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The influence of non-financial values and goals on the
internationalisation process of Austrian, German and Swiss
family businesses to emerging Asia
DISSERTATION
of the University of St. Gallen,
School of Management,
Economics, Law, Social Sciences
and International Affairs
to obtain the title of
Doctor of Philosophy in Management
submitted by
Stephan Erdödy
from
Hungary and Germany
Approved on the application of
Prof. Dr. Li Choy Chong
and
Prof. Dr. Martin Hilb
Dissertation no. 4518
Gutenberg AG, Schaan 2016
ii
The University of St. Gallen, School of Management, Economics, Law, Social
Sciences and International Affairs herby consents to the printing of the present
dissertation, without herby expressing any opinion on the views herein expressed.
St. Gallen, May 30, 2016
The President:
Prof. Dr. Thomas Bieger
iii
Dedicated to my parents
iv
Acknowledgements
I would like to thank Prof. Dr. Li Choy Chong for his guidance and outstanding
support throughout the process of this thesis. Prof. Chong has always encouraged me
to strive for the best possible result. I would also like to express my gratitude to my
second supervisor, Prof. Dr. Martin Hilb, for his support and advice.
Moreover, I would like to thank those people who have participated in the interviews
for this thesis and made this project possible.
Especially, I would like to thank my dear friend Philipp Bierl, with whom I had many
inspiring conversations and whose continuous support has advanced my thinking on
many business and personal matters. Thank you for this, Philipp!
Finally, I would like to thank my family, for their patience and loving support during
all phases of my life and especially during my time as a PhD student.
Munich, 17 December 2015,
Stephan Erdödy
v
Abstract
Family Businesses (FBs) represent the backbone of the economies of Austria,
Germany and Switzerland (AGS). These companies are different from their non-
family peers in terms of both resources and capabilities. Especially FBs seem to have
specific non-financial values and goals influencing their decision- and strategy-
making. The field of non-financial values and goals in FBs is, however, largely
uncovered. At the same time, these FBs increasingly need to internationalise in order
to grow. The prospering regions of Asia, specifically China and the ASEAN states,
have become the target of internationalisation activities of these companies. Still, how
these FBs internationalise is not known.
Furthermore, it can be assumed that the non-financial values and goals of FBs
influence the internationalisation process to emerging Asian countries. Nonetheless,
existing theories are insufficient to explain this phenomenon.
Driven by this gap in management research, this study used Straussian Grounded
Theory to set forth a new theory on how non-financial values and goals influence the
internationalisation process of AGS FBs to emerging Asia. The study found that non-
financial values and goals are main referencing points for international decision- and
strategy-making. While non-financial values exercise influence beyond the scope of
context and time, non-financial goals remain unchanged in nature, but have a dynamic
influence on the internationalisation process at different points in time.
With these results, the present study contributes to research of non-financial values
and goals by identifying the difference between values and goals and by describing
their nature. It also contributes to FBs internationalisation studies by shedding light on
the nature of the internationalisation process of AGS FBs to emerging Asia. Further, it
yields implications for FB management to understand how their non-financial values
and goals influence the internationalisation process and how they can be managed.
vi
Zusammenfassung
Familienunternehmen (FU) stellen das Rückgrat der österreichischen, deutschen und
schweizer Volkswirtschaften (DACH) dar. Diese Unternehmen weisen deutliche
Unterschiede, sowohl in ihren Ressourcen und Fähigkeiten, zu ihren nicht-FU
Wettbewerbern auf. Insbesondere scheinen FU spezielle nichtökonomische Werte und
Ziele zu haben, die ihre Entscheidungs- und Strategiefindungsprozesse beeinflussen.
Gleichzeitig internationalisieren FU verstärkt, um zu wachsen. Die aufstrebenden
Regionen Asiens, vor allem China und die ASEAN Staaten, sind zu Hauptzielen von
Internationalisierungsaktivitäten dieser Unternehmen geworden. Allerdings ist
unbekannt, wie FU dorthin internationalisieren.
Des Weiteren kann davon ausgegangen werden, dass nichtökonomische Werte und
Ziele von FU den Internationalisierungsprozess nach Asien beeinflussen. Existierende
Theorien sind allerdings nicht darauf ausgerichtet, dieses Phänomen hinreichend zu
erklären.
Aufgrund dessen, verwendet diese Studie die Straussian Grounded Theory um eine
neue Theorie über den Einfluss nichtökonomischer Werte und Ziele auf den
Internationalisierungsprozess von DACH FU nach Asien zu etablieren. Die Ergebnisse
dieser Studie zeigen, dass nichtökonomische Ziele wichtige Entscheidungsgrundlagen
für Internationalisierungsstrategien sind. Während nichtökonomische Werte ihren
Einfluss über Kontexte und Zeiträume hinweg ausüben, bleiben nichtökonomische
Ziele zwar an sich unverändert, aber haben einen dynamischen Einfluss auf den
Internationalisierungsprozess zu verschiedenen Zeitpunkten.
Mit ihren Ergebnissen trägt diese Studie zur Forschung über nichtökonomische Werte
und Ziele in FU bei, indem sie Werte und Ziele klar trennt und ihre einzelnen Attribute
definiert. Zusätzlich erweitert sie das Wissen über FU Internationalisierungsprozesse.
Abschließend gibt die Studie praktische Hinweise für die Unternehmensführung von
FUs, wie nichtökonomische Werte und Ziele den Internationalisierungsprozess nach
Asien beeinflussen und wie sich diese steuern lassen.
vii
Table of Contents
Acknowledgements ...................................................................................................... iv
Abstract .......................................................................................................................... v
Zusammenfassung ........................................................................................................ vi
Abbreviations ............................................................................................................... xi
Tables ........................................................................................................................... xii
Figures ......................................................................................................................... xiii
1. Introduction ............................................................................................................... 1
1.1 Research context ................................................................................................... 1
1.2 Previous research .................................................................................................. 2
1.3 Research objectives ............................................................................................... 3
1.4 Key definitions ...................................................................................................... 4
1.4.1 Defining the FB ..................................................................................................... 4
1.4.2 Defining values and goals ..................................................................................... 7
1.4.3 Defining internationalisation ................................................................................. 9
1.4.4 Defining process .................................................................................................. 10
1.4.5 Defining emerging Asia ...................................................................................... 10
1.5 Dissertation structure .......................................................................................... 11
2. Research context ..................................................................................................... 13
2.1 FBs in AGS ......................................................................................................... 13
2.1.1 The economic role of FBs in AGS ...................................................................... 13
2.1.2 The role of internationalisation for AGS FBs ..................................................... 14
2.2 The economic development of emerging Asia ................................................... 16
2.2.1 Economic development from 1950 to 1995 ........................................................ 16
2.2.1.1 China ........................................................................................................... 16
2.2.1.2 The ASEAN states ........................................................................................ 17
2.2.2 Economic development since 1995 ..................................................................... 19
2.3 The culture of AGS and emerging Asia .............................................................. 21
viii
2.4 Summary ............................................................................................................. 24
3. Literature review and research question .............................................................. 25
3.1 Non-financial values and goals ........................................................................... 26
3.1.1 Economic model of man ...................................................................................... 26
3.1.1.1 Agency theory .............................................................................................. 27
3.1.2 Humanistic model of man ................................................................................... 28
3.1.2.1 Behavioural theory of the firm .................................................................... 29
3.1.2.2 Stewardship theory ...................................................................................... 30
3.1.3 Mixed models ...................................................................................................... 32
3.1.3.1 Behavioural agency theory .......................................................................... 32
3.1.3.2 Socioemotional wealth view ........................................................................ 33
3.2 Internationalisation processes of the company ................................................... 36
3.2.1 Economic school of internationalisation ............................................................. 36
3.2.1.1 Transaction cost theory ............................................................................... 37
3.2.1.2 Internalisation theory .................................................................................. 38
3.2.1.3 Eclectic framework ...................................................................................... 39
3.2.1.4 Resource-based theory ................................................................................ 41
3.2.2 Internationalisation as an experimental learning process .................................... 42
3.2.2.1 Psychic distance .......................................................................................... 43
3.2.2.2 The Uppsala model of internationalisation ................................................. 45
3.2.2.3 Innovation-related models – the Born Global theory .................................. 48
3.3 Research gap and research question .................................................................... 51
4. Methodology ............................................................................................................ 55
4.1 Research philosophy ........................................................................................... 55
4.2 Research approach – the choice of qualitative research ..................................... 57
4.3 An inductive approach ........................................................................................ 59
4.4 Arguments for the use of grounded theory ......................................................... 59
4.5 Data collection and analysis ................................................................................ 61
4.6 Data collection strategy ....................................................................................... 62
4.6.1 Data sampling ...................................................................................................... 62
4.6.2 Data sources ......................................................................................................... 63
ix
4.6.3 Data analysis procedures ..................................................................................... 66
4.6.3.1 Open coding ................................................................................................. 66
4.6.3.2 Axial coding ................................................................................................. 68
4.6.3.3 Selective coding ........................................................................................... 69
4.6.4 Pilot case .............................................................................................................. 69
4.6.5 Expert interviews ................................................................................................. 71
4.6.6 Ensuring validity and reliability .......................................................................... 75
4.7 Limitations of this research ................................................................................. 76
5. Findings from the cases .......................................................................................... 77
5.1 Non-financial values and goals of AGS FBs ...................................................... 77
5.1.1 Non-financial values of AGS FBs ....................................................................... 77
5.1.2 Non-financial goals of AGS FBs ......................................................................... 79
5.1.3 Summary of findings on non-financial values and goals of AGS FBs ................ 82
5.2 Internationalisation process of AGS FBs to emerging Asia ............................... 83
5.2.1 Internationalisation strategies of AGS FBs to emerging Asia ............................. 83
5.2.1.1 Internationalisation paths of AGS FBs ........................................................ 83
5.2.1.2 Market entry modes and target markets of AGS FBs to emerging Asia ...... 86
5.2.2 Internationalisation strategy development of AGS FBs to emerging Asia ......... 89
5.2.2.1 The strategy- and decision-making process ................................................ 89
5.2.2.2 Decision drivers ........................................................................................... 90
5.2.2.3 Internationalisation timing .......................................................................... 91
5.2.3 Summary of findings on the internationalisation process of AGS FBs to
emerging Asia ..................................................................................................... 93
5.3 Cross-case analysis .............................................................................................. 94
6. Influence of non-financial values and goals on the internationalisation process
of AGS FBs to emerging Asia .............................................................................. 101
6.1 Non-financial values and goals of AGS FBs .................................................... 102
6.2 Internationalisation pattern to emerging Asia ................................................... 103
6.2.1 Timing ............................................................................................................... 103
6.2.2 Market pattern ................................................................................................... 105
6.2.3 Internationalisation path .................................................................................... 106
x
6.3 International management ................................................................................. 110
6.3.1 Planning and strategy-making ........................................................................... 110
6.3.2 International knowledge management ............................................................... 112
6.3.3 International cultural management .................................................................... 115
6.3.4 International financial management .................................................................. 118
6.3.5 International human resources management ..................................................... 120
6.3.6 International network management ................................................................... 123
6.3.7 International control management ..................................................................... 126
6.3.8 International marketing management ................................................................ 128
6.4 Incremental process of AGS FB internationalisation to emerging Asia and the
dynamic influence of non-financial values and goals ....................................... 132
6.5 Proposition table ................................................................................................ 134
7. Conclusion ............................................................................................................. 140
7.1 Theoretical implications .................................................................................... 140
7.1.1 Non-financial values and goals in AGS FBs ..................................................... 141
7.1.2 AGS FB internationalisation processes to emerging Asia ................................ 142
7.1.3 Influence of non-financial values and goals on the internationalisation process of
AGS FBs to emerging Asia ............................................................................... 143
7.1.4 Straussian grounded theory in FB internationalisation studies ......................... 144
7.2 Managerial implications .................................................................................... 145
7.3 Future research .................................................................................................. 146
8. List of References .................................................................................................. 148
9. Appendix ................................................................................................................ 175
xi
Abbreviations
Abbreviation Meaning
AGS Austria, Germany and Switzerland
ASEAN Association of Southeast Asian Nations
BG Born Global
DACH Deutschland, Österreich und Schweiz
EU European Union
FB Family Business
FDI Foreign Direct Investment
GDP Gross Domestic Product
HR Human Resources
IMF International Monetary Fund
IP Intellectual Property
KfW Kreditanstalt für Wiederaufbau
KPI Key Performance Indicator
MNE Multinational Enterprise
US/USA United States/United States of America
WTO World Trade Organisation
xii
Tables
Table 1: Research problem and questions .................................................................. 4
Table 2: Average share of AGS FB export sales as percentage of total sales........ 14
Table 3: Summary of the agency theory ................................................................... 27
Table 4: Summary of the stewardship theory .......................................................... 31
Table 5: Research problem and research question.................................................. 54
Table 6: Qualitative and quantitative research approaches ................................... 58
Table 7: Sources of evidence used for this study...................................................... 64
Table 8: Example of the open coding process .......................................................... 67
Table 9: Changes in the interview guide ................................................................... 70
Table 10: Key information on the expert interviewees ........................................... 73
Table 11. Actions to ensure validity and reliability ................................................. 75
Table 12: Internationalisation paths of AGS FBs to emerging Asia ...................... 84
Table 13: Overview of international activities of AGS FBs in emerging Asia ...... 87
Table 14: Cross-case analysis ..................................................................................... 95
Table 15: Internationalisation timing of AGS FBs to emerging Asia .................. 104
Table 16: Internationalisation market pattern of AGS FB to emerging Asia..... 106
Table 17: Internationalisation pattern of AGS FB to emerging Asia .................. 109
Table 18: Internationalisation planning and strategy-making of AGS FBs to
emerging Asia ............................................................................................................ 112
Table 19: International knowledge management of AGS FBs ............................. 115
Table 20: International cultural management of AGS FBs .................................. 118
Table 21: International financial management of AGS FBs ................................ 120
Table 22: International HR of AGS FBs ................................................................ 123
Table 23: International network management of AGS FBs ................................. 126
Table 24: International control management of AGS FBs ................................... 128
Table 25: International marketing management of AGS FBs .............................. 132
Table 26: Proposition table ...................................................................................... 135
Table 27: Theoretical contributions on non-financial values and goals in FBs .. 142
Table 28: AGS FB internationalisation process to emerging Asia ....................... 143
Table 29: Influence of non-financial values and goals on the internationalisation
process of AGS FB to emerging Asia ...................................................................... 144
xiii
Figures
Figure 1: Triangle of family business definition ........................................................ 5
Figure 2: Interest groups in FBs .................................................................................. 6
Figure 3: Influence of values on goals and actions .................................................... 8
Figure 4: Estimated future development of international sales of AGS FBs ........ 14
Figure 5: Future international growth markets of AGS FBs ................................. 15
Figure 6: Annual GDP growth in Greater China and the ASEAN states (in %) . 19
Figure 7: GDP per capita growth in Greater China and ASEAN states (in %) ... 20
Figure 8: Annual foreign direct investment net inflow ($billions) ......................... 21
Figure 9: The revised Uppsala model of 2009 .......................................................... 47
Figure 10: Philosophical assumption in social sciences ........................................... 56
Figure 11: Grounded theory’s recursive analysis approach ................................... 61
Figure 12: Principals of the honourable merchant .................................................. 79
Figure 13: Non-financial values and goals of AGS FBs .......................................... 83
Figure 14: First international activities of AGS FBs ............................................... 91
Figure 15: First market entry of AGS FBs in Asia .................................................. 92
Figure 16: Non-financial values and goals of AGS FBs ........................................ 103
Figure 17: The establishment chain of international production to emerging Asia
and influencing non-financial values and goals ..................................................... 107
Figure 18: Development of family influence on internationalisation planning and
strategy-making over time ....................................................................................... 111
Figure 19: The influence of quality and reputation goals on the branding strategy
..................................................................................................................................... 131
Figure 20: The influence of non-financial values and goals on an AGS FB’s
internationalisation strategy formulation to emerging Asia ................................. 133
1
1. Introduction
1.1 Research context
Family Business (FB) research argues that FBs differ substantially from their non-FBs
counterparts (Chua et al., 2003; Zellweger et al. 2013). Certain non-financial values,
goals and characteristics and overall the close relationship between the family, the
individual and the business (Gersick et al., 1997, Gómez-Mejía et al., 2007, 2011) are
found to provide valuable assets to the company and are seen to be key pivotal
reference points for decision-making (Gómez-Mejía, 2007, 2011). Also, FBs try to
preserve and enhance these non-financial values and goals (Berrone et al., 2012).
