright 2018 Small Business Institute® APA Citation Information: Tsao, C. W., Wang, M. J., Lu, C. M., Chen, S. J., & Wang, Y. H. (2018). Internationalization propensity in family-con- trolled public firms in emerging markets: The effects of family ownership, governance, and top management team heterogeneity. Journal of Small Business Strategy, 28(1), 28-37. w w w. j s b s . o rg Family governance, TMT heterogeneity, Internationalization propensity Introduction As the decision to internationalize is a strategic choice, the ownership and control of a firm (i.e., whether the firm is a family firm) affect international strategies differently (Banalieva & Eddleston, 2011; Zahra, 2003). Despite its im‐ portance, research on the interplay between family-con‐ trolled firms and international dimensions is sparse (Pukall & Calabrò, 2014), and studies of the effect of family influ‐ ence on a family firm’s internationalization have remained inconclusive (Arregle, Duran, Hitt, & van Essen, 2017). Al‐ though some characteristics may promote the internation‐ alization of family firms (e.g., Carr & Bateman, 2009; Zahra, 2003), other factors may impede the expansion of their operations into different countries (e.g., Banalieva & Ed‐ dleston, 2011; Fernández & Nieto, 2006; Graves & Thomas, 2006). Recent studies have noted that family firms have di‐ verse ownership, management, and governance over‐ sight (Liang, Wang, & Cui, 2014; Matzler, Veider, Hautz, & Stadler, 2015), which signifies that the active or passive involvement of family in corporate governance may influ‐ ence the internationalization process and ability of family firms differently. Most studies measure family influence as a combination of ownership and management, although some assess the effect of such influence on the interna‐ tionalization of small and medium-sized enterprises (SMEs) (e.g., Fernández & Nieto, 2006; Graves & Thomas, 2006; Liang et al., 2014), which typically lack management capa‐ bilities and resources and tend to adopt risk aversion strat‐ egies toward growth and international expansion. Although family-controlled and -managed firms play an important role in the global economy (Jaskiewicz, Combs, & Rau, 2015), research suggests that family business be‐ haviors differ between transition and developed econo‐ mies (Ratten, Dana, & Ramadani, 2017; Wright, Chrisman, Chua, & Steier, 2014). The Economist (2015) indicates that the center of the modern economy is shifting to a different part of the world—most notably Asia—where family com‐ panies remain dominant. It also predicts that the share of family firms among large multinationals will increase from 15% to 40% over the next decade, mainly because of the http://www.smallbusinessinstitute.biz http://www.jsbs.org 29 C. W. Tsao, M. J. Wang, C. M. Lu, S. J. Chen, & Y. H. Wang Journal of Small Business Strategy / Vol. 28, No. 1 (2018) / 28-37 rising number of large family firms in Asia. Such a state‐ ment means that Asian family firms are increasingly ex‐ panding overseas; however, little is known about how fam‐ ilies influence the internationalization propensity of their businesses in emerging markets. Moreover, although the main decision-maker for the internationalization process is the business founder/own‐ er, such a decision will benefit from the advice of top exec‐ utives such as the top management team (TMT). The upper echelon (UE) perspective proposes that the TMT acts on the strategic situations it faces and that these personalized understandings are a function of executives’ experienc‐ es, values, and personalities (Hambrick, 2007). Although a TMT’s power plays a key role in shaping major organi‐ zational outcomes, Carpenter, Geletkanycz, and Sanders (2004) indicate that overseas industry experience, which may affect the industry network and managerial skills of TMTs, is less explored, thus providing an opportunity to bridge the gap in the family business literature on interna‐ tionalization issues. In this study, we answer the above questions by exam‐ ining how internationalization propensity (i.e., the numbers of countries in which the sample companies have subsidiar‐ ies overseas) is affected by family heterogeneity (i.e., fam‐ ily participation is heterogeneous in terms of ownership, governance oversight, or a combination of both) and TMT heterogeneity (i.e., TMTs’ background is heterogeneous in terms of team members’ overseas education and indus‐ try experience) in publicly traded Taiwanese enterprises. Publicly listed firms in Taiwan, an export-driven economy and one of the major emerging markets in the Asia-Pacific region, where more than two-thirds of public companies remain close to family direction and scrutiny (Tsai, 2013), provide an ideal setting within which to examine whether family-controlled public firms in emerging markets have an internationalization advantage owing to their concentrated ownership. A sample comprising 105 Taiwanese publicly traded enterprises is used to test how these dimensions of family and TMT heterogeneity predict internationalization propensity. The analysis shows that active family participation in ownership and governance oversight and TMT overseas industry experience heterogeneity are significantly and positively associated with internationalization propensity. However, in contrast to our expectations, family ownership is found to be significantly but negatively associated with internationalization propensity. This study thus advances our knowledge in the field of family business international‐ ization in three main ways. First, as varying levels of family ownership and control are likely to serve as an important contingency in firms’ strategic decisions (Arregle et al., 2017; Chrisman, Chua, & Sharma, 2005; Melin & Nordqvist, 2007), this study develops a more fine-grained understand‐ ing of family-controlled public firms in an emerging market and internationalization propensity by distinguishing be‐ tween ownership and governance oversight under differ‐ ent contingencies. Second, through its application of socio‐ emotional wealth (SEW) theory, the study can explain that if family members are actively engaged in ownership, man‐ aging, and supervising, the firm is likely to expand interna‐ tionally. Third, through its application of an UE perspective, the study shows that family firms are effective in their in‐ ternational expansion if TMT members are heterogeneous in terms of overseas industry experience. In the following section, we review the literature on family and TMT heterogeneity in international expansion and examine the possible relationships among them. Theoretical Background and Hypotheses Family Heterogeneity and Internationalization Propensity Recent research on family business issues has at‐ tempted to avoid dichotomous definitions (Deephouse & Jaskiewicz, 2013) because of the ambiguous distinction between family and non-family firms (Chrisman, Chua, Pearson, & Barnett, 2012) and considerable heterogene‐ ity within family businesses (Chrisman et al., 2012; Chua, Chrisman, & Sharma, 1999). Family heterogeneity thus be‐ comes a crucial cue while analyzing strategic decisions in start-up businesses, cultural contexts, entrepreneurship, organizational theory, and internationalization. Family heterogeneity involves ownership, family in‐ volvement, power control, and the governance mechanism of business management, all of which vary to differing ex‐ tents in family firms (Pukall & Calabrò, 2014; Nordqvist, Sharma, & Chirico, 2014). Pukall and Calabrò (2014) sug‐ gest four crucial research angles, including family firm het‐ erogeneity and its direct impact on internationalization. With regard to internationalization strategy, the powers and attitudes of the CEO and board are critical. Previous research on the internationalization of fam‐ ily firms has provided mixed results (Arregle et al., 2017; Fernández & Nieto, 2006; Sciascia, Mazzola, Astrachan, & Pieper, 2012). Studies show that family SMEs have less in‐ tention to diversify (Fuentes-Lombardo & Fernandez-Ortiz, 2010; Okoroafo, 1999) because of their risk aversion and unwillingness to weaken the control of family CEOs (Gallo, Tapies, & Cappuyns, 2004). In other cases, family firms are expected to internationalize more than other firms because of their flexibility, speed in decision-making, long-term ori‐ entation, and stewardship compared with their non-family counterparts (Arregle et al., 2017). Family Ownership and Internationalization Propensity in Public Listed Firms in an Emerging Market According to The Economist (2015), “The biggest chal‐ lenge for family companies is how to preserve family con‐ trol while competing with public companies.” Thus, fam‐ ily-controlled public firms might face major conflicts in growing globally while maintaining their control. The Econ- omist (2015) suggests three techniques for family business‐ es to preserve family control while competing with public companies, namely by controlling their stakes, carrying the absolute voting right, and securing their ownership in 30 C. W. Tsao, M. J. Wang, C. M. Lu, S. J. Chen, & Y. H. Wang Journal of Small Business Strategy / Vol. 28, No. 1 (2018) / 28-37 terms of a trust or foundation. By drawing on the SEW perspective, the discussion on family heterogeneity shifts to the issues of ownership, long- term orientation, and family involvement (Pukall & Calabrò, 2014). With respect to internationalization