At the same time FBs increasingly find themselves in an international business
environment (Claver et al., 2007). Previous studies have shown that FBs act differently
in the international environment, compared to non-FBs. Factors such as limited access
to capital (Fernandéz & Nieto, 2005), the influence of their ownership structure
(Fernandéz & Nieto, 2006; Holt, 2012) or lack of managerial capabilities (Graves &
Thomas, 2008) make FBs act cautiously and may restrain internationalisation. On the
other side, FBs wish to pass the company on to the next generation (Berrone et al.,
2012) and may want to provide job opportunities for family members (Gómez-Mejía
et al., 2007) and therefore need to observe growth opportunities, e.g. through
internationalisation (Claver et al., 2009).
Austria, Germany and Switzerland (AGS) are traditionally rich of FBs (Niefert et al.,
2009). In Austria 90% (Dörflinger et al., 2013), in Germany 93% (Niefert et al., 2009)
and in Switzerland 88% (Fueglistaller & Zellweger, 2007) of all privately held firms
are FBs. In addition, FBs provide a high percentage of jobs being subject to social
insurance (Stiftung Familienunternehmen, 2015). Also, they employ up to three
quarters of their employees on domestic shores while stock exchange listed non-FBs
from AGS only employ about a third of their staff in AGS.
Internationalisation is at the very heart of AGS FBs success, as about 80% are
involved in international activities (PWC, 2012). On average, 35% of total corporate
sales are generated from internationalisation activities. German-speaking FBs have led
the internationalisation wave to the prospering regions of Asia (China and the
2
Association of Southeast Asian States (ASEAN) for many years (KfW Economic
Research, 2012). According to PWC (2013), Asia accounts for 31% of international
sales of AGS FBs. China for instance, is the second most important international
market for AGS FBs, accounting for 27,4% of international sales. Internationalising to
Asia is therefore considered a necessity in the industry. Many FBs from AGS are
already present in Asia or are looking more seriously into deepening their commitment
(^ Economic Research, 2012; PWC, 2012).
Given the important role of FBs in AGS, it is beneficial to understand how their non-
financial values and goals affect their strategy-making. This is especially important
looking on the internationalisation process of such firms to emerging Asian countries.
As a consequence, deepening knowledge in this specific area is indeed a necessity.
1.2 Previous research
FB research just recently started to realize that there are non-financial values and goals
in FBs and that they may be captured in defining factors or endowments (Gómez-
Mejía et al., 2007, 2011; Berrone et al., 2012; Pukall & Calabró, 2013). The field
acknowledges that non-financial values and goals act as pivotal reference points of
decision and strategy-making and hence influence the business deeply (Naldi et al.,
2013). However, previous research falls short on explaining what exactly non-
financial values and goals in FBs are and how to distinguish them. In addition,
previous studies have not acknowledged how, why, when, where and by whom non-
financial values and goals play out in decision and strategy-making processes, but only
that they affect decision and strategy-making. Also, this field has mainly been
developed conceptually and lacks empirical proof across different data population and
cultural contexts (Pukall & Calabró, 2013). As a consequence not much about non-
financial values and goals in FBs and their specific influence is known.
Internationalisation studies have widely relied on theories that gained their empirical
grounding from samples of large, mainly manufacturing, multinational companies
(McDougall & Oviatt 1996, Johanson & Vahlne, 2009). Studies on SME and FB
internationalisation share the view that established theories are not satisfactory in
explaining internationalisation (Thai, 2008) and that they lack a processual perspective
(Kontinen & Ojala, 2010a). Furthermore, previous studies looked on FB
3
internationalisation from developed markets e.g. from Western Europe1 (Gallo & Pont,
1996; Fernandéz & Nieto, 2005, 2006; Claver et al. 2007; Pinho, 2007; Claver et al.,
2009), the Scandinavian countries (George et al., 2005; Kontinen & Ojala, 2010 a,
2010 b; 2011 a, 2012) or from the Anglo-Saxon world (Okoroafo, 1999; Davis &
Harveston, 2000; Zarah, 2003; Graves & Thomas, 2008). Oddly enough, these studies
rarely focused on particular target markets (Kontinen & Ojala, 2010a), which can be
described as a main issue in internationalisation. In addition, they have left AGS FBs
uncovered, despite their economic importance and the cultural influences on non-
financial values and goals that might apply in this context.
How non-financial values and goals shape the internationalisation process of AGS FBs
to emerging Asia is therefore an unresearched field (Pukall & Calabró, 2013; Liang et
al., 2014). Given the economic relevance of FBs in AGS countries and the status quo
in the research streams of non-financial values and goals of FBs, as well as FB
internationalisation there is a strong need for explanatory studies in this neglected area.
1.3 Research objectives
This research endeavour was triggered by the lack of research on non-financial goals
and values in FBs and the missing explanatory power of current internationalisation
theories. This work‟s main aim has therefore been to connect both research areas and
try to understand how non-financial values and goals in FBs shape the
internationalisation process. Due to the adopted focus the context of AGS FBs
internationalising to emerging Asia was chosen, mainly stemming from the virtually
non-existent body of research in this area despite the economic importance of FBs in
AGS and the high level of internationalisation activities of these firms in the emerging
countries of Asia.
With this, the author follows the call of Kontinen & Ojala (2010) to fill the gap of
research on FB internationalisation directed toward a specific target market and the
call of Pukall & Calabró (2013) on the effect of family related factors on FB
internationalisation and the suggestion of Liang et al. (2014) for a deeper investigation
of how family dynamics affect internationalisation processes. The research problem,
goals, questions and objectives are visualized in Table 1.
1 Not including AGS
4
Table 1: Research problem and questions
Research problem Research goals
No existing theory provides satisfactory answers
about the influence of non-financial values and
goals on the internationalisation process of AGS
FBs to emerging Asia
1) Shed light on an unexpected problem
2) Advance theory
Research question Research objective
Overall RQ0: How do non-financial values and
goals influence the internationalisation process of
AGS FBs to emerging Asia?
Sub RQ1: What are non-financial values and
goals in AGS FBs and what is the difference
between the two?
Sub RQ2: What is the nature of the
internationalisation process of AGS FBs to
emerging Asia?
To understand how non-financial values
and goals influence this process
To understand what the non-financial
values and goals of AGS FBs are and
where the difference between the two lies
To learn about their internationalisation
strategy development in the chosen
context
Source: Author`s own creation
The contributions of this study are severalfold. Firstly, it contributes to a) the literature
of non-financial values and goals, b) research on FB internationalisation and c) it helps
to investigate the intercept of the two above fields by looking at how non-financial
goals and values shape the internationalisation process of AGS FBs to emerging Asia.
Secondly, this study delivers insights for FB owners and managers to help them
understand the dynamics that shape the internationalisation process of their businesses.
1.4 Key definitions
This section provides definitions of important key concepts employed in this
dissertation. These concepts were used differently in previous studies. It is therefore
necessary to define each concept for its use in this particular study. The following
paragraphs describe how these concepts are to be understood and why they were
chosen for this research endeavour.
1.4.1 Defining the FB
FB studies have not yet agreed on a common definition of FBs – in fact Gómez-Mejía
et al., (2011) doubt that there will ever be a consensus over this question.
What makes FBs different from other companies is the family involvement (Gómez-
Mejía et al., 2007). Gallo & Sveen (1991) define FBs by two determinants; family
ownership and family control - “a firm where the family owns the stock and exercises
5
full managerial control” (Gallo & Sveen, 1991, p.182). Litz (1996) points out that
intra-organizational aspirations (also often referred to as trans-generational
aspirations) are equally important. These three dimensions can be described as the FB
triangle (as depicted in Figure 1.).
Figure 1: Triangle of family business definition
Source: Own creation based on definition by Litz (1996)
Despite this definition there is considerable heterogeneity among FBs (Melin &
Nordqvist, 2007). Sirmon et al. (2008) differentiates between family-influenced and
family-controlled firms. This study looks on FBs defined as “(a) firm controlled by a
family through involvement in management and ownership, coupled with a
transgenerational vision for the firm” (Zellweger et al. 2013, p. 231).
Additionally, and in order to fully understand the FB it is useful to consider the
various stakeholder groups within a FB. These groups are well summarized by Hilb‟s
(2013) four circle model of stakeholders in FBs as depicted in Figure 2.
6
Figure 2: Interest groups in FBs
Source: Adapted from Hilb et al. (2009, p.10)
The first circle relates to the business owner (Hilb, 2013). The ownership status can
differ from one FB to another. In some cases only one person owns the company
whereas in other cases ownership may be scattered among many family members.
Still, also family members without shares may be actively involved in the company.
The second circle represents the family, regardless of whether family members
actually own company stocks. They may still have significant real or psychological
influence on the FB. The management circle would usually hint at non-family
management. However, this study looks specifically on family-managed FBs (as
defined by Zellweger et al, 2013). Consequently, there is minimum of family
involvement in day-to day management (at least one family member holds a
managerial position). Therefore, this circle may address family as well as non-family
management (as not all management positions are usually held by family members).
The interests of the management may be different from the interests of the family that
7
is not involved in the company management. The last circle relates to the board of
directors (Hilb, 2013). This institution might not exist in every FB. The areas where
the circles overlap describe both possible areas of synergy and of tensions.
This model depicts well, that also FBs are embedded in a complex field of multi-
stakeholders aspirations which can significantly influence the FBs non-financial value
and goal set as well as its strategy-making (Hilb et al., 2009; Hilb, 2013; Zellweger et
al., 2013).
Bearing Hilb‟s (2013) suggestions about the multi-stakeholder perspective in mind this
study uses Zellweger et al. (2013) definition to define and understand the FB. The
reason for this choice is first, that this definition gives a holistic understanding of FBs
and second, that family controlled-firms are the ones where non-financial values and
goals can be expected to show the clearest impact on decision-making (Chrisman et al.,
2012; Zellweger et al. 2013). Thirdly, the intra-organizational aspiration dimension is
included in this definition and captures the behavioural dimension as well as the
possible source of non-financial values and goals, and is therefore well-suited to a
study of the latter (Gómez-Mejía, 2007).
1.4.2 Defining values and goals
Hofstede et al. (1990) referred to values as the driving force behind goals and hence as
the foundation for business behaviour to achieve these goals. Gómez-Mejía et al.
(2007; 2011) introduced the view that values and goals are key pivotal reference points
in FBs for the decision-making process. However, details about the influence of values
on goals and how they may depend on each other is a field that has barely been
covered (Felden & Hack, 2014). Researchers assume that values have long-term
impact on goals and herewith directly influence actions as depicted in Figure 3: Felden
& Hack point out that values and goals may change over time due to external and
internal influences.
8
Figure 3: Influence of values on goals and actions
Source: Adapted from Felden & Hack (2014, p. 36)
Values
Looking specifically on values there have been various attempts to define the term.
The definition of Rockeach (1973) has gained widest acceptance in the field. He
described values as “enduring beliefs that a specific mode of conduct is personally or
socially preferable to an opposite or converse mode of conduct or end-state of
existence” (Rockeach, 1973, p. 5). Guth & Tagiuri (1965) points out that every person
has his/her own set of values. Although the number of personal values tends to be low
and they are commonly influenced by the socio-cultural environment, they are also
existent on a collective level. Specifically, in FBs the family can be seen as the source
of such values. To provide a definition for values in FBs, Felden & Hack (2014) have
collected a set of five criteria, as follows:
Socially inspired and shared within the family (Roth et al. 2009, as cited in
Felden & Hack, 2014)
Serve as orientation framework for family members, because values influence
the social identity of the family (Verplanken & Holland, 2002)
Influence perception and code of conduct of family members (Meglino &
Ravlin, 1998, as cited in Felden & Hack, 2014)
Valid across contexts (Hitlin & Piliavin, 2004)
Stable over time (Klein, 1991)
This study understands values analogous to Rockeach‟s (1973, p. 5) definition and the
five criteria collected by Felden & Hack (2014) and outlined above. This is because
9
Rockeach‟s (1973) definition clearly describes that values exist for guiding inter-
human conduct and provide a framework for ethical behaviour, while Felden & Hack‟s
(2014) list presents a set of defining criteria specifically for values in FBs and stress
that the values of the family become the values of the whole organization.
Goals
Felden & Hack (2014) claim that goals can be derived from values. In organizations,
goals constitute results which are to be achieved by the entity. Depending on the
nature of goals, there may be a hierarchy among them. However, Felden & Hack
(2014) fail to provide a specific definition of goals. In general, the field‟s lack of
definitional clarity on values is dwarfed by the lack of consensus on the definition of
goals. Looking at basic etymology, a goal is “the object of a person’s ambition or
effort; an aim or desired result” (Oxford Dictionary, 2015). Such goals do not need to
be directed toward a tangible output but can be intangible as well. Single goals may
not always be independent from each other but may, in fact, cause each other (Felden
& Hack, 2014). In addition, there may be goals that act against each other.
This study therefore understands non-financial goals of FBs as defined by their
etymology (Oxford Dictionary, 2015). Further, it understands goals as inspired by the
family value system. It focuses on non-financial goals that may yield economic and
non-economic results. The use of this definition is appropriate, because the field has so
far done little to provide a comprehensive definition of goals (Perrow, 1970; Tagiuri &
Davis, 1992; Felden & Hack, 2014). Further, it is open to the nature and possible
interrelationships of goals and to their connection with values. Finally, it allows for
non-financial values, which is the purpose of this study and a barely covered field
(Pukall & Calabró, 2015).
1.4.3 Defining internationalisation
One of the original definitions of internationalisation comes from Turnbull (1987). He
describes internationalisation as outward movement of a firm‟s international
operations. Common agreement on a universal internationalisation definition however,
has not been achieved so far (Andersen, 1997). In an attempt to come up with a
holistic definition Lehtinen & Penttinen (1999, p. 13) suggested the following:
“Internationalisation of a firm concerns the relationships between the firm and
its international environment, derives its origin from the development and
10
utilization process of the personnel’s cognitive and attitudinal readiness and is
concretely manifested in the development and utilization process of different
international activities, primarily inward, outward, and cooperative operations.”
Lehthinen & Penttinen‟s (1999) definition combines three perspectives; the network
dimension, the behavioural influence of the decision-makers and lastly, the process
perspective. All three perspectives match well with the purpose of this study to answer
how non-financial values and goals shape the internationalisation process of AGS FB
to emerging Asia and are hence applied in the remainder of this thesis.
1.4.4 Defining process
Hjorth et al. (2015) state that process studies view the world as something underway,
constantly becoming and perishing. Hirsch (1990) describes processes as sequences of
events and actions that describe how things change over a given time period. Hirsch
adds that theory building, using this definition, will provide answers for the “how?”
and “why?” a process takes a particular course. In 1997, Pettigrew altered this
definition by including a contextual element: “a sequence of individual or collective
events actions and activities unfolding over time in context” (Pettigrew, 1997, p. 338).
Pettigrew‟s (1997) definition is the most appropriate for the use in this study due to the
following reasons. Strategy-making, such as internationalisation, itself is a process
shaped by individuals or collectives, within one or between several companies. Also,
this definition introduces the contextual element in processes, which is given looking
on FB internationalisation to emerging Asia and in the observation of the impact of
non-financial values and goals on this process, which are contextual by nature.
1.4.5 Defining emerging Asia
This study focuses specifically on greater China and the ASEAN member countries
(ASEAN, 2015). To distinguish these regions from the rest of the Asian continent and
to find a term that makes this text easier to read, the following countries are hence
referred to as emerging Asia: China, Hong Kong, Taiwan, Vietnam, Laos, Myanmar,
Thailand, Cambodia, Philippines, Malaysia, Singapore, Indonesia and Brunei
Darussalam.
This includes a large number of different countries with distinct cultures, languages
and economic development stages. But these countries also share strong similarities, in
11
culture and religion, history and taste. In addition, all these states are characterised by
fast and dynamic economic development. This study therefore treats this region as one
broad cultural and geographical area and will highlight differences in the empirical
results, if applicable.
1.5 Dissertation structure
Chapter 1 presented an overview of the research context, as well as the theoretical and
practical reasons for this study. It emphasises the importance of understanding how
non-financial values and goals shape the internationalisation process of AGS FBs.
Also, the research gap is identified and the research objectives and questions posed. In
addition, key definitions for this study are provided.
Chapter 2 provides an introduction into the research context by showing the economic
importance of FBs in AGS and the role that internationalisation plays for these
companies. It also gives a brief overview of the economic development of emerging
Asia from the 1960s until 1995 and provides up-to-date economic data on emerging
Asia from 1995 until today to demonstrate the attractiveness of this prosperous region.
Also it offers insights into the role of culture of the studied regions of AGS and
emerging Asia.
Chapter 3 comprises the literature review. It reviews existing theories in the fields of
non-financial values and goals of FBs and corporate decision-making. The same is
done for internationalisation theories, with an emphasis on internationalisation theories
relevant for FBs. This chapter also delineates the research problem and questions, and
concludes that existing theories do not have the explanatory power to address the set
research question and that hence a new theory is needed to fulfil the objectives of this
study.
Chapter 4 presents the chosen methodology. It comments on the epistemological tenets
and chosen research design by advocating the use of a qualitative research
methodology, namely the Straussian grounded theory. It also describes how samples
were chosen, data collected and analysed, and which validity measures were taken to
improve the robustness of the new theory. Lastly, it comments on the limitations of
this study.
12
Chapter 5 presents the empirical findings of this research project, organised analogous
to the two sub-RQs presented in Table 1. In the first part, it reports in detail on non-
financial values and goals in AGS FBs. In the second part, findings on the
international strategy-making of AGS FBs to emerging Asia are presented.
Chapter 6 puts forward the new theory on the influence of non-financial values and
goals of AGS FBs on their internationalisation process to emerging Asia by answering
the overall RQ (as stated in Table 1). The new theory was developed under Straussian
grounded theory making techniques.
Chapter 7 delineates theoretical and practical implications and contributions of this
study. It concludes the dissertation with proposing future research areas, building on
the insights of this research project.
13
2. Research context
The following chapter provides an introduction into the wider business and economic
context of the research project. It demonstrates the economic importance of FBs in
AGS (in section 2.1) and shows the contribution of internationalisation to the growth
of FBs, specifically internationalisation to Asia. Further, it touches upon emerging
Asia‟s economic development (in section 2.2) and provides current economic data to
highlight the economic potential of emerging Asia.
2.1 FBs in AGS
2.1.1 The economic role of FBs in AGS
FBs play a special role in the economies of AGS: in Austria 90% of privately held
companies are FBs (Dörflinger et al., 2013), in Germany 93% (Niefert et al., 2009),
and in Switzerland 88% (Fueglistaller & Zellweger, 2007). However, these numbers
are often estimations, based on changing FB definitions (Wenzel, 2014). FBs are not
only numerous, but also known for their high-quality products. Up to 1,000 German
FBs belong to the list of world market leaders in their respective market (BDI, 2014).
FBs are commonly associated with the German word “Mittelstand” (The Economist,
2015a). “Mittelstand” has even been adapted in the English language to describe
Germany‟s system of highly specialized and mostly family-owned, medium-sized
companies which have created industrial clusters and structures in their home regions
and are found to contribute significantly to their country‟s economic vibrancy and
stability (The Economist, 2015a). Similar praise is given to FBs in Austria and
Switzerland. Also, FBs were faster to catch up than non-FBs after the financial crisis
(PWC, 2012).
48% of sales2 across all existing companies in Germany, are generated by FBs
(Stiftung Familienunternehmen, 2015), while in Austria this figure is 61% (Dörflinger,
et al, 2013). The benefit for society becomes visible when the contribution of FBs to
the labour market is taken into consideration. In Austria 71% of all employees work in
FBs (Dörflinger et al., 2013) and in Switzerland around 64% (Fueglistaller &
Zellweger, 2007). In Germany 56% of employee contracts subject to social insurance
are prepared by FBs (Stiftung Familienunternehmen, 2015). In the period from 2006 to
2012 the Top 500 German FBs increased their workforce by 11%, while DAX
2 Excluding state owned companies
14
companies decreased their workforce by 7.3% in the same period (BDI, 2014). It is
also found that around 71% of employees of German Top 500 FBs actually work in
Germany, while this figure is only 38% in DAX companies.
2.1.2 The role of internationalisation for AGS FBs
Looking specifically at internationalisation, data shows that it has become a main
source of growth to FBs (PWC, 2012). Nowadays, international sales already represent
up to 48% of total sales of Austrian, 31% of German, and 32% of Swiss FBs. These
percentages are expected to grow by 2017, as shown in Table 2.
Table 2: Average share of AGS FB export sales as percentage of total sales
Country In 2012 Estimate for 2017
Austria 48% 52%
Germany 31% 37%
Switzerland 32% 33%
Source: Adapted from PWC (2012)
Export sales as a proportion of overall sales are expected to grow by 5% across AGS
FBs between 2012 and 2017. In addition, the majority of AGS FBs clearly sees future
exports on the rise (44% of FBs in AGS) as shown in Figure 4.
Figure 4: Estimated future development of international sales of AGS FBs
Source: Adapted from PWC (2012)
15
Considering the target markets of FB internationalisation activities, a substantial
amount of effort is targeted at Asia. 31% of AGS FBs expect to internationalise further
to Asian markets by 2017 (PWC, 2012), as depicted in Figure 5. The latter shows that
Asia ranks second in export frequency, just behind Europe. This fact is further
enforced by the forecast that Asia will catch up or even overtake Europe in due course
as the most important international market for AGS FBs (PWC, 2012, 2014).
Figure 5: Future international growth markets of AGS FBs
Source: Adapted from PWC (2012)
China, for instance, is the second most important international market for AGS FBs,
accounting for 27.4% of international sales. In Germany 32% of all internationally
active FBs plan to intensify their activities in emerging Asia in the coming years,
while 23% wish to increase their commitment in other Asian markets (KfW, 2012). In
Switzerland, FBs also plan to increase their Asian commitment and anticipate that
China will contribute 29% to international sales before the end of the decade (PWC,
2014). Similar growth expectations of internationalisation apply to the ASEAN states
(Entrepreneur, 2015). Internationalising to Asia is therefore considered a necessity in
the industry.
Foreign direct investments (FDI) are also relevant for internationalisation. However,
data on FDI of AGS FBs, especially on emerging Asia, is scarce. A study by the
German Kreditanstalt für Wiederaufbau (KfW, 2012) claims that on average 28% of
“Mittelstand” companies in Germany have undertaken FDI in China. This number
needs to be considered carefully, as it does not explicitly relate to FBs but to medium
sized-businesses as a whole. 42% of these companies planned to increase their FDI
16
commitment in the future. Among the group of supporters of further FDI commitment,
38% wish to increase their investments in China and 23% in other Asian countries.
2.2 The economic development of emerging Asia
The economic development of emerging Asia has not been a heterogeneous process
due to the diversity of countries in this region. Mainly socio-economic ideologies such
as communism have kept many countries away from the international market place.
Since the 1970s/1980s there has nevertheless been a process of change which opened
up many of the former closed economies. A short overview of this development is
provided in the context of the period from 1950/1960 until 1995; then several
economic indicators since 1995 are selected to highlight the economic attractiveness of
emerging Asia.
2.2.1 Economic development from 1950 to 1995
2.2.1.1 China
The political developments of the 1940s and 1950s after years of civil war and the
ultimate victory of the communists under Mao Zedong over national forces led China
into almost three decades of political and economic isolation from the rest of the
world. It was not until the year 1978 that China began to open itself and its market to
the world (Chen et al., 1995). Two issues triggered this shift in policy. Firstly,
increasing pressure from the Soviet Union, especially after Vietnam became part of the
Soviet‟s sphere of influence, made China look for mighty partners outside Asia, e.g.
the USA. Secondly, there was a realisation among the communist elite that little
progress was being made with the country‟s current economic policy. China‟s annual
GDP per capita growth was well below her prospering neighbours Japan and South
Korea. Total factor productivity painted an even grimmer picture, as it had had
remained stagnant or even declined since 1957 (Chen et al., 1995).
This situation was the basis on which Deng Xiao-Ping proposed his reform agenda at
the meeting of the communist party‟s central committee in 1978 (Chen et al., 1995).
The party leadership agreed on a policy of the “Open Door” and introduced the “Law
of the People‟s Republic of China on Joint Ventures Using Chinese and Foreign
Investment” in July 1979, which laid the legal foundation for investments in China. In
the subsequent years, the government established a growing number of special
17
industrial zones (e.g. Shenzhen and Zhuhai). Such zones were extended to even more
regions within the country in 1985. These years also saw several amendments and
changes to the joint venture law (e.g. 1988 and 1990) which significantly improved the
business climate for foreign investors. These measures triggered the inflow FDI, which
gained momentum in the late 1980s. In 1991, China received $34.4 billion in FDI,
Hong Kong being the biggest foreign investor, followed by the USA, Japan, the UK
and Germany. Since the early 1990s, China has continued to open its economy and
attract an ever-increasing inflow of FDI (Chen et al., 1995).
2.2.1.2 The ASEAN states
The Association of Southeast Asian States (ASEAN) was established in 1976 by
Indonesia, Malaysia, Philippines, Singapore and Thailand with the aim of creating a
union of economic, social and cultural progress (ASEAN, 2015). In the years from
1984 to 1999 the small oil Sultanate of Brunei Darussalam3 joined the association
together with Laos, Myanmar and Cambodia.
The economic development of ASEAN member states was not homogeneous due to
the deep structural and economic differences among the member states4. Three groups
with different development patterns can be identified (Hill, 1994): the core group
Singapore, Malaysia, Thailand (and to a certain extent Indonesia), the Indochinese
countries (Vietnam, Laos, Myanmar and Cambodia) and the Philippines.
The driving forces of ASEAN‟s economic development were Singapore, Malaysia,
Thailand (and to a certain extend Indonesia) (Hill, 1994). These countries emerged
from colonialism (except Thailand, which has never been a colony) while generally
keeping liberal economic tenets. They also generally adopted pragmatic, effective and
outward-looking policies. This specifically applied (and still does) to Singapore, which
managed to become part of the first world in less than a generation under the wise
leadership of Lee Kuan Yew, while Indonesia was the country which remained most
closed within in this group (The Economist, 2015b). In 1994 Singapore represented
less than 1% of ASEAN‟s population, but contributed around 40% to the association‟s
exports (Hill, 1994). This was somehow paralleled by the rapid growth of these
economies and structural changes over the years, which had less pro-foreign trade
3 Due to its small size and limited economic unimportance, Brunei‟s development is not
discussed in detail 4 Member states as of 2015
18
policies than its ASEAN fellows. These developments created a positive environment
for foreign investors of all kinds. Between 1965 and 1990 economic growth in
Indonesia, Thailand and Malaysia was roughly double that of World Bank‟s “middle
income” parameter, compared to similar countries in the developing world (Hill,
1994).
The countries of Indochina underwent a different development (Hill, 1994). They can
be counted among the late reformers. These countries were characterised by extreme
poverty, radical political ideologies (some still prevailing) and limited accessibility for
foreign investment. This has changed in the last decade and these markets have been
opened to the global economy. Within this group, Vietnam managed to open its
economy by introducing a reform process in 1986. At that time the average per capita
income was $100, but this has increased to roughly $2,000 in 2014 (World Bank,
2015). Myanmar, Laos, and Cambodia did not manage to effectively open their
markets until 1995, and in fact Myanmar only took this step in 2011. It can be said,
however, that these countries have started to adopt the same policies of pragmatism,
effectiveness and outward orientation as their peers in the south over the past 15 years,
and are in the process of opening their economies (World Bank, 2015).
A special case is the Philippines (Hill, 1994). The country inherited much from its
former colonial occupants, such as libertarian economic attitudes and a small state.
From independence until 1970 the Philippines was among the progressive economies
within ASEAN. However, from 1970 until the mid-1980s its GDP per capita stagnated
and put it far behind Thailand, which it had still surpassed in 1970 in terms of GDP
per capita. This can be attributed to many factors, but specifically to protectionist
government behaviour and loose fiscal policies. 1986 marked a turning point, when
deep structural reform policies were introduced (World Bank Operations Evaluation
Department, 1998). The following years saw continuous reform efforts, which began
to bear fruit around 1994-1995 (International Monetary Fund, 1998).
In sum, ASEAN member states experienced different rates of development due to their
diverse political, economic and historic factors. Since mid-1990 (and in the case of
Cambodia, Laos and Myanmar even later) all of these markets have become part of the
world economy and present a highly dynamic and emerging region.
19
2.2.2 Economic development since 1995
After 1995 most countries in emerging Asia had fully opened their markets to world
trade and foreign investors. To highlight the region‟s economic vibrancy and
attractiveness, also for AGS FBs, three main economic indicators are presented and
explained in the following.
Figure 6 shows the annual GDP growth in emerging Asia. Especially Greater China5
showed an average annual GDP growth rate of 6.52% between 1995 and 2014 (World
Bank Database, 2015). ASEAN6 reported an average annual GDP growth of 4.91% in
the same time period. The overall annual GDP has shown a considerable growth since
the 1990s, only interrupted by the 1998 Asian Financial Crisis and the Global
Financial Crisis of 2008/2009.
Figure 6: Annual GDP growth in Greater China7 and the ASEAN states (in %)
Source: Based on data from the World Bank (2015)8
Annual GDP per capita growth paints a similar picture as depicted in Figure 7. While
the Chinese annual GDP per capita grew on average 5.69% per year between 1995 and
2014, ASEAN9 states were slightly behind with 3.27% in the same time period (World
Bank Database, 2015). The overall positive economic development has created wealth
for the peoples of the region. China has managed to create a growing middle class,
accounting for some 250-300 million people (KPMG, 2012). Estimates predict that by
2027 around 800 million Chinese will belong to the middle class. Nevertheless, there
5 China and Hong Kong
6 Does not include Laos (data was not reported to the World Bank)
7 China and Hong Kong
8 Does not include Laos (data not reported to the World Bank)
9 Does not include Laos (data not reported to the World Bank)
20
are substantial differences in real GDP per capita within emerging Asia, ranging from
$56,287 in Singapore to $1,090 in Cambodia (World Bank Database, 2015).
Figure 7: GDP per capita growth in Greater China10
and ASEAN states (in %)
Source: Based on Data from the World Bank (2015)
In addition, emerging Asian countries have become main targets of AGS companies‟
export activities. In 2014, German companies alone sold goods and services worth
87.11 EUR billion to Greater China11
and about 22.27 EUR billion to ASEAN12
states
(Statistisches Bundesamt, 2015). In 2014, Swiss companies exported goods and
services accounting for some 36.05 billion EUR (39.02 CHF) to greater China13
(Statistik Schweiz, 2015). Much smaller volumes apply to Austrian companies, which
had an export volume of 3.13 EUR billion to China and 1.65 billion to ASEAN in
2014 (Statistik Austria, 2015).
A more informative indicator for the international attractiveness of a market for
foreign companies than export volumes (as mentioned above) is FDI inflow (KPMG,
2012). Figure 8 shows that Greater China14
attracted by far the largest portion of
incoming investments between 1995 and 2013 (World Bank Database, 2015).