propensity, pre‐ vious studies of the impact of family ownership on interna‐ tionalization show contrasting empirical outcomes (Arregle et al., 2017; Fernández & Nieto, 2006; Sciascia et al., 2012). Some firms are found to be willing to risk international ex‐ pansion (Calabrò & Mussolino, 2013; Zahra, 2003, 2005), while others are less prone to do so (Fuentes-Lombardo & Fernandez-Ortiz, 2010; Gallo et al., 2004; Okoroafo, 1999). The recent meta-analytic review by Arregle and col‐ leagues (2017) on the impact of family involvement on internationalization finds that family firms’ international‐ ization differs from that by other firms because of the sig‐ nificant presence of family members in ownership and the TMT as well as the risks and challenges in developing the geographic scope of their foreign direct investment (FDI). The authors suggest that the distinctive nature of family firms, including both their specific advantages and disad‐ vantages, influences internationalization approach. There‐ fore, one should not neglect the heterogeneity of family firms compared with non-family firms. Risk aversion characterizes most SMEs, whereas a posi‐ tive attitude to risk is more common in public listed compa‐ nies. Public listed companies differ from SMEs in terms of both the management and the ownership components, es‐ pecially in family-run or -dominant firms. The level of family ownership refers to the percentage share held by the fam‐ ily, affecting the voting power within board decisions. The size of the dominant family and operational power of the CEO, irrespective of whether he/she is a family member, influence strategic decisions such as internationalization. SMEs from emerging economies are outward into for‐ eign markets vigorously in recent decades (Zhu, Hitt, & Ti‐ hanyi, 2006). In the early 1960s, Taiwan entered a period of rapid economic growth and industrialization, creating a stable industrial economy. According to Chen, Lawler, & Bae (2005), firms in Taiwan that have been exposed ex‐ tensively to Western managerial techniques tend to adopt some Western thinking with the intention of expanding their family businesses beyond the domestic market. To compete globally, most public companies in Taiwan are at‐ tempting to accept global standards and follow global cor‐ porate governance practices. Therefore, we propose the following hypothesis. Hypothesis 1a. In public listed firms in emerging markets such as Taiwan, family ownership has a positive impact on internationalization propensity. Family Governance Oversight and Internationalization Propensity in Public Listed Firms in Emerging Markets Ownership in voting control matters only when the ex‐ pansion decision is presented at board meetings. As family firms have diverse ownership, management, and gover‐ nance oversight, depending on the level of the dominant family’s involvement, ownership and management might dominate the business’s decisions differently. Banalieva & Eddleston (2011) conclude that family leaders tend to have a home region focus, while non-family leaders lean increas‐ ingly toward an international strategy; however, leaders of family-controlled public firms might pursue better perfor‐ mance through international expansion. From the SEW perspective, family business leaders are driven by more than simply short-term economic goals, working toward longer-term objectives (Miller & Le Bret‐ on-Miller, 2006). Specifically, family firms are often distin‐ guished by their socioemotional preferences, and some strive to create an evergreen business to pass onto their relatives (i.e., they are long-term-oriented; Gomez-Mejia, Makri, & Kintana, 2010; Miller, Wright, Le Breton-Miller, & Scholes, 2015). Hence, although internationalization might be a difficult decision for family businesses owing to its un‐ predictability and resource intensity (Ratten et al., 2017), a long-term vision of their business and organizational be‐ havior within their operation could facilitate international‐ ization, since internationalization propensity may enable them to grow and thrive compared with rivals. Given that a significant number of Taiwanese public firms are managed and controlled by founding families, as long as the family can secure their ownership and control irrespective of the firm’s structure (i.e., foundation or pyra‐ mid), there are advantages to international expansion, and the chance of risk decreases. Therefore, family sharehold‐ ers within the dominant family governance mechanism should tend toward international expansion. Thus, this study proposes the following hypothesis. Hypothesis 1b. In public listed firms in emerging markets such as Taiwan, active family participation in governance oversight (i.e., family members hold dominant ownership and have a vital influence on strategic decisions) has a pos‐ itive impact on internationalization propensity. TMT Heterogeneity and Internationalization Propensity An increasing volume of organizational research has studied the link between TMTs and international strategies (Carpenter et al., 2004; Reuber & Fischer, 1997; Sambharya, 1996; Bose, 2016). The main research stream in the litera‐ ture on UE tends to consider TMT demographics as prox‐ ies of TMT dynamics (Hambrick, 2007; Hambrick & Mason, 1984), suggesting that executives’ experience, values, and personalities greatly influence their interpretations of the situations they face and, in turn, their decision-making. Hence, organizational outcomes such as strategies and performance are expected to reflect the characteristics of these leaders. Further, building on Hambrick and Mason’s original UE model, Carpenter et al. (2004) introduce over‐ seas assignment experience as a new variable that may af‐ fect the managerial skills of TMTs. Heterogeneous TMTs are more likely than homoge‐ neous TMTs to be positively associated with managerial https://en.wikipedia.org/wiki/Industrialization 31 C. W. Tsao, M. J. Wang, C. M. Lu, S. J. Chen, & Y. H. Wang Journal of Small Business Strategy / Vol. 28, No. 1 (2018) / 28-37 strategic behavior (i.e., a showing greater propensity for strategic actions; Hambrick, Cho, & Chen, 1996). These provide the skills required to address environmental com‐ plexities, thus enhancing productivity in turbulent environ‐ ments (Keck, 1997) and demonstrating a higher degree of internationalization (Reuber & Fischer, 1997). For example, Carpenter and Fredrickson (2001) link the educational di‐ versity of TMTs with global strategic attitude by reasoning that the former provides an indicator of the diversity of the cognitive processes embedded in a TMT. Further, previous research has mostly used overseas assignment/work ex‐ perience to predict firm-level outcomes (e.g., Carpenter, 2002; Carpenter & Fredrickson, 2001; Carpenter, Sanders, & Gregersen, 2001; Bose, 2016). Reuber and Fischer (1997) find that internationally experienced TMTs have a greater propensity to develop foreign strategic partners, and industry network, which is associated with higher internationalization. Moreover, while Carpenter et al. (2001) report that specific TMT work experiences affect the success of multinational firms, they also find that this effect is stronger in firms having a greater global presence. The above discussion leads us to propose the following hypothesis. Hypothesis 2a. Overseas industry experience heterogene‐ ity within a TMT has a positive impact on internationaliza‐ tion propensity. In addition, Tsao, Chen, Lin, and Liao (2013) investigate the effect of TMT overseas education experience hetero‐ geneity on organizational performance. Their emperical results indicate that overseas education experience, a pre‐ viously unexplored TMT background characteristic, also affects firm performance. Therefore, we propose the fol‐ lowing hypothesis. Hypothesis 2b. Overseas education experience heteroge‐ neity within a TMT has a positive impact on international‐ ization propensity. Method Sample We adopted publicly traded companies in Taiwan as our research sample to examine the influence of family and TMT heterogeneity on internationalization propensity. We chose Taiwan as our sample for four reasons. First, 74% of public listed companies in Taiwan are dominated by fam‐ ily ownership and involvement in operations (Tsai, 2013). Second, Taiwan is a small developing economy compared with the United States and European countries (e.g., the average capital of publicly traded companies in Taiwan is US$1.49 billion1), which enables us to view the sample as different from public firms in developed economies. Third, the economy of Taiwan is an indispensable partner in the global value chains of the electronics industry (Sturgeon & Kawakami, 2010). Regarding increasing competition with newly emerging countries, Taiwan is facing international‐ ization challenges because of domestic labor shortages, which increase overheads and land prices, and environ‐ mental protection; hence, in the past two decades, tradi‐ tional labor-intensive industries have steadily moved off‐ shore. For example, Taiwanese companies have become major foreign investors in China, Thailand, Indonesia, the Philippines, Malaysia, and Vietnam. Finally, detailed com‐ position and demographic information on the boards and TMTs of SMEs is lacking. The study collected stable and ac‐ curate information from publicly traded firms, leading to a reliable research result. Data Collection We adopted three data