Specifically, since 2004 Greater China has seen an increasing influx of foreign
investment. This may in part be due to the considerable softening of joint venture
laws, being a matter of critique by many foreign companies, and China‟s entry into the
World Trade Organisation in 2001 which forced it to adapt more foreign investor-
friendly policies and standards (KPMG, 2012). It should be noted that for several years
10
China & Hong Kong 11
China, Hong Kong & Taiwan 12
Not including Cambodia 13
China and Hong Kong 14
China and Hong Kong
21
there has been a shift in the type of FDI. The 1990s and early 2000s saw FDI
capitalising on the competitive production cost basis. Today FDI is becoming more
and more an issue of customer access and proximity (KPMG, 2012).
Figure 8: Annual foreign direct investment net inflow ($billions)
Source: Based on Data from the World Bank (2015)
A similar picture appears in the case of the ASEAN15
states, though the total number
of FDI inflow is more modest (World Bank Database, 2015). Also in this case, a
steady rise can be observed since 2004, only interrupted by the world financial crisis
of 2008/2009. In 2013/2014, FDI in ASEAN accounted for roughly 8% of global FDI
(ASEAN Investment Report 2013/2014). Between 2012 and 2014 ASEAN states
received some $58.0 billion in FDI from countries from the European Union16
(ASEAN, 2015). As a consequence, the European Union is the biggest source of FDI
to ASEAN.
2.3 The culture of AGS and emerging Asia
When international business is concerned the role of culture needs to be addressed.
Tylor (1974, p. 1) defined culture as “that complex whole which includes knowledge,
belief, art, morals, law, custom, and any other capabilities and habits acquired by man
as part of a society”. Often this definition is supplemented by adding that culture is a
process over successive generations (Parson, 1954). Despite those who claim that
globalization is marginalizing local cultures by diluting their authenticity it is
unchallenged that hug cultural differences prevail, ranging from language, religion and
15
Does not include Laos (data not reported to the World Bank) 16
Including Switzerland
22
tastes to business ethics (Kvint, 2010). Kvint (2010) calls culture a strategic risk factor
that needs to be carefully considered for a successful internationalization strategy.
In order to provide guidance on assessing culture numerous scholars have undertaken
studies to yield frameworks that could henceforth be used by sociologist, and
companies, to study this issue. Two contributors to this debate are Laurent (1997) and
Hofstede et al. (2010).
Laurent (Laurent, 1997, as cited in Hilb, 2013) provided a set of 10 dimensions
ranging from attributes such as time horizon, decision driver, over way of decision-
making to goals of interaction. The assessment of these attributes results in a nation
either being a hard (e.g. the USA) or a soft culture (e.g. Vietnam).
Similar to Laurent, and based on a sample of 116.000 IBM employees across the
globe, Hofstede et al. (2010) developed six cultural dimensions. 1. power distance, 2.
individualism vs. collectivism, 3. masculinity vs. feminity, 4. uncertainty avoidance
index, 5. long-term orientation and 6. indulgence versus restraint. Each dimension
describes a key cultural evaluation parameter. For example, power distance relates to
the way, power and hierarchy are understood in a culture. The USA is a country that
shows very low power distance, as the people have equal rights and in an organization
setting favour flat hierarchies between peers and subordinates (Hofstede, et al. 2010).
The situation is different in China where strict hierarchies in both society and
organizations are highly valued. Though Hofstede‟s work has become the target of
extensive critique in the field of cultural sciences it is widely applied in management
science (Fischer et al., 2010; Mazanec et al., 2015).
Looking on the geographical setting of this thesis, two cultural areas are studied; AGS
on the one side and emerging Asia (as defined in section 1.4.5) on the other. Logic
implies that larger sets of countries as used in this study show cultural heterogeneity.
Turning to AGS it becomes clear that the single countries show many differences in
the dimensions laid out by Laurent (1997, as cited in Hilb, 2013) and Hofstede (2010).
While Germany is in Laurent‟s evaluation certainly a hard culture when it comes to
negotiations and power transferral within an organization, Austria and Switzerland are
soft in that respect. Looking on Hofstede‟s et al. (2010) dimension of long-term
orientation, however, all three countries share a similar orientation for rather long
23
relationships in life and business. Despite these academic categories there are obvious
cultural similarities like geographical proximity, religion, language and history. All
three countries were once members of the Holy Roman Empire and Austria and
Germany only became formally separated after Emperor Franz Joseph I. had called an
end to the union in 1806 (Putzger, 1999). Despite the differences between the AGS
countries it is still justifiable to treat them as a broad cultural area, which may differ in
single specific factors but share the important fundaments of culture, language, history
and religion.
Looking on emerging Asia (as defined in section 1.4.5) a similar situation becomes
observable. The countries of emerging Asia stretch from China‟s cold northern borders
with Russia to the tropical islands of Indonesia. Naturally, these countries show many
cultural differences. Looking on Laurent‟s (2010) approach to distinguish between
hard and soft cultures, Hong Kong and Singapore show common characteristics of
hard cultures (The Economist, 2015b), comparable to the Anglo-Saxon world or to a
certain degree even Germany, (e.g. both Asian nations value achievements of results
rather than relationships) (Hofstede et al. 2010). By contrast, Thailand and or other
countries in south east Asia are soft cultures and stress the importance of long-term
relationships with people over the achievements of fast results (Hofstede et al. 2010).
But also strong cultural similarities exist. One example is religion, as Buddhism and
Confucianism (in their different denominations) are the most widespread faiths in this
region (although Islam is predominant in Malaysia and Indonesia after having replaced
Buddhism several centuries ago) (Encyclopaedia Britannica, 2016). In addition, some
of these Asian nations host powerful diasporas of other ethnicities within their country.
This specifically applies to the Chinese minorities in south east Asia, e.g. in Singapore
or Thailand where ethnic Chinese make up 11% of the total population (Academy for
Cultural Diplomacy, 2016). These minorities often hold substantial power in both
business and public service. Furthermore, historical similarities exist. China‟s
emperors had strong influence on their southern neighbours for centuries, so that many
historical similarities and linkages exist (Wright, 2001). Especially history since the
rise of colonialism and de-colonialization has confronted the region with similar
events and problems. In contrast to AGS emerging Asia cannot rely on one lingua
franca. In fact, especially south east Asia is a mosaic of different languages
(Encyclopaedia Britannica, 2016). Nevertheless, and despite the considerable
differences, the region of emerging Asia has strong cultural similarities on many levels
24
(as explained above) and can therefore be treated as one broad cultural region for the
purposes of this thesis.
2.4 Summary
This chapter has demonstrated that FBs play an important part in the national
economies of AGS. Internationalisation has become a main source of growth for these
FBs. Asia, specifically emerging Asia, has become a main playfield of international
activities and growth endeavours. The countries of emerging Asia have taken different
paths of economic development, while finally become part of the global economy.
Nowadays, emerging Asia is characterised by high rates of economic growth and is an
important region for FDI. Despite the considerable cultural differences within AGS
and emerging Asia it is still justifiable to threat them as one broad cultural area as the
single countries share basic cultural, historic and religious fundamentals.
25
3. Literature review and research question
The literature review of this thesis is divided into two major fields, i.e. non-financial
values and goals and internationalisation of FBs.
FB studies usually attempt to identify the essence of FBs by looking at specific
economic resources or varying attitudes towards risk, while others use capabilities
(Habbershon, et al., 2003; Fernández & Nieto, 2005, 2006), e.g. managerial
capabilities or softer factors such as FB culture (Ward, 1988; Corbetta & Salvato,
2004). To view the source of the FB‟s uniqueness as a product of its non-financial
values and goals is a dormant field that awaits discovery.
As a result of this, FB studies have drawn on common theories that deal with general
questions of company and agent behaviour, but do not specifically cover what is
understood by non-financial values and goals. As a consequence, this literature review
attempts to identify and review existing theories that have already been applied (in the
field of FB studies), which seek to explain why decisions are made, implying that
these are influenced by individual non-financial and goal settings. In this group, two
major tenets can be distinguished. On the one side are theories with economic tenets,
for example the Agency Theory (Jensen & Meckling, 1976; Eisenhardt, 1986) and the
Behavioural Agency Theory (Wiseman & Goméz-Mejia, 1998), which claim that the
profitability of decision-making depends on the alignment of the owner‟s and
manager‟s interests (goals respectively) and inclination toward risks (Kahneman &
Tversky, 1972).
This school, however, sees goals in rational-economic terms and does not address non-
financial values. On the other side are humanistic models, such as the Stewardship
Theory, which account for the intrinsic motivation of good company management and
accept non-financial goals as source. Still, they do not comment on the nature and
deeper impact of the latter. A few years ago a hybrid version, rooted in both traditions,
emerged called the Socioemotional wealth view (Goméz-Mejia et al., 2007), which
has advanced theory in the field of understanding FBs goals.
The second part of the literature review focuses on internationalisation studies.
Research on international trade has a long tradition in economics, going back to early
contributions, such as the work of Scot Adam Smith (Smith, 1776) on the wealth of
nations. It took until 1966 for business researchers to pay the appropriate attention to
26
the internationalisation phenomenon (Aharoni, 1966). Two major schools of thought
of internationalisation are discussed in later chapters. Firstly, the economic school,
which sees internationalisation as a rational decision-making process that is
strategically planned, aiming at competitive advantage transfer and protection, as well
as cost optimisation. Secondly, the behavioural school, which sees internationalisation
as an experimental learning process that is driven by a bundle of economic and non-
economic considerations.
Although literature on the influence of non-financial values and goals of AGS FBs on
the internationalisation process to emerging Asia is literally non-existent, it is helpful
to review what existing theories propose. This chapter therefore reviews complete
theories from the areas mentioned above and investigates if and how these theories
have been employed in the FB context. This also includes an evaluation of the
weaknesses and strengths of the respective theory. Finally, an assessment is made of
whether the existing theoretical and empirical knowledge is sufficient to deduce
propositions on how non-financial values and goals of AGS FBs influence the
internationalisation process to emerging Asia.
3.1 Non-financial values and goals
Theories on non-financial values and goals in FBs are rare. There is only one model
which specifically addresses this issue, which is less than seven years old (Goméz-
Mejia et al., 2007) and has only recently received attention from researchers. To
identify the sources of today‟s understanding of this topic, it is useful to review
theories that have been used in FB research to address non-financial values and goals
(Naldi et al., 2013). The subsequent sections review such theories and evaluate their
usefulness for the purposes of this study.
3.1.1 Economic model of man
The economic model of man (homo economicus) is one of the oldest tenets in
economics and commerce. This tenet holds that a rational actor seeks to maximise
his/her utility (Jensen & Meckling, 1976). Naturally, such models face difficulties
when applied to the real world, especially in FB, as they are shaped by human actors
with limited rationality (Madison et al., 2015). This section presents the agency theory
as the most noteworthy representative.
27
3.1.1.1 Agency theory
Agency theory is concerned with the relationship between the principal (company
owner) and the agent (company manager) (Jensen & Meckling, 1976; Eisenhardt,
1986). The theory is rooted in economics and claims that agents try to put their own
interests before those of the principal (Jensen & Meckling, 1976; Eisenhardt, 1986;
Davis et al., 1997). With these assumptions, agency theory attests opportunism to
individualistic, self-serving actors. The diverging interests may lead to insufficient
communication or the withholding of information. Consequently, there is an
asymmetric information situation between the parties (Eisenhardt, 1989). To avoid
this, it is important for the principal to put effective governance mechanisms in place
to ensure that his interests are appropriately pursued by the agent (Jensen & Meckling,
1976; Eisenhardt, 1986; Cruz et al., 2010). Monitoring the agent should be
supplemented by incentivising. This favours an interest alignment of both parties and
increases firm performance by cost minimization from information-asymmetry (Fama,
1980). A summary of these agency theory‟s characteristics is provided in Table 3.
Table 3: Summary of the agency theory
Agency theory
Foundational work Jensen & Meckling (1976)
Relationship
Based on the principal-manager relationship: describes the individual-level
agent behaviours and the firm-level agency governance mechanisms that
are implemented in response
Assumption Economic model of man
Behaviour Opportunistic: Individual/self-serving
Governance
Monitoring and incentive systems: mechanism to curb opportunistic
behaviour by aligning the interests of the manager with those of the
principal
Outcome Pro-organizational outcomes: Firm performance by way of cost
minimization
Source: Adapted from Madison et al. (2015, p. 3)
Early researchers did not see the use of agency theory to explain family business
behaviour, because both ownership and management lie in the same hands.
Consequently, interests were naturally aligned and respective governance mechanisms
unnecessary (Jensen & Meckling, 1976; Fama & Jensen, 1983; Chrisman et al., 2004).
Since that time, FB scholars have found evidence that also FBs face agency costs and
the theory has an explanatory strength in certain circumstances, e.g. in cases of family
altruism which may favour family candidates for positions over outside candidates
28
with better skills and education (Schulze et al., 2001). Therefore, agency theory was
picked up and applied in the FB context, especially to previously uncovered areas such
as asymmetric altruism, executive entrenchment (Block, 2012; Moores 2009; Schulze
et al., 2001) and the divergence of shareholder goals (Villalonga & Amit, 2006).
At the centre of agency theory application in FB studies lies the idea that FBs are
embedded in family relationships, which is the root cause for their uniqueness and
potential asymmetric agency conflicts (Schulze et al., 2003).
Agency theory has been the target of critique, mainly for three reasons. Firstly,
Wiseman & Goméz-Mejia (1998) criticised that the theory‟s understanding of risk is
too narrow and does not capture all important aspects. Secondly, agency theory lacks
explanatory power when it comes to sociological and psychological mechanisms in the
principal/agent relationship because it mainly focuses on the risk of information-
asymmetry (Perrow, 1986; Blair, 1995; Hoskission et al. 200). Thirdly, the cultural
context of the organisation seems to play a role, as studies from transitional Asian
economies have rejected the use of agency theory because cultural factors play an
important role in the well- or ill-functioning of principal agent relationships (e.g. Phan,
2001). Fourthly, Phan (2001) points out that the concept has rarely been tested in
emerging Asian markets, since the theory, like many others, was developed based on
observations of western multinational companies and lacks empirical verification from
other cultural backgrounds.
As the above criticism of the agency theory shows, it does not provide the necessary
framework to investigate non-financial values and goals in FBs. Rooted in economic
theory, the agency model can only provide a broad understanding of principal/agent
relationships and how the inclination of risk leads to business decisions. With this, the
theory discusses goals on a high level and mostly from an economic viewpoint. This
model does not reflect the values behind the goals. In addition, family goals are not
naturally part of the theory. Hence, the theory cannot be used to deduce propositions
for this research project.
3.1.2 Humanistic model of man
Opposed to the economic model of man are humanistic models which account for the
occurrence of irrational human behaviour with diverging goals and assumptions
(Argyris, 1973). This stance recognises that humans have a need to grow mentally and
29
reach higher levels of achievement, and that this need is driven by intrinsic, intangible
forces. This view was strongly shaped by findings from psychology such as McGregor
(1960) and Maslow (1970). The first theoretical contribution to recognize this was the
behavioural theory of the firm (Cyert & March, 1963). The stewardship theory
receives growing attention in FB studies (Dodd & Dyck, 2015; Madison et al., 2015).
3.1.2.1 Behavioural theory of the firm
In 1963 Cyert & March published the book “A Behavioural Theory of the Firm”,
which, for the first time, introduced a behavioural and humanistic stance in the field. It
is concerned with organizational processes of performance assessment, seeking of the
latter and decision-making (Greve, 2003). It states that managers follow economic as
well as non-economic goals (Cyert & March, 1963). Even if value maximization is the
paramount goal, striving for non-economic objectives can contribute to the benefit of
the management, but also for other shareholders (Zellweger et al., 2013). Also crucial
to this theory is the concept of bounded rationality. It states that rationality is imperfect
because decision-makers may suffer from a lack of available information, cognitive
limitations and lack of time to evaluate all possible solutions (Simon, 1952; March &
Simon, 1958; Cyert & March, 2007; Argote & Greve, 2007).
Among the strengths of behavioural theory of the firm is that it acknowledges
organisational learning (Argote, 1999; Argote & Greve, 2007). Further, it has inspired
many fields of organisation science, e.g. its branches in economics, management and
sociology (Argote & Greve, 2007) to establish theories following humanistic stances,
e.g. institutional theory, which explains how firms react to cognitive expectations and
regulatory environments (Meyer & Rowan, 1977).