sources to both provide thor‐ ough and objective primary and secondary data (Cycyota & Harrison, 2002) and avoid the effect of common method variance. The first data source is firms’ annual reports of 2014, collected from the firms’ official websites or the Mar‐ ket Observation Post System, the official public database of the Taiwan Stock Exchange that provides basic firm-level information, financial performance report, and governance information on Taiwanese publicly traded firms for public use. The second data source is the Taiwan Economic Jour- nal (TEJ) database, a credible source of financial and gover‐ nance reporting for Taiwanese publicly traded firms. Family ownership (percentage of stock and shares) for 2014 is col‐ lected from the TEJ. The third data source is self-adminis‐ tered questionnaires by the CEOs of publicly traded com‐ panies. These questionnaires provided data on firm size, firm age, industry categories, subjective family ownership, and governance oversight level. The data collection procedure comprised three steps. First, we downloaded the list of public listed companies from the website of the Taiwan Stock Exchange, and then we sent the CEO questionnaires to 1,353 public listed com‐ panies between October and December 2014. To raise the response rate and simplify the data reporting procedure, we coded the questionnaires by using numbers to avoid pressurizing participants. It is likely that participants would be willing to answer openly if the questionnaire carried no company identification (e.g., company name). We also coded the questionnaire to allow easier matching with our mailing list and the other two data sources. A total of 105 usable questionnaires were included in the analysis. The relatively low response rate (7.76%) might have been because of the difficulty of accessing CEOs, as a buffer can keep CEOs from various requests for informa‐ tion (Cycyota & Harrison, 2002). CEOs also often have tight schedules and face considerable demand for information from industry analysts and stakeholders (Haleblian & Fin‐ kelstein, 1987), leading to a low willingness to respond to research questionnaires. Second, we collected information on the boards and TMTs of the 105 sampled companies from their annual re‐ ports of 2014. To demonstrate the degree of international diversity, we reviewed the information on the number of overseas affiliate countries and the demographic charac‐ http://sdos.ejournal.ascc.net/cgi-bin/sciserv.pl?collection=journals&journal=01492063&issue=v30i0006&article=749_uerraecotmtc&form=fulltext#bib21#bib21 https://en.wikipedia.org/wiki/Labor_shortage https://en.wikipedia.org/wiki/Environmental_protection https://en.wikipedia.org/wiki/Environmental_protection 32 C. W. Tsao, M. J. Wang, C. M. Lu, S. J. Chen, & Y. H. Wang Journal of Small Business Strategy / Vol. 28, No. 1 (2018) / 28-37 teristics of TMT members including education background and occupational history. We coded these data accordingly and combined them with the data from the questionnaires. The third step involved analyzing the raw data on the sampled TMTs’ overseas experiences, including education background and occupational history. We then calculat‐ ed the heterogeneity index suggested by Blau (1977); we termed this measure the international diversity of the TMT. Measures Family Heterogeneity. As family heterogeneity signifi‐ cantly affects internationalization propensity (Pukall & Cal‐ abrò, 2014), we included family ownership and governance oversight. Family ownership represents the control of the stock in the company, measured as the percentage of di‐ rect and indirect stock and shares owned by the family in 2014. The data on family ownership were collected from the TEJ database. On family governance oversight, follow‐ ing Miller, Lee, Chang, and Le Breton-Miller (2009), family firms were defined as “those in which owner-managers’ report that their family owns more shares than any other block holder, and in which strategic decision-making is di‐ rectly influenced by multiple members of the same family” (Miller et al., 2009: p.809). Hence, family governance over‐ sight was measured by two yes/no questions in the CEO questionnaire: “Is the total percentage of stock and shares owned by the company’s dominant family greater than that owned by any other shareholders?” and “Do the dominant family members have a vital influence on the strategic de‐ cisions of the company?” If the answer to the question was yes, it was coded as 1 and 0 otherwise. Next, we created a four-category dummy variable based on the answers to these questions. (D1: if dominant stock shares amount to 0, the influence on the decision is 1; D2: if the dominant stock shares amount to 