However, this also constitutes a major weakness of this theory, as it has hardly
succeeded in establishing itself as a theoretical framework. Also, Cyert and March
called it “A (not “The”) Behavioural Theory of the Firm”, (Argote & Greve, 2007, p.
337) meaning that it represents a general theoretical insight and not the new
foundational theory for a specific field. In addition, it is often suggested that
quantitative testing of hypotheses drawn from the theory is difficult, because many
measures are hardly established or simply difficult to observe (Argote & Greve, 2007).
It is also hard to track the link between organisational performance and individual
aspiration (Greve, 2003).
30
Behavioural theory of the firm has rarely been applied in FB studies, because the
theorem is too broad to produce propositions. However, it has inspired many
humanistic theories such as stewardship theory (Davis et al., 1997). Also, it allows for
incorporating economic and humanistic stances, as in the case of behavioural agency
theory and socio-emotional wealth view. As a behavioural theory itself, it is only a
foundational concept for more specified theories with behavioural tenets to build on. It
is too weak in its directions toward non-financial values and goals to deduce
proposition for this research.
3.1.2.2 Stewardship theory
Stewardship is concerned with the relationship between the principal (business owner)
and the steward (business manager) (Davis et al., 1997). The etymological roots of the
word “steward” point to the very meaning of the theory. A steward is a caretaker of
someone else‟s property, and he/she does so, as if he/she were the rightful owner
(Oxford English Dictionary, 2015). The theory draws on knowledge from sociology
and psychology. Despite the majority of economic theories in the field of
principal/agent relationships it takes a humanistic stance by presenting managers as
stewards, who are driven by intrinsic goals of care-taking and a high level of selfless
commitment to the business. Among these intrinsic goals and next to economic ones,
achievement affiliation, and self-actualisation are named (Davis, et al., 1997)
Therefore, there is natural alignment between the principal‟s and the steward‟s
interests as both parties strive to establish a cooperative and trustful relationship
(Corbetta & Salvato, 2004; Hernandez, 2008; Zahra et al., 2008). This leads to
information symmetry between the parties (Davis et al., 1997). Accordingly, there is
no problem of agent motivation (Barney, 1990; as cited in Donaldson & Davis, 1991).
Given the absence of motivational problems, the company and decision-making
structures should be designed in a way to facilitate efficient management. Therefore,
governance mechanisms should be structured in a way to provide a helpful
environment for further pro-organisational behaviour and increased firm performance
(Davis et al., 1997. The previously elaborated foundations of stewardship theory are
depicted in Table 4.
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Table 4: Summary of the stewardship theory
Stewardship theory
Foundation work Davis et al. (1997)
Relationship Based on the principal-manager relationship: describes the individual-
level steward behaviours and the firm-level stewardship governance
mechanisms that are implemented in response
Assumption Humanistic model of man
Behaviour Pro-organisational: collective/other-serving
Governance Trust systems: mechanisms to encourage cooperation and involvement
to facilitate the natural alignment of interests between the manager and
principal
Outcome Pro-organisational outcomes: Firm performance by way of wealth
maximisation
Source: Adapted from Madison et al. (2015, p. 3)
Stewardship theory has experienced wide echo in the FB research community. Some
theorists claim it is “ideal for explaining governance in the family business context”
(Davis et al., 2010, p. 1093; as cited in Madison et al., 2015). Miller et al. (2008) said
that FBs are more likely to show stewardship behaviour toward their long-term
planning and well-being of the business than non-family-led businesses, and this
behaviour is often sustained for generations (Miller & Le Breton-Miller, 2006).
Pearson & Marler (2010) found that FB leaders may work toward a culture of
reciprocal stewardship in the firm by creating an inclusive family feeling. Also,
reciprocal altruism was observed in FBs and is found to be a steward behaviour, which
can have a positive effect on company performance (Eddleston et al., 2008). However,
FBs show a risk of management encapsulation from the rest of the company and a top-
down decision process, which can have a negative impact on the firm performance
(Miller & Le Breton-Miller, 2006).
Despite the fact that stewardship theory has advanced the discussion on the uniqueness
of FBs (Madison et al., 2015) it does not have the explanatory power to explain the
deeper non-financial values and goals in a FB that lie beyond good stewardship
behaviour, but to distinguish them. It is limited in explaining the sociological and
psychological mechanisms of the business owner vs manager relationship (Perrow,
1986; Blair 1995; Hoskisson et al., 2000). In particular, the theory cannot explain
when, why, how and by whom such non-financial values and goals come into action in
the decision-making processes, and it is not able to transfer its claims to culturally less
observed regions, such as emerging Asia, as most evidence stems from developed
32
economies. In addition, and like the agency theory, it primarily deals with companies
in which ownership and management are separate, which is not the case in FBs in the
framework of this study. The stewardship theory, therefore, does not allow the
formation of appropriate propositions for this research project.
3.1.3 Mixed models
The inability of economic models of man to explain organisational behaviour shaped
by humans and the inconclusiveness of humanistic models on the objectives and
drivers of human behaviour have led to an alliance of both tenets to elevate our
understanding of companies. This specifically applies to FB studies, which have faced
explanatory dilemmas on intangible decision drivers for a long time. The agency
theory has incorporated behavioural tenets which gave birth to the behavioural agency
theory. More recently, the socio-emotional wealth view (Goméz-Mejia et al., 2007)
has tried to establish such an alliance of economic and humanistic traditions and has
received recognition from researchers in the field.
3.1.3.1 Behavioural agency theory
Due to the shortcomings of the conventional agency theory, Wiseman & Goméz-Mejia
(1998) refined it to better reflect managerial risks and how they affect decision-
making. Their pioneering work resulted in the behavioural agency theory. Specifically,
this model tries to move the agency theory from its agent risk aversion assumption to a
loss aversion approach (Kahneman & Tversky, 1979). This means “self-interested
agents adjust their risk preferences relative to how they frame prospects for changes
to personal wealth” (Lim et al., 2010, p. 198). An awareness of potential personal
losses plays an important role here, creating two groups: agents who anticipate losses
of personal wealth are more inclined to risky investments, and agents who do not
anticipate such losses and prefer low-risk investments (Kahneman & Tversky, 1979).
In a FB context, such decisions are shaped by existing goals, which are referred to as
endowments (Wiseman & Goméz-Mejia, 1998). Practically speaking, a family owner
or manager with such endowments may work against the interests of non-family
owners, especially if the endowment is socio-emotional (non-economic), e.g.
maintaining family control over the company by avoiding investments that would
dilute their control access (Wiseman & Goméz-Mejia, 1998, as cited in Miller & Le
Breton-Miller, 2014).
33
The behavioural agency theory is comparatively young, but has gained supporters
(Lim et al., 2010). Also, it takes agency theory to a new level by explaining the
personal interests of principals and agents, namely their risk preferences regarding
personal wealth, while the agency theory only considers interest in general (Larraza-
Kintana et al., 2007; Devers et al., 2008).
However, this model was developed to explain the behaviour in publicly-traded
enterprises, which are very different to FBs (Lim et al., 2010). Also, four of its key
assumptions make it hardly applicable in the FB context (Goméz-Mejia et al., 2007;
Lim et al., 2010). Firstly, the theory assumes that ownership and control do not lie in
the same hand. Secondly, it assumes scattered ownership structure, calling for outside
agents. Thirdly, it presumes agents to be self-interested, which leads to information
asymmetries and the emergence of agency costs. Fourthly, it views self-interest as a
way to maximise personal economic wealth and does not comment on non-financial
goals. This poses problems for the applicability of the theory in the FB context. For
example, Goméz-Mejia et al. (2007) argue that agents may be related (in a family
sense) to principals and may therefore not follow exclusively financial goals.
These arguments show that the theory is not capable of serving as a framework in the
context of this research endeavour.
3.1.3.2 Socioemotional wealth view
A newcomer in FB research is the Socio-emotional Wealth View (SEW) (Gómez-
Mejía et al., 2007, 2011; Berrone et al., 2012). Recent studies have stressed the
uniqueness of FBs, arising from simultaneously having non-financial and financial
objectives which affect decision-making (Naldi et al., 2013), e.g. Naldi et al. (2013) on
appointing family CEOs and Pukall & Calabró (2015) on FB internationalisation
SEW can be described as the “single most important feature of a family business
essence that separates it from other organizational forms” (Berrone et al., 2012, p. 3).
More easily, it comprises family specific non-financial objectives. According to this
theory, FBs will always take these objectives as a pivotal reference point for strategic
decisions. Consequently, they pursue strategies that protect and/or enhance their SEW
(Astrachan et al., 2002). This is because families perceive the business and family as
the same thing (Astrachan et al., 2002).
34
SEW is rooted in behavioural agency theory (Berrone et al., 2012; Pukall & Calabró,
2013) which states that companies make strategic choices based on the reference point
of their main goals (Schulze et al., 2001). Behavioural agency theory itself is of
eclectic nature, and draws on behavioural theory of the firm and prospect theory but
mainly and foremost on agency theory (Berrone et al., 2012). To recall, agency theory
holds that principals (business owners) delegate work and responsibilities to agents,
leading to agency costs, because agents follow their own interests and not necessarily
those of the principals (Jensen & Meckling, 1976) as described in detail in Chapter
3.1.1.1.
However, FBs try to achieve financial and non-financial goals simultaneously
(Gómez-Mejía et al., 2007; Zellweger et al., 2013) SEW considerations are likely to
overrule financial considerations (Wieseman & Gómez-Mejía, 1998). In times of
economic constraint, this can lead to behaviour which is unusual for FBs, e.g. by far
higher risk exposure in capital commitment to save the company at any cost (Berrone
et al. 2012). Other non-economic decisions to preserve SEW were observed, e.g. by
aiming for higher standards of environmental protection as required by law (Berrone et
al., 2010), or by showing disproportionally high respect to industry norms (Miller et al.,
2011). But FBs also follow financial goals to protect the SEW, e.g. by introducing
contracts for the top management (compensation may be linked to certain financial
KPIs) that secure the family‟s wealth (Cruz et al. 2010).
Naldi et al. (2013) suggest that SEW should be looked at in a company-specific
context, to take into account the considerable heterogeneity among FBs. But what
actually are non-financial values and goals in FB? SEW does not deliver a concrete
answer to that, especially because it uses terms like “objectives” or “goals”, while
“values” are not explicitly mentioned or clarified. Rather, theorists speak of SEW
endowments. SEW endowments try to capture the value that a particular firm extracts
from these non-financial values or goals (Berrone et al., 2012). Berrone et al., (2012)
talk about FIBER endowments, consisting of family control and influence,
identification with the firm, binding social ties, emotional attachment and renewal of
family bonds to the firm through dynastic succession. However, Naldi et al. (2013)
only identifies three endowments, namely family control, perpetuating the family
dynasty and reputation while Gómez-Mejía et al. (2011) stress the importance of
family altruism.
35
SEW endowments are influenced by contingency variables (Gómez-Mejía et al., 2011;
Berrone et al., 2012; Pukall & Calabró, 2013; Naldi et al., 2013). Contingency
variables are variables that may significantly influence how strong SEW endowments
affect FB decision-making. Goméz Mejia et al., (2011) and Berrone et al. (2012) count
company size, family stage, ownership structure and governance structure among
these variables. In essence, research suggests that as FBs grow they show a tendency
to loose SEW.
Despite the rising popularity of SEW (Miller & Le Brenton-Miller, 2014; Chua et al.,
2015), the infancy of SEW as a concept is reflected in the fact that there is as yet no
agreement on the number and nature of SEW endowments. While Berrone et al.
(2010) suggest FIBER endowments, Naldi et al. (2013) report only three endowments.
Further studies also show different preferences in their SEW endowment selection
(e.g. Zellweger et al., 2013). Also, it is criticised that the concept has a problem
connecting cause and effect of endowments on business behaviour and performance,
for example limiting internationalisation, risk-taking or debts may not be driven by
SEW concerns, but by the need for short-term financial returns (Goméz-Mejia et al.,
2010; Miller & Le Brenton-Miller, 2014). Further, the concept may not be specific to
FBs, but can be applied to first-generation entrepreneurs as well.
In addition, most SEW objectives are not measured directly and are generally very
difficult to measure (Goméz-Mejia et al., 2011). Nor does the concept state if an
endowment constitutes a non-financial value or a goal, or both, but simply describes
them as goals or objectives. Finally, the concept does not provide guidance whether
endowments should be treated as a whole or as independent components and where,
when and how these components influence decision-making (Chua et al., 2015).
If research really wants to understand SEW objectives it must “be precise in
specifying and examining the locus, drivers and casual implications of its various
components” (Miller & Le Brenton-Miller, 2014, p. 4). This, and the unclear situation
regarding the number, nature and relationship of non-financial values and goals, are
the reasons why SEW is not strong enough to produce reliable propositions for this
research project.
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3.2 Internationalisation processes of the company
Internationalisation is a strategic process that affects the company at all levels
(Anderson, 1997). Bradely (1995) proposes two dimensions which separate
internationalisation from other growth strategies: firstly, target market selection and
secondly, entry mode selection. Bradely‟s (1995) dimensions are rooted in the so-
called economic school, which understands internationalisation as a strategic planning
process of rational decision-making. Examples are the Transaction Cost Theory
(Williamson, 1979), Dunning‟s Eclectic Paradigm (Dunning, 1988), and the Resource-
based View (Barney, 1991), to mention just a few.
On the other hand is the behavioural school, rooted in the behavioural theory of the
firm (Penrose, 1959). It assumes that decision-makers in businesses may have limited
rationality, lack knowledge about strategic alternatives, have conflicting goals and
expectations and try to mitigate risk and uncertainty (Penrose, 1959; Aharoni, 1966).
Thus, companies assess internationalisation as the outcome of continuous adjustments
to their environment (Aharoni, 1966 as cited in Thai, 2008). Lacking
internationalisation knowledge can be acquired through experience (Penrose, 1959 as
cited in Thai, 2008; Johanson & Vahlne, 1977).
This economic and behavioural school of internationalisation stand in contrast to each
other. A growing number of studies on FB internationalisation have explained
internationalisation as a behavioural process of experimental learning e.g. Okoroafo
(1999), Child et al. (2002), Claver (2007), Graves & Thomas (2008), Kontinen &
Ojala (2010 b) and Pukall & Calabró (2013). Both tenets and their theories are
presented in the following.
3.2.1 Economic school of internationalisation
Theories of the economic school of internationalisation share the idea that
internationalisation is driven by cost optimisation considerations (Coase, 1937;
Rugman, 1981; Dunning, 1988; Weisfelder, 2001) and that organisations seek to
transfer and protect firm specific competitive advantages through internationalisation
(Dunning, 1988; Barney, 1981). This school of thought has taken an in-depth look at
the internationalisation of multinational enterprises and assumes that it decides
rationally and views production as its most important activity.
37
3.2.1.1 Transaction cost theory
The transaction cost theory originates from transaction cost economics, which play an
important role in the classical economic sciences. In a business-related sense the
theory predicts that the interest of the individual and society may not go hand-in-hand,
as it sees firms as an alternative way to organise economic activity (Weisfelder, 2001,
as cited in Thai, 2008). The term “transaction cost” refers to costs which arise when an
economic exchange occurs. Like most economic theories, the transaction cost theory
argues that business decision-making is a product of rational evaluation of existing
alternatives (Barretto & Rocha 2001, as cited in Thai, 2008).
According to Williamson (1979), internationalisation is not seen as a distinct process
in transaction cost theory, but as a process based on the careful evaluation of internal
and external cost, like any other business process. As such cost evaluations play an
important role in the early phases of internationalisation, the theory is effective in
explaining entry mode decisions and vertical integration choices (Erramilli & Rao,
1993). What drives internationalisation decisions is transaction cost minimisation and
benefit maximisation (Andersen, 1997). This leads to a constant adaptation of
organisational structure in each internationalisation stage, based on rational and
opportunistic goals (Williamson, 1979).