1, the influ‐ ence on the decision is 0; and D3: when both answers are positive.) TMT Heterogeneity. In this study, the measure of the TMT’s international experience consists of two dimensions: TMT overseas assignment and TMT overseas education. TMT overseas education refers to the highest education of each executive gained overseas, while TMT overseas assignment denotes foreign industry experience. First, we categorize TMT overseas education based on the location of the respondent’s graduate school: (1) Taiwan, (2) Unit‐ ed States/Canada, (3) Europe, (4) Japan, (5) China, and (6) other. The same procedure is adopted for TMT overseas assignment to code each executive’s past occupational ex‐ perience. For example, if the respondent’s highest degree was from UC Berkeley and he or she served as a manager in the Singapore branch of the firm for five years, we assigned the codes (2) and (6) for overseas education and overseas assignment experience, respectively. If occupational expe‐ rience spans multiple regions, we assigned the code (6). In the second step, we calculated the heterogeneity of the TMT’s international experience by using the het‐ erogeneity index suggested by Blau (1977): Heterogeneity (H)=1-ΣP i ², where P i is the proportion of the population in category i. A TMT size of five indicates that four executives obtained their degrees from Taiwan, and one executive from the United States. Then, H=1-.68=.32 if all five execu‐ tives obtained their degrees from Taiwan, and H=0 other‐ wise. Internationalization Propensity. In this study, we adopt the concept of multinationalism, since FDI increas‐ es the control that a firm can exercise but also involves a relatively high degree of commitment, risk, and complexity compared with exporting (Anderson & Gatignon, 1986). In‐ ternationalization propensity was measured as the number of countries in which public listed companies had subsid‐ iaries or strategic business units in 2014. Control Variables. Firm size is correlated with interna‐ tionalization strategy, as larger companies have a better chance of expanding their business overseas (Thomas & Graves, 2005; Zahra, 2003). As firm age rises, businesses might adopt internationalization to expand the market (Graves & Thomas, 2008; Zahra, 2003); on the contrary, firms might take advantage at an earlier age (Autio, Sapi‐ enza, & Almeida, 2000). Industry differences such as a dif‐ ferent level of competition might cause different strategies regarding international expansion (Yip, 1992; Murphy & Tocher, 2017). Hence, we adopted three control variables: firm age, firm size (log), and an industry dummy (the service indus‐ try serves as the reference group). Firm age was calculated based on the year of inception. Firm size was measured as the official number of employees (Miller & Droge, 1986). Note that we used the log transformation of firm size in the linear regressions. The industry categories were divid‐ ed into manufacturing, service, high-tech and electronics, and other. Results Among the 105 samples, average firm age, average control ownership, average firm size (log), and the average number of international expansion nationalities are 28.25 years, 30.21%, 2.46, and 3.66, respectively. Regarding the heterogeneity index of TMTs, average overseas assignment experience is 0.31, while the maximum is 0.94; whereas average overseas education is 0.33 compared with a max‐ imum of 0.70. Table 1 reports the means, standard devia‐ tions, and correlations for all the variables in the model. We use ordinary least squares regression analysis to test our hypotheses. Table 2 shows the models and direct variables relating to Hypotheses 1a, 1b, 2a, and 2b. Regarding family heterogeneity, the main effects model makes a significant contribution to the outcome. H1a (H1b) predicts that family ownership (governance oversight) is positively related to internationalization propensity. The results of H1a show that, unexpectedly, family ownership is significantly but negatively related to internationalization propensity (β=-0.23, p<0.05), indicating that the higher the 33 C. W. Tsao, M. J. Wang, C. M. Lu, S. J. Chen, & Y. H. Wang Journal of Small Business Strategy / Vol. 28, No. 1 (2018) / 28-37 family ownership level, including direct and indirect stock and shares, the lower the possibility of internationalization propensity is. To understand this contradictory result more in depth, we verified our data and found that compared with the majority of sample companies, some are much larger. Thus, although family ownership is relatively low, these have a greater degree of internationalization propen‐ sity. Therefore, we conducted an additional test by elim‐ inating eight companies with