Nevertheless, internationalisation theorists have found it necessary to make
adaptations to transaction cost theory (Erramilli & Rao, 1993). Such adaptations
include non-transaction cost benefits, for example from increased integration and
control, (Kobrin, 1986; Hill et al, 1990) and to gain a larger share of the subsidiaries‟
profits (Anderson & Gatingnon, 1986). Erramilli & Rao (1993) add cultural distance
and country risk as interfering variables.
Despite many modifications, the transaction cost theory still falls short on a number of
issues. Firstly, companies may internationalise for many reasons, not necessarily to
save costs. These reasons, however, are not included in the theorem (Oviatt &
McDougall, 1994). Secondly, the theory does not distinguish well between the
individual stages of internationalisation, especially where partnerships are concerned
(Gatingnon & Anderson, 1988). Thirdly, it is often difficult to quantify empirical data
because many aspects of transaction costs are hardly observable, such as the cost of
business relationship building (Thai 2008).
38
FB studies have not made much use of the transaction cost theory because it does not
reflect that family businesses are irrational organisations (Pukall & Calabró, 2015).
Indeed, this theory strongly emphasises economic cost-saving considerations
(Weisfelder, 2001) but provides no assistance in understanding non-economic decision
drivers, like non-financial values and goals of FBs. Also, it does not acknowledge that
FBs might not want to internationalise to emerging markets for simple cost reduction
reasons, but for market seeking or to fulfil family-specific goals, such as increasing
family wealth or providing employment for family members. The transaction cost
theory thus does not provide an adequate framework for investigating the set research
question and derive propositions for the given research context.
3.2.1.2 Internalisation theory
The internalisation theory goes a long way back to the work of Ronald Coase (1937),
who looked on transaction cost of foreign activities. The internalisation theory
evaluates conditions under which it is more efficient to organise economic activity
(Weisfelder, 2001, as cited in Thai, 2008). The theory distinguishes between internal
markets (where planning is performed by the company only) and external markets (i.e.
trade among autonomous entities). Internationalisation is seen as a process of
internalising activities, which is why theorists define internationalisation as “the
process of making a market within the firm” (Rugman, 1981 pp. 20 & 50-51, as cited
in Thai, 2008).
The internalisation theory has received special attention from researchers focusing on
MNEs such as the “Reading School”, e.g. Buckley & Casson (1976), Dunning (1980)
or Rugman (1980). These researchers claim that market failures (e.g. information cost)
are the driving force for MNEs to invest directly in foreign markets instead of seeking
licensing agreements. It is important to note that MNEs have a specific advantage over
competitors and protect it through their organisational structure. Only if this is assured
will MNEs embark on internationalisation. As in other economic streams, theorists
claim that this occurs only when the benefits of internationalisation outweigh the costs
and thus presuppose rational decision-making (Erminio & Rugman, 1996).
Simple benefits vs cost calculations expose the shortcomings of this theory. For
example, it largely neglects other forms of market entry, such as exporting, which is
only seen as a stepping-stone for FDI. However, exporting is the predominant entry
mode in MNEs (Johanson & Vahlne, 2009) and FBs (Kontinen & Ojala, 2010a). This
39
also applies to later entry modes such as licensing, which bear the risk of know-how
losses. Further, this theory does not capture the process of internationalisation, but
explains driving economic factors versus entry modes (Buckley & Casson, 1998;
Calof & Beamish, 1995). Also, Buckley (1988, as cited in Thai, 2008) criticised the
theory for being static and difficult to test, because the measurement of key variables
is not established.
All in all, the internalisation theory is not the correct theoretical setting to address the
set research question of this research endeavour. In fact, FB internationalisation
studies have barely made use of this theory because its setup does not account for the
uniqueness of FBs, as it roots in economic theory and gained its empirical verification
from MNE studies. Also, it does not address non-financial values and goals existent in
FBs and therefore falls short on providing the necessary knowledge to deduce
propositions.
3.2.1.3 Eclectic framework
The eclectic paradigm of international production is a widely used framework for
assessing the why and where of international production (Erdener & Shapiro, 2005). It
argues that firms internationalise in order to avoid disadvantages or to capitalise on the
advantages of imperfections in the external mechanism, e.g. differing labour cost
across geographies, to seek resources and advantages (Austin & Kohn 1990, as cited in
Thai 2008). The paradigm is rooted in internalisation and transaction cost theory
(Dunning, 2008).
Dunning (1988) explains corporate internationalisation mode choices by referring to
competitive advantage considerations. These competitive advantage considerations
rest on three parameters.
The first parameter is ownership advantages. Ownership advantages are developed in
the home market, but provide critical resources for international expansion (Dunning,
1988). These include tangible assets such as specific natural resources or capital, as
well as intangible assets, for example a strong brand (Buckley & Casson, 1981) or
unique marketing capabilities (Dunning, 1988). Additionally, a company may be able
to capitalise on cross-border governance opportunities (Dunning, 1993). Such
opportunities may come from economies of scale, scope or learning (Tolentino, 2001).
More recently, Dunning (2002) incorporated relational assets. This refers to the ability
40
to create beneficial relations and networks which can prove helpful for
internationalisation. The second parameter is location-specific advantages (Dunning,
1988). Location-specific advantages differ from one country to another. Dunning
(2008) categorised location advantages in three main groups: economic advantages
(e.g. labour force, market size etc.), political risks (e.g. regulatory changes, trade
policies etc.) and social advantages (e.g. favourable demographics, psychical closeness
to the home country etc.).
The third parameter focuses on internalisation advantages. The latter are transferable
across geographical boundaries and stem from the control of key assets (Dunning,
1988). In short, it addresses the ability to leverage domestic advantages by
internalising markets into the company (Dunning, 1998 as cited in Erdener & Shapiro,
2005). The transferability of assets in internalisation is subject to transaction cost
considerations, as not all assets can be transferred easily and in the same way. A
common example is know-how, which is subject to evaluation uncertainties (Dunning,
1993).
The OLI paradigm gained international recognition and acceptance, especially in
economics (Erdener & Shapiro, 2005). Nevertheless, McCann & Mudambi (2004)
argued that Dunning‟s theorem was outdated and did not explain changes that had
happened since invention of the paradigm. Also, the paradigm was primarily used to
explain the internationalisation behaviour of Western MNEs (Dunning, 2001), while
neglecting the increasing importance of smaller companies from other parts of the
world (Erdener & Shapiro, 2005).
Looking at FB internationalisation, evidence is scarce. Erdener & Shapiro (2005)
applied the eclectic framework to look on cultural and economic factors in the
internationalisation of Chinese FBs and found Dunning‟s work helpful to organise
their results. Zahra (2003) and Fernández & Nieto (2005) both examine how family
ownership affects internationalisation in economic terms and take an eclectic stance.
As many other economic theories of internationalisation, also the eclectic paradigm
draws its empirical grounding from studies on MNEs (Dunning, 2008; Thai, 2008)
which are very different from FBs. Overall, the eclectic paradigm has rarely been
applied in the FB context (Kontinen & Ojala, 2010a; Pukall & Calabró, 2015) because
the theory is far from an organisational type deeply shaped by human behaviour
(Goméz-Mejia, et al., 2008, 2011). Also, previous studies only looked at economic
41
factors in FBs such as family ownership and risk proclivity (Zahra, 2003; Fernández &
Nieto, 2005).
For this research project the author does not advocate the use of the eclectic
framework as a theoretical foundation. Beside its centricity on MNEs from western
countries, the framework takes a purely economic stance on internationalisation. It is
therefore unsuitable for explaining how non-financial values and goals in FBs
influence the internationalisation process. Moreover, the paradigm takes a static view
on advantage parameters (Benito & Welch, 1997), while this study observes the
internationalisation process which is the flow of decisions, resources and behaviour
over time.
3.2.1.4 Resource-based theory
The resource-based theory explains performance differences within industries by
addressing firm resources. Resources are defined as “all assets, capabilities,
organizational processes, firm attributes, information, knowledge, etc. controlled by a
firm that enable the firm to conceive of and implement strategies that improve its
efficiency and effectiveness” (Barney, 1991, p. 101). Firms achieve a competitive
advantage from their resources, which may not be reproducible or substitutable
(Barney, 1991, 2001; Peteraf, 1993). Resources are thus reference points for corporate
strategy-making and the source of a company‟s power (Grant, 1991).
However, resources alone do not create a competitive advantage (Barney, 1991;
Sirmon & Hitt, 2003). Instead, resources must be organised and managed in an
effective way to create competitive advantages (Sirmon & Hitt, 2003).
In comparison to the eclectic framework and transaction cost theory, resource-based
theory is more specific on several issues. Firstly, it specifies the nature of resources
more adequately than the eclectic paradigm (Peng, 2001). Secondly, the resource-
based view highlights the exploitation and development of resources, not just their
exploitation as in the transaction cost theory (Madhok, 1997, as cited in Thai, 2008). A
further advantage of this theory is that it allows the exploration of dynamic conditions
and is hence not as static as the eclectic or transaction cost theories.
Nevertheless, the theory has its shortcomings. Peng (2001) points out that although the
theory refers to organisational learning, it does not comment on strategic alliance
building. As a resource-based theory it presupposes the equilibrium of product and
42
factor markets (Barney, 1991, as cited in Thai, 2008). It takes for granted that every
market has the necessary institutions to foster market efficiency. Thai & Chong
(2013), however, found that such institutions were lacking in Vietnam and that other
internationalisation theories are better suited to addressing such issues.
In FB internationalisation studies the use of resource-based theory is contemporary
and has gained supporters (Kontinen & Ojala, 2010a; Pukall & Calabró, 2015). A
good example is Graves & Thomas‟s (2006) study on the internationalisation of
Australian FBs in which they compared the capabilities of FBs and non-FBs in the
process of internationalisation. They found that the managerial capabilities of FBs lay
far behind those of non-FBs. However, such studies tend to focus on specific resources
or capabilities and their influence on internationalisation performance, while they
leave process-related questions unanswered (Graves & Thomas, 2006; Kontinen &
Ojala, 2010a; Pukall & Calabró, 2015).
Overall, the theory refers to resources such as capital or knowledge, but does not
identify the emotional drivers behind the business, especially non-financial values and
goals of FBs. Apart from this, the theory does not comment on internationalisation
steps, especially FB internationalisation steps, and is therefore not equipped to produce
propositions on how the non-financial values and goals of FBs play out in the
internationalisation process to emerging Asia.
3.2.2 Internationalisation as an experimental learning process
Experimental learning process models stand in clear contrast to the idea of the
economic school that internationalisation is driven by optimal resource allocation and
usage strategies across different geographies. Rather, these models describe
internationalisation planning and strategy-making as a process of incremental
adaptation to changing environmental conditions (Aharoni, 1966, as cited in Thai,
2008). The behavioural school is rooted in the behavioural theory of the company (as
explained in Chapter 3.1.2.1) attesting the limited rationality of organisations and their
decision-makers, a lack of knowledge about alternative solutions and their effects,
conflicting goals and aspirations, as well as a desire to avoid risks (Thai, 2008).
These thoughts have influenced three major models of internationalisation, namely
psychic distance (Johanson & Wiedersheim-Paul, 1975), the Uppsala models
43
(Johanson & Vahlne, 1977, 2009) and the BG phenomenon (Cavusgil & Knight,
2004), which are explained in the subsequent sections.
3.2.2.1 Psychic distance
The concept of psychic distance belongs to the core theories of behavioural
internationalisation studies. It is defined as the “(…) factors preventing or disturbing
the flow of information between a firm and market” (Johanson & Wiedersheim-Paul,
1975, p. 307-308). The efficiency of information exchange depends on how well
information on foreign market needs to flow to the firm and vice versa (Johanson &
Wiedersheim-Paul, 1975, as cited in Child et al., 2002). The definition stresses the
view of internationalisation being a dynamic and experimental learning process. It is
critical that information is not only collected, but also interpreted correctly in the given
context to deduce the correct market strategy (O‟Grandy & Lane, 1996). Psychic
distance creates gaps between the company and the foreign market, and may prove a
major obstacle for the company‟s internationalisation (Johanson & Vahlne, 1977,
1990). It should be noted that psychic distance is not static, but changes over time due
to developments of social, cultural and economic exchanges.
The understanding of distance itself has changed in the last 60 years. Early studies
took an economic stance on distance by looking at transportation costs while applying
the laws of comparative advantage in international trade theory (Daniels et al., 1979).
Beckermann (1956) focused on the costs of traversing to explain the distribution of
exports and imports. He argued that companies would first export/import to/from
economically nearer countries. In his view, transaction costs played the main role in
the import/export distribution relation. Johanson & Wiedersheim-Paul‟s research
(1975) introduced a sociological aspect to the psychic distance debate. They counted
factors such as language, culture, political systems, level of education etc. among its
determinants and stressed that psychic distance is correlated with geographic distance.
In the 1980s, Hofstede‟s pioneering research on cultural differences added focus to the
discussion. Hofstede rated the differences between nations by establishing cultural
determinants such as individualism, uncertainty avoidance, and masculinity-femininity
and power distance. According to his research Austria, Germany and Switzerland are
countries with very low psychic distance between each other, as the countries of south-
eastern Asia, while there is large psychic distance between German-speaking countries
and south-east Asian countries. Hofstede (1980) suggested that geographical proximity
44
may contribute to low psychic distance, e.g. German-speaking countries. But there are
exceptions to this rule, for example the US and Cuba, which are geographically close,
but have high psychic distance (Johanson & Wiedersheim-Paul, 1975).
Psychic distance theorists followed Hofstede‟s suggestion by saying that companies
move to markets they understand first, before they target more distant markets
(Johanson & Vahlne, 1977; Kogut & Singh, 1988; Benito & Gripsrud, 1992).
Nordstrom & Vahlne (1992, as cited in Thai, 2008) pointed out that structural
differences, such as legal systems and institutions in general as well as language
barriers, should be considered in psychic distance. Fletcher & Bohn (1998, as cited in
Child et al., 2002) found from a larger sample of Australian firms that the manager‟s
personality could have a decisive impact on internationalisation, but not necessarily
through the influence of psychic distance. Moreover, Dow (2000) argued that psychic
distance can be a good predictor of early export market selection.
As shown, the concept has developed from a purely economic stance to a behavioural
stance today, incorporating various cultural variables. On the bottom line, this research
stream agrees that companies adopt internationalisation pathways which are shaped by
psychic distance considerations (Ahokangas, 1998). This assumes that there is a
similarity among psychically close countries and that it is easier for companies to learn
to succeed in markets they understand (Kogut & Sigh, 1988, as cited in Thai 2008).
Numerous scholars have found evidence for the concept of psychic distance. This
includes prominent Nordic scholars, such as the fathers of the Uppsala model
Johanson &Vahlne (1977) and Johanson & Wiedersheim-Paul (1975) but also
Loustarinen (1979). Also, family business studies found proof for the concept (George
et al., 2005; Basly, 2007; Claver et al., 2007; b.) Kontinen & Ojala, 2010).
However, many studies also cast doubt on the concept. O‟Grady & Lane (1996)
showed that using psychic distance may produce false results because the level of
uncertainty depends highly on the perceived similarity between the two markets. Also,
Child et al. (2002) suggested that the psychic distance concept is in need of general
refinement after analysing the internationalisation behaviour of Hong Kong-based
companies, which proved to have more to do with migration ties of the entrepreneur.
This made the entrepreneur prefer foreign markets where he/she had family relations,
not considering the hurdles of psychic distance.
45
Moreover, the concept seems to be helpful in explaining the early phases of
internationalisation (Dow, 2000), especially during agency establishment (Johanson &
Wiedersheim-Paul, 1975) but falls short in later stages. Nevertheless, the aim of this
research is to study the internationalisation process of AGS FBs as a whole and not
only in early phases, as these companies may choose to increase their international
commitment and establish, for instance, production facilities in emerging Asia.
Lastly, the concept uses an absolute measure of distance and neglects perceived
distances and how these might influence the decision-makers‟ choice and the
company‟s performance in a chosen market (O‟Grady & Lane, 1996). This study takes
a non-financial value and goals perspective on internationalisation. Non-financial
values and goals are, by definition, shaped by individual perceptions. As a result they
may have significant influence on the business behaviour (Weber, 1934; McKinnon,
2010). This leads to the conclusion, that the psychic distance concept does not have
the explanatory power to deduce propositions for the needs of this research project.