low family ownership (i.e., less than 8%) and a greater degree of internationalization propensity (i.e., subsidiaries in more than three countries). The ordinary least squares regression with these 97 sample firms shows that family ownership is not associated with internationalization propensity (β=-0.13, p=0.16), confirm‐ ing that the sample companies that actual hold low family ownership but have subsidiaries in more countries are out‐ liers, which caused the significant but negative impact of family ownership on internationalization propensity. Active family participation in both ownership and gov‐ ernance oversight is positively related to internationaliza‐ tion propensity (β=0.22, p<0.05), which supports H1b. In other words, the greater the level of family domination in stock and shares and management involved in the gover‐ nance system, the higher is the possibility of a public listed family firm internationalizing. These results indicate the crucial influence of active family participation in ownership and governance oversight on internationalization propen‐ sity. Regarding TMT heterogeneity, H2a and H2b predict that international experience and education are positive‐ ly related to internationalization propensity. The results of the main effects in Table 2 reveal the positive and signif‐ icant association between having TMTs with overseas as‐ signment experience heterogeneity and internationaliza‐ tion propensity (β=.23, p<.001), supporting H2a. However, the findings for H2b differ from our expectations, showing insufficient evidence to claim that having TMTs with over‐ seas education heterogeneity affects internationalization propensity. As our relatively small sample might have insufficient explanatory power, we adopted GPower to estimate the overall estimated power (Cohen, 1992). The result shows that our study has sufficient statistical power (power=0.99, Table 1 Descriptive statistics and correlations Variables Mean s.d. 1 2 3 4 5 6 7 8 9 10 Firm size (log) 2.46 0.55 Firm age 28.25 13.46 .29** Industry (dummy) 1.37 0.86 -0.16 -.25* Family Ownership 30.21 18.91 -0.06 -0.13 -0.04 Family Governance oversight_D1 0.06 0.24 0.01 0.03 -0.19 0.02 Family Governance oversight_D2 0.03 0.18 -0.16 0.19 -0.06 -0.11 -0.05 Family Governance oversight_D3 0.34 0.48 0.17 .23* -0.05 0.11 -.19* -0.14 TMT overseas assignment 0.31 0.24 0.11 0.06 0.01 -0.03 -0.02 -0.02 -0.01 TMT overseas education 0.33 0.19 -0.17 -0.05 0.02 -0.01 0.00 0.09 -0.03 0.14 Internationalization propensity 3.66 3.76 .49** 0.18 0.00 -.25** -0.15 0.04 .21* .29** 0.03 *p<.05, **p<.01 (two-tailed test), N=105 Table 2 Simple regression analyses predicting the level of internationalization propensity Internationalization propensity Base model Main effects Constant -5.62*** -5.54*** Control variables Firm size (log) .49*** .48*** Firm age .06 -.07 Industry (dummy) .09 .06 Independent variables Family Ownership -.23* Family Governance oversight_D1 -0.03 Family Governance oversight_D2 0.17 Family Governance oversight_D3 0.22* TMT overseas assignment .23*** TMT overseas education .06 F 11.15*** 7.35*** R2 .25*** .41** *p<.05, **p<.01, ***p<.001, N=105 34 C. W. Tsao, M. J. Wang, C. M. Lu, S. J. Chen, & Y. H. Wang Journal of Small Business Strategy / Vol. 28, No. 1 (2018) / 28-37 effect size=0.695, α=0.05, sample size=105, number of pre‐ dictors=9). Discussion and Conclusion The internationalization behaviors of firms vary greatly depending on the degree and type of family influence (Ba‐ nalieva & Eddleston, 2011) as well as the managerial capa‐ bilities of TMTs (Carpenter et al., 2004; Reuber & Fischer, 1997; Sambharya, 1996). Understanding the organizational drivers of international success and failure thus lies at the heart of international business theorizing and empirical in‐ vestigation (Lu & Beamish, 2004; Peng, 2004). In this study, we examine the determinants of public family firms’ internationalization in an emerging economy, with a focus on two factors that relate to family hetero‐ geneity. In particular, the level of family influence on the control and management of public listed firms in Taiwan remains high compared with most Western countries; thus, the research context in this study is ideal to establish whether linkages between family and TMT heterogeneity and internationalization propensity exist. In contrast to our expectations, the data analysis of H1a revealed that actual family ownership has a significant but negative influence on internationalization propensity in Taiwanese public listed firms; however, our result concurs with SEW theory that overseas expansion might be under‐ taken to preserve the welfare of the family and avoid risk (Okoroafo, 1999; Sanchez-Bueno & Usero, 2014; Pukall & Calabrò, 2014). In line with H1b, active family participation in owner‐ ship and governance oversight have a more positive impact on internationalization propensity when family involve‐ ment in ownership and governance oversight are both present. Although empirical evidence on the influence of family involvement on internationalization is mixed (Pukall & Calabrò, 2014), our research supports previous empirical work on family-controlled public firms, which establishes the positive effects of family governance oversight on inter‐ nationalization propensity. In line with H2a, TMT overseas industry experience heterogeneity is significantly and positively associated with internationalization propensity. However, our results did not reveal an association between TMT overseas education heterogeneity and internationalization propensity. Contributions and Implications This study advances the field of family business inter‐ nationalization in three main ways. First, as varying levels of family ownership and control are likely to affect firms’ strategic decisions (Arregle et al., 2017; Chrisman et al., 2005; Melin & Nordqvist, 2007), this study develops a more fine-grained understanding of family-controlled pub‐ lic firms in emerging markets and internationalization pro‐ pensity by distinguishing ownership and governance over‐ sight. Second, through its application of SEW theory, we examine family heterogeneity effects beyond the agency and stewardship paradigm to explain that if family mem‐ bers are actively engaged in ownership, managing, and su‐ pervising, a firm is likely to expand internationally. Third, through its application of an UE perspective, our research highlights the potential positive aspect of TMTs’ overseas assignment. The study shows that family firms are effective at international expansion if TMT members are heteroge‐ neous in terms of overseas industry experience, which en‐ hances TMTs’ human and social capital and thus serves as a strong predictor of internationalization propensity. On a practical level, our findings have implications for family business owners, non-family executives within listed family firms, and family business advisors. First, this study highlights the important role of family ownership along with governance control, which emphasizes long-term vision and fosters effective decision-making and enhanc‐ es dominant powers and legitimacy through the unity of ownership and governance control; which in turn assists a firm’s ability to organize firm-specific resources to compete in the international marketplace. Second, our findings sug‐ gest that the overseas assignment/work experience diver‐ sity of TMTs provides as a strong predicator of internation‐ al expansion. Business linkages such as industry networks, joint ventures, and subsidiaries play an important role in increasing the probability of international expansion (Bose, 2016). Therefore, TMT oversea related resources and com‐ petencies play an important role in the decision of inter‐ nationalization, for owners and managers in family firms, invest in building a heterogeneous top executive team in terms of its overseas industry experience will benefit inter‐ national market expansion. Limitations and Directions of Future Research The present study, however, also leaves several ques‐ tions unanswered. Its first limitation concerns the main effects of TMTs’ demographic characteristics. Although nu‐ merous scholars have recognized the key role of a TMT’s power in shaping major organizational outcomes, proxies such as its demographic characteristics can be unreliable (Denis, Lamothe, & Langley, 2001; Lawrence, 1997; Smith, Smith, Olian, Sims Jr., O’Bannon, & Scully,1994). Hence, fu‐ ture studies should aim to collect primary data to direct‐ ly examine the TMT’s socio-cognitive concerns. This may compensate for the above limitation and advance the the‐ oretical underpinning of UE theory. The second limitation concerns the study’s focus on the measure of international expansion. Firms use a variety of other measures of internationalization. Future research could thus focus on the impact of these other measures on firm internationalization. Third, concerns might be raised about the small sample size and generalizability of our findings outside the cultural and institutional context in which this research was conducted. Future research should therefore examine whether our findings on the influence of family heterogeneity on internationalization are replica‐ ble outside Asia, where the impact of family involvement on business operations is likely to be lower. 35 C. W. Tsao, M. J. Wang, C. M. Lu, S. J. Chen, & Y. H. 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