3.2.2.2 The Uppsala model of internationalisation
A main contribution to the behavioural school of internationalisation is stage theory,
also known as the Uppsala model of internationalisation by Johanson & Vahlne
(1977).
The model was developed based on a sample of four Swedish manufacturing
multinationals (Johanson & Wiedersheim-Paul, l975; Johanson &Vahlne, 1977).
Johanson & Wiedersheim-Paul (1975) observed that these multinationals focused on
their home market first, before they followed a gradual, incremental
internationalisation going hand in hand with increasing resource commitment, while
acquiring internationalisation-critical knowledge and experiences along the way.
The authors of the Uppsala models suggest three different concepts, which comprise
stage theory. These are the establishment chain, experimental learning and psychic
distance.
The establishment chain
Johanson & Wiedersheim-Paul (1975) observation showed that companies tended to
follow a stepwise approach to internationalise, which is commonly referred to as the
establishment chain. This chain is typically constituted of the following four steps:
46
1. No or only sporadic exporting
2. Exporting via agent
3. Establish sales subsidiaries
4. Start abroad production
These steps go hand in hand with increasing resource commitment and growing
internationalisation knowledge and experience (Johanson & Wiedersheim-Paul, 1975;
Johanson & Vahlne, 1997). However, firms might skip stages if they already have the
sufficient internationalisation knowledge. In addition, market size has an impact on the
establishment, as the market size might not be large enough to undergo all stages.
Experimental learning
The Uppsala model explains internationalisation as an experimental learning process.
Internationalisation knowledge is acquired during the process (Johanson &
Wiedersheim-Paul, l975; Johanson &Vahlne, 1977). The model is therefore built on
the assumption that lacking knowledge is a considerable obstacle for
internationalisation. However, knowledge can be obtained through establishing foreign
operations, which decreases uncertainty and motivates firms to deepen their
international commitment (Johanson & Vahlne, 1977, 1990)
Psychic distance
The Uppsala model also rests on the psychic distance concept. According to Johanson
& Wiedersheim-Paul (1975) companies tend to internationalise to psychically close
countries first, before targeting more distant ones, as outlined in Section 3.2.2.1.
Practically speaking, a company would first internationalise to countries close in
language, culture and geography before expanding to more distant countries. This is
again a process of experimental learning and declining risk avoidance, as companies
learn about the countries they are present in (Johanson & Vahlne, 1977, 1990). Every
country and culture creates new knowledge and experience and provides them with the
confidence they need to embark on further missions.
The 1977 model has since become an important concept in internationalisation studies
of the firm (Kontinen & Ojala, 2010a). However, it has also attracted critique from
several emerging theories such as the BG view, which holds that companies may
internationalise from inception (McDougall, 1994 and Knight & Cavusgil, 1996). Thai
& Chong (2008) found positive evidence on the BG phenomenon looking on the
internationalisation process of Vietnamese family SMEs. Other researchers also cast
47
doubt on stage theory‟s validity (Turnbull, 1987; Millington & Bayliss, 1990; Bell,
1995; Oviatt & McDougall, 1997, 2005).
As a reaction to this critique Johanson & Vahlne (2009) came up with a revised
Uppsala model as pictured in Figure 9. It aims to incorporate the changes that have
happened in the fields of economic and regulatory environments, business practices
and theoretical advances since 1977. The new model is built on the former concept but
includes several major changes. Firstly, it strongly emphasises the importance of
networks and network relationships. The authors assess networks as the main driver
for internationalisation. Based on Coviello (2005), Johanson & Vahlne (2009) argue
that today it is more important to overcome the liability of outsidership, meaning not
being part of a network, than to overcome the liability of foreignness, meaning not
being a native company in the target market. In addition, Johanson & Vahlne (2009)
point to the importance of trust. They argue that trust and commitment are not only
products of formal constructs but also of having common binding experiences that
deliver the ground for mutual trust.
Figure 9: The revised Uppsala model of 2009
Source: Adapted from Johanson & Vahlne (2009 p. 1424)
48
With regard to FB internationalisation, a growing number of studies find proof of the
Uppsala model in their results e.g. Okoroafo (1999), Child et al. (2002), Claver (2007),
Graves & Thomas (2008), Kontinen & Ojala (2010b). This may be the case because
FBs show a preference for risk avoidance when they internationalise, and a stepwise
internationalisation process may fulfil this need (Kontinen & Ojala, 2010b).
However, there have been rejecting voices as well, e.g. by Lin (2013) who found that
FB opt for rapid pace, narrow scope and irregular rhythm of internationalisation. Apart
from that the model was developed on a data set of MNEs (Oviatt & McDougall,
1997; Johanson & Vahlne, 2009) which are different from FBs. Further, the model
assumes that knowledge is gained, stored and used in the decision-making system of
the organisation (Thai, 2008), while in FBs often the family CEO is the only decision-
maker. Also, the model fails to address factors that influence the process, as it expects
that “the internationalisation process, once it has started, will tend to proceed
regardless of whether strategic decisions in that direction are made or not” (Johanson
& Vahlne, 1990, p. 12, as cited in Thai, 2008). Contrary to that, this study takes a
process view. Further, its evidence comes from developed economies and proof from
emerging markets is still scarce (Thai & Chong, 2008, 2013). Lastly, the Uppsala
theory does not account for the non-financial values and goals driving decision-
making and may influence internationalisation; rather it only covers strategic
functions, such as learning and entry modes.
All this makes the Uppsala model unsuited to be used as leading theoretical concept
for this research project.
3.2.2.3 Innovation-related models – the Born Global theory
Contrary to the long-term, process-oriented learning perspective of the renewed
Uppsala model stand innovation-focused models. These models assume that managers
and individuals in organisations are the main drivers of internationalisation and not
organisational capabilities or psychic distance (Thai, 2008). Moreover, these models
favour firm behaviour over geographical market choices. This breed is most
prominently addressed by the Born Global theory (BG) (Rialp et al., 2005; Cavusgil &
Knight, 2015).
The BG theory states that ventures may choose to internationalise at, or right after,
inception despite the hurdles of asset parsimony (Cavusgil & Knight, 2015). The term
was coined by McKinsey & Co., a consultancy, in 1993 (Rennie, 1993). The academic
49
community already observed unusual rapid internationalisation processes in the early
1990s (Hedlund & Kverneland, 1985; Jolly et al., 1992), and the interest has grown
ever since (Rialp et al., 2005; Cavusgil & Knight, 2015). For this theory, psychic
distance does not play a significant role, as BGs often chose to enter far distant
markets very early on. Therefore, they obtain necessary internationalisation
capabilities in a much shorter time than traditional firms, as explained by the Uppsala
model (Zahra et al., 2004). Internationalising under the constraints of asset parsimony
indicates that BGs are fairly risk-averse (Oviatt & McDougall, 1994, 1997; Bell &
McNaughton, 2000; Rasmussen & Madsen, 2002), which further contradicts psychic
distance considerations (Johanson & Vahlne, 1977).
Cavusgil & Knight (2015) and Laanti et al. (2007) point out that external factors have
played an important role in the upcoming of this type of company behaviour. Among
these factors are globalisation, technology advancements (such as the Internet, which
makes it much easier to access international management capabilities (Knight &
Cavusgil, 1996). Oviatt & McDougall (2007) and Laanti (2007) stress the increasing
importance of global networks, which additionally facilitate early internationalisation.
In addition, home market conditions play a vital role for the emergence of such
companies (Gabrielsson et al., 2008). Studies in Nordic countries found that
companies react to inadequate home market demand, with early internationalisation to
seek financial stability (Madsen & Servais, 1997; Freeman & Cavusgil, 2007;
Cavusgil & Knight, 2015).
On the other side, there are a number of internal factors which drive early
internationalisation. In their 2004 article, Knight & Cavusgil highlighted the role of
innovation because it is a source of new knowledge and organisational capabilities.
Nelson & Winter (1982) and Schumpeter (1934) argue that innovation is not
necessarily linked to the development of a new product but can translate into new
strategic approaches to penetrate markets by internationalisation. Innovation also plays
an indirect role in the BG theory, because most evidence stems from young high-tech
SMEs in niche markets (Fernhaber et al., 2007; Cavusgil & Knight, 2015). Most
importantly, however, researchers find explanation of this rapid form of
internationalisation in the characteristics and goals of the company management
(Cavusgil & Knight, 2015). Cavusgil & Knight (2015, p. 6) note that BGs strive
despite “(…) conditions of asset parsimony (…)” and “(…) appear to overcome such
deficiencies by leveraging unique capabilities and strengths – a high degree of
entrepreneurial orientation, persistence, innovation, and differentiated offerings”.
50
These factors are attributed to the founders and managers of BGs, which tend to be
start-up ventures. With this, the venture manager and his goals form an integral part of
the BG theory (Cavusgil & Knight, 2015). Also other studies agreed on the role of an
entrepreneurial orientation, to foster early internationalisation (Jones & Coviello,
2005; Kuivalainen et al., 2007; Mathews & Zander, 2007). Thai & Chong‟s (2008)
study on BGs in Vietnam found that a main driver for internationalisation was the
manager‟s personal leadership desire.
Evidence for BGs has strengthened over the years (Cavusgil & Knight, 2015) and was
found in diverse geographies, such as Australia (McKinsey & Company, 1993;
Rennie, 1993) and the USA (Cavusgil & Nevin, 1981; McKinsey & Company, 1993).
But there have also been other studies, which found evidence in emerging markets
(Cavusgil & Knight, 2015) for example in south-east Asia (Thai & Chong, 2008) and
Latin America (Lopez et al., 2009).
The concept of BGs has, despite its youth, attracted critique from a wide range of
scholars. The first common criticism is that the field should move toward more
consistency in labelling (Cavusgil & Knight, 2015), as these vary from „born globals‟
(Rennie, 1993) over „high technology start-ups‟ (Jolly et al., 1992) to „early
internationalising firms‟ (Rialp et al., 2005), to name just a few. Secondly, Andersen
(1993) criticised the complexity of the model and the number of variables, which are
composed of hardly observable concepts. As a consequence, internationalisation stages
are difficult to track. Finally, the theory suffers from an inconsistency of criteria across
many studies such as differing explanations and definitions (Madsen et al., 2000;
Rasmussen et al., 2001, Fan & Phan, 2007; Cavusgil & Knight, 2015). This makes it
difficult to cross-compare these studies (Madsen, 2013).
Despite the popularity of this concept, the researcher evaluates it as unsuitable for
deducing propositions for the defined research topic. The reasons for this are threefold.
Firstly, the BG theory offers answers for the internationalisation of new ventures
SMEs but fails to comment on enterprises that are, for example, held by a subsequent
generation. FBs for the purposes of this study, however, are at least in the second
generation. Secondly, the theory is heavily focused on exporting, although exporting is
only the first step within an internationalisation process and this study takes a process-
driven perspective. Thirdly, the theory attributes instant internationalisation to
manager-specific characteristics and goals, such as personal drive (Thai & Chong,
2008). Non-financial goals are indeed part of this study. However, goals are rooted in
51
non-financial values which are not addressed by the theory. Also, BG contributions
have highlighted that management characteristics and goals do have an influence on
internationalisation. Still, they fail to define the nature of these characteristics and
goals and how exactly they shape the internationalisation process.
3.3 Research gap and research question
This chapter reviews existing theories in two areas; non-financial goals and values,
and internationalisation theories in the realm of FBs.
Looking at the non-financial values and goals of FBs, there are no direct management
theories addressing this issue. Most closely related are theories which cover corporate
decision-making, dealing with the principal-agent/steward relationship, which can be
divided into the economic school, the humanistic school and mixed models.
Economic models, here represented by agency theory, argue that there may be
problems in aligning the interest of principal and agent due to diverging goals. These
models see such diverging interests mainly in differing risk inclination or wealth
maximisation goals. This stream of theories is inappropriate for producing reliable
propositions for this research for the following reasons. Firstly, they focus broadly on
principal agent relationships but do not explain situations in which interests are
aligned. Secondly, they only recognise economic decision drivers (e.g. wealth
maximisation) and pay no attention to non-economic/non-financial decision drivers.
Thirdly, the theory does not comment on non-financial values and how they influence
non-financial goals in FBs.
Humanistic models argue that besides economic decision drivers, non-economic ones
also exist. However, these theories exhibit the following shortcomings. Firstly, they
only recognise that principals and agents may have non-financial goals and
aspirations. However, they do not explain which these are and how, when, where and
by whom they might come into force. Secondly, they do not explain if such non-
financial goals are underpinned by certain non-financial values. Thirdly, given their
lack of clarity on what these goals are, they are difficult to measure and to compare.
Consequently, this research stream does not provide a helpful theoretical framework
for this research project.
52
Mixed models, such as the SEW concept, argue that firms, specifically FBs consider
economic and non-economic goals as pivotal reference points for decision-making.
This theorem is the first of its kind to provide a better explanation of FB goals,
however the following weaknesses make it ill framed for the use in this project.
Firstly, the concept was developed only conceptually and lacks empirical grounding.
Secondly, it has not been tested in culturally specific contexts. Thirdly, it mentions
that there are goals but it is not conclusive on what they are, how many there are and
when and how they play out in a strategic process. Fourthly, it does not explain non-
financial values and how those might be the source of non-financial goals.
Looking at internationalisation studies, the economic school argues that firms take
rational decisions driven by competitive advantage transfer and cost optimisation
considerations in a systematically planned way. However, this assumption can hardly
be applied to FBs due to the following reasons. Firstly, reality shows that firms rarely
make decision purely on rational thinking (Mintzberg et al., 1976). Secondly, FBs may
have conflicting goals and aspiration (Claver et al., 2009) or might even
internationalise for totally different reasons such as keeping family harmony (Scholes
et al., 2015) by providing job opportunities for family members. Thirdly, the economic
model assumes the availability of resources, existing internationalisation-relevant
institutions and information symmetry. However, FBs often suffer from an imminent
lack of various resources (Fernández & Nieto, 2006; Graves & Thomas, 2006) while
institutions are underdeveloped and information flows inefficient Vietnam (Thai &
Chong, 2008).
The behavioural school of internationalisation characterises internationalisation as a
process of incremental adaptations to changing environmental conditions (Aharoni,
1966, as cited in Thai, 2008) and attests organisations and their decision makers
limited rationality, a lack of knowledge about alternative solutions and their effects,
conflicting goals and aspirations, as well as a desire of risk avoidance (Thai, 2008).
This line of reasoning bears more explanatory power on the investigated research topic
than the economic school. Nevertheless, the following shortcomings make theories ill-
suited for this research project. Firstly, they focus specifically on early phases of
internationalisation (mostly exporting) while later stages are not covered in the same
depth. Also, empirical results are mixed, especially when stage theory is concerned as
it has “merit in its use as a framework for classification purposes rather than for an
understanding of the internationalisation process itself” (Turnbull, 1993, p. 183, as
cited in Thai, 2008, p. 72-73)
53
To conclude, neither existing theories explained in the values and goals section, nor
established internationalisation studies are equipped to explain how non-financial
values and goals influence the internationalisation process of AGS FBs to emerging
Asia. In fact, theories in Section 3.1 do not even provide an answer to what the
difference between non-financial values and goals is and which are existent in FBs.
Also, internationalisation theories do not provide a picture of how the nature of AGS
FBs‟ internationalisation process to emerging Asia is. In short, nothing about the
influence of non-financial values and goals of AGS FBs to emerging Asia is known.
However, the topic deserves attention because of the following reasons.
FBs account for the lion‟s share of privately held companies in the AGS countries
(Niefert et al., 2009). Many researchers agree that FBs have strong non-financial goals
that drive their business behaviour (Gómez-Mejía et al., 2007; 2011; Berrone et al.,
2012). Non-financial FBs strongly internationalised to emerging Asia in recent years
(PWC, 2012). Therefore, it would be beneficial to understand how their non-financial
values and goals shape this process. In order to do so, this study tries to uncover the
dynamics of an unexplored problem and aims at building a theory in this area. This
research follows the call of Kontinen & Ojala (2010a) to fill the gap of research on
internationalisation directed toward a specific target market and of Welch &
Paavilainen-Mäntymäki (2014) nurture our understanding of internationalisation
processes as a whole. Further, it responds to the calls of Pukall & Calabró (2013) on
the effect of family related factors on FB internationalisation as well as Liang et al.‟s
(2014) suggestion for a deeper investigation of how family dynamics affect
internationalisation. The research problem and question are depicted in Table 5.
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Table 5: Research problem and research question
Research problem Research goal
No existing theory provides satisfactory answers
about the influence of non-financial values and
goals on the internationalisation process of AGS
FBs to emerging Asia
1) Shed light on an unexpected problem
2) Advance theory
Research question Research objective
Overall RQ0: How do non-financial values and
goals influence the internationalisation process of
AGS FBs to emerging Asia?
Sub RQ1: What are non-financial values and
goals in AGS FBs and what is the difference
between the two?
Sub RQ2: What is the nature of the
internationalisation process of AGS FBs to
emerging Asia?
To understand how non-financial values
and goals influence this process
To understand what the non-financial
values and goals of AGS FBs are and
where the difference between the two lies
To learn about their internationalisation
strategy development in the chosen
context
Source: Author’s own creation
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4. Methodology
The previous chapter concluded that existing literature cannot answer the overall
research question of how non-financial values and goals shape the internationalisation
process of AGS FBs to emerging Asia. The research field is still young and has not
sufficiently examined the impact of non-financial values and goals on
internationalisation and does not provide answers for specific cultural contexts,
especially not of AGS FBs internationalising to emerging Asia. This leaves the
researcher in a setting where it is impossible to deduce clear propositions from
previous research. This situation called for an inductive research approach which is
outlined in detail in the subsequent sections.
This chapter is structured as follows. Firstly, it comments on the philosophical stance
of this research and suggests tackling the set research question with a qualitative
approach. Secondly, it argues for the use of Straussian grounded theory for this
research endeavour. Thirdly, the process of data collection and analysis is outlined.
Lastly, it comments on validity and reliability considerations, as well as on the
limitations of this research.
4.1 Research philosophy
Research can be defined as “an original investigation undertaken in order to
contribute to knowledge and understanding in a particular field” (Meyers, 2013 p. 6).
Scientific investigations are shaped by the belief that the world can actually be
observed. This view presupposes philosophical assumptions which steer the research
endeavour and are the “basic belief system or worldwide view that guides the
investigator” (Guba & Lincoln, 1994, p. 105). Sobh & Perry (2006) argue that this
worldview consists of ontology, epistemology and methodology and should be
clarified a priori.
There is no binding consensus on the number of philosophical assumptions in research
(Myers, 2013). For example, Guba & Lincoln (1994) present four, namely positivism,
post-positivism, critical theory and constructivism. Other researchers, such as
Olikowski & Baroundi (1991) follow Chua (1986) with their definition of three
philosophical paradigms. These are positivism, interpretivism and criticism as depicted
in Figure 10. This study relies on Olikowski & Baroundis‟ (1991) view of three
assumptions, as suggested by Myers (2013).
56
Figure 10: Philosophical assumption in social sciences
Source: Adapted from Myers (2013, p. 37)
Firstly, positivism assumes that there is an objective reality which can be described by
measuring properties being independent from the researcher (Myers, 2013). Positivism
aims at testing theory by being objective. In turn, this means that positivism excludes
discovery effects (Guba & Lincoln, 1994). Critics argue that it is well suited for
science research but falls short on the social science studies, where humans in complex
socio-cultural organisations and situations are observed (Sobh & Perry, 2006; Myers,
2013). Such assumptions however, closely match with the needs of quantitative studies
in the social sciences, although qualitative studies also adopt positivistic assumptions
(Wong & Ellis, 2002).
Secondly, interpretivism argues that reality can only be understood through social
constructions (such as language or consciousness) and by using their instruments.
Another characteristic is that interpretivists do not predefine independent and
dependent variable (Kaplan & Maxwell, 1994). Their focus is on human-sense making
and behaviour in situation specific contexts over a given period of time. The purpose
of interpretive research is to “(…) understand phenomena through the meanings that
people assign to them” (Myers, 2013 p. 39). This school of thought rejects the use of
quantitative natural science methodologies.
As a third philosophical stance, there is critical realism. It assumes that social reality is
historically constituted and is produced and perpetuated by human beings (Blaikie,
57
2009; Meyers, 2013). Critical realism‟s core belief is that reality cannot be assessed
directly (Easterby-Smith et al., 2002) but that phenomena are concept-driven, which
must be observed by casual explanations (Sayer, 1992, 2002). Contrary to positivism,
which advocates measurability and neglects the difference between natural and social
sciences, criticism specifically addresses such differences (Sayer, 2002; Myers &
Klein, 2011). According to Sayer (2000) critical realists can choose quantitative or
qualitative research methodologies. He points out that the choice should be based on
the needs and learning objectives of the respective research project. Additionally, this
stance acknowledges the benefits of data triangulation, which is common practice and
adds to the validity of qualitative research (Brymen & Bell, 2009; Meyers, 2013; Yin,
2014). Critical realism is particularly helpful when mechanisms are to be identified,
which can hardly be explained on the macro level, as the underlying events and
situations are context-based and driven by subjective perceptions (Wynn & Williams,
2012). Easton (2010) concludes that critical realism simultaneously allows the
understanding of phenomena and the explanation of the data.
As this study aims to uncover how non-financial values and goals shape the
internationalisation process of AGS FBs to emerging Asia it adopts a critical
assumption worldview. This is because the critical realism stance allows the study of
the contexts and perceptions of the actors within the context, whilst relying on data
triangulation. Consequently, this research is in line with Marschan-Piekkari & Welch‟s
(2004) call for more in-depth studies in qualitative internationalisation research to
overcome the positivistic tendency in this field.
4.2 Research approach – the choice of qualitative research
Within the research realm, two different streams of research methodologies can be
distinguished; quantitative research and qualitative research.
Quantitative research methods have a history of use in the natural sciences for
observing natural phenomena (Myers, 2013). Over time, quantitative methods have
also gained a foothold in the social sciences. Examples of quantitative research
methodologies in the social sciences are surveys or statistical analysis as depicted in
Table 6. The benefit and aim of quantitative methodologies is to quantify observations
in order to “(…) represent values and levels of theoretical constructs and concepts and
the interpretation of the numbers is viewed as strong scientific evidence of how a
phenomenon works” (Straub et al., 2004 as cited in Myers, 2013, p. 7). Quantitative
58
methods are well-suited to the analysis of large quantifiable sample sizes to generalise
for a large population. On the other hand, quantitative research can hardly account for
social and cultural aspects in organisation and/or cultural settings. Consequently,
context observations are sacrificed for higher generalisability. Therefore, the
researcher did not adapt a quantitative research design, as this research project tries to
uncover processes and human behaviour in differing contexts and under changing
cultural conditions which can hardly be captured appropriately by quantitative
research tools.
Table 6: Qualitative and quantitative research approaches
Qualitative research:
A focus on text
Quantitative research:
a focus on numbers
Action research Surveys
Case study research Laboratory experiments
Ethnography Simulation
Grounded theory Mathematical modelling
Semiotics Structured equation modelling
Discourse analysis Statistical analysis
Hermeneutics Econometrics
Narrative and metaphor
Source: Adapted from Myers (2013, p.8)
Qualitative methodologies were originally developed in the social sciences. They are
particularly strong to study cultural and social phenomena (Myers, 2013). Qualitative
research accounts for the context in which decisions and actions are made. Contexts
are best studied by talking and interacting with people. Popular methodologies in
business studies are case study research (Yin, 2014), but also approaches such as
grounded theory (Myers, 2013) – as visualised in Table 6.
As qualitative data collection relies on what people have to say, it can “(…) help us to
understand people, their motivations and actions, and the broader context within
which they work and live” (Myers, 2015, p. 8). The benefits of qualitative research
are:
59
Good to study subjects in-depth
Well-suited to explanatory research
Good, when the topic is new
Study social, cultural and political aspects of people in organisations
Observation of long-term processes (Miles & Huberman, 1994)
But even qualitative methodologies suffer from shortcomings, such as limited
generalisation capability (Myers, 2013). This may be possible but only if the data set is
not based on sampling logic.
Despite the shortcomings of qualitative research, the author chose this methodology
stream for this research project. This is because this research project is an in-depth
study, and of an exploratory nature. Furthermore, it attempts to study a barely covered
field in which social and cultural aspects of organisations in specific cultural contexts
are the main research purpose. In addition, this research was focused on longitudinal
processes.
4.3 An inductive approach
This research follows an inductive research approach. Normally, research questions
are deduced by exploring research gaps in the literature and then explored abductively,
as they can rely on established theories in the given field (Kirkeby, 1994). However, in
the presented research, the literature review did not allow to deduce propositions
because the field is scarce and important categories and theoretical relationships
remain in the dark. Therefore, an inductive approach is needed to create a new
theoretical setting for this neglected research field.
4.4 Arguments for the use of grounded theory
To answer the overall research question of how non-financial values and goals shape
the internationalisation process of AGS FBs to emerging Asia, this study called for the
use of a qualitative methodology. As this field is still uncovered and former studies on
socioemotional wealth and FB internationalisation have not produced satisfactory
answers, this leaves the researcher with a setting in which relevant categories and
variables remain in the dark. This situation required a research methodology that
provided aid to develop categories and see their relationships deriving from the raw
data (Patton, 2002). Among qualitative research methodologies these criteria are best
60
met by grounded theory. According to Goulding (2002, p. 55) the use of this
methodology is recommended when “the topic of interest has been relatively ignored
in the literature or has been given only superficial attention”. This was the case in this
research endeavour. The investigation of non-financial values and goals in FBs is in its
very infancy (Berrone et al., 2012) and FBs internationalisation studies have neither
accounted for the influence of non-financial values and goals on internationalisation
yet, (Pukall & Calabró, 2013; Liang et al., 2014) nor has this field paid the necessary
attention to specific target markets (Kontinen & Ojala, 2010a).
Moreover, grounded theory serves the purpose of this study, because it allows the
explanation of context-based, process-oriented descriptions of organisational
phenomena (Myers, 2013). Lastly, this methodology helps to formulate theories that
“(1) enable an explanation of behavior, (2) are useful in advancing a theory, (3) are
applicable in practice, (4) provide a perspective on behavior, (5) guide and provide a
style for research on particular areas of behavior, and (6) provide clear enough
categories and hypotheses that crucial ones can be verified in present and future
research” (Goulding, 2002, p.43, as cited in Thai et al., 2012, p.4). These
characteristics are well suited to address the stated research questions.
Grounded theory is divided into two schools (Myers, 2013). The first is the Glaserian
School, which emphasises “the interpretive, contextual and emergent nature of theory
development” (Thai et al., 2012, p. 4). Its main suggestion is that the researcher should
not conduct a literature review prior to the data collection but only afterwards and then
integrate the literature into the emerging theory as secondary data (Glaser, 1992). This
approach seems unpractical for this research project because it is unrealistic not to
have any prior knowledge about the field. Also, this approach can take forever and this
study was subject to limited time and resources.
On the other side stands the Straussian school, which allows a prior literature review
and requires a strict data analysis by employing highly complex and systematic data
coding techniques (Strauss & Corbin, 1998). According to Strauss & Corbin (2008, p.
12) the researcher “begins with an area of study and allows the theory to emerge from
the data”. Myers (2013, P. 106) points out that the researcher should not have
“preconceived theoretical ideas” before the research project but allow the concepts to
emerge from the data. Straussian grounded theory seems more appropriate for this
research than its Glaserian sibling because this school allows conducting a prior
61
literature review to look for unanswered questions and lack of knowledge in the
literature. It was therefore employed as methodology for this research.
4.5 Data collection and analysis
This study followed a Straussian-grounded theory approach, which means that a
typical recursive process of data collection, coding and comparative analysis was
conducted until the results reached scientific saturation (Glaser & Strauss, 1967;
Corbin & Strauss, 1990; Thai et. al., 2012; Myers, 2013) as visualised in Figure 11.
Figure 11: Grounded theory’s recursive analysis approach
Source: Adapted from Locke (1996, p. 240), as depicted in Thai et al. (2012, p.5)
After a literature review, the researcher collects a first data set (Locke, 1996; Thai et.
al. 2012). This undergoes open-coding procedures, in which concepts are examined in
small text units (usually line-by-line). Next is axial coding, where relationships
between the categories at the higher level of properties and dimensions are discovered.
Finally, selective coding tries to establish the categories and integrate them to allow
theoretical statements. These statements provide the initial propositions, which are
then tested in the following data collection, by using theoretical sampling logic. This is
repeated until scientific saturation has been reached.
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4.6 Data collection strategy
4.6.1 Data sampling
According to Strauss & Corbin (1998) grounded theory does not have to fulfil the
requirements of statistical sampling. This is because it aims at discovering patterns and
not at testing hypotheses (Denscombe, 1998). However, as this study looks on the
special context of how non-financial values and goals shape the internationalisation
process of AGS FBs to emerging Asia, some basic case selection criteria were applied,
following theoretical sampling logic (Glaser & Strauss, 1967). In order to be classified
as a FB in the understanding of this study and the context of internationalisation to
emerging Asia, an observation prospect had to fulfil the following basic criteria:
1. Classifiable as a FB according to Zellweger et al.‟s definition (2013, p. 231),
stating that there has to be a high degree of family-ownership, managerial
involvement of family members and cross-generational aspirations. This meant
that the FB had to be at least in the second generation or there was a succession
process from the first to the second generation in progress.
2. Internationalised to at least one country in emerging Asia. In the understanding
of this study, a business has internationalised once it has exported products
abroad. This is a commonly used definition for internationalisation in both
practice (e.g. see KfW Economic Research (2012) and Baledegger (2013) and
academic research (Kontinen & Ojala, 2010 a)).
3. Headquartered in AGS because a) region has a traditionally high percentage of
FBs among privately held companies (e.g. Germany with 93% (Niefert et al.,
2009)), b) AGS FBs have not yet been subject of English-language research in
this context, c) for reasons of feasibility to the author and d) because this was
the geographical setting of this study
These criteria were applied to the pilot case and the subsequent 25 surveyed cases of
this study.
In grounded theory the researcher has to collected data until scientific saturation is
reached, which was the case after 25 FBs had been surveyed. The selection of these
cases was an ongoing process, following the suggestions of theoretical sampling logic
(Glaser & Strauss, 1967), which meant that the cases did not need to obey the
principles of common case study design (Eisenhardt, 1989) or statistical sampling
(Strauss & Corbin (1998). Strauss & Corbin (1998) suggest neither to control for
63
variables nor to look for homogeneity of population distribution and also not for
significance. Instead, they suggest concentrating on the dimensional variation of
concepts and their properties. Consequently, the researcher looked for theoretical
contributions that companies offered, following the patterns that emerged from the
previous cases, to further verify or decline these patterns. These patterns and the
suggestions for further interview participants by the interviewed FBs structured the
sampling approach, as recommended by Descombe (1998).
The following example illustrates how the sampling was done in practice. From Case
Company 16 it could be observed that trust played a significant impact on the CFO
appointment for the Chinese subsidiary, which meant that only people would get this
job if there had been a long standing, trustful relationship between the FB CEO and
the potential CFO candidate. FB CEOs clearly preferred employees who had worked
at the FBs headquarter for many years. To test this proposition the researcher looked
for two more companies that had similar operations in China or ASEAN, which
required a local CFO and where trust played a role, also including the respective time
period and industry perspective.
The number of cases is not predefined in grounded theory. The researcher had to
proceed with data collection until scientific saturation was reached (Thai et al., 2012).
As stated previously, scientific saturation was reached after 25 companies had been
studied and the interviews did not reveal new information anymore.
4.6.2 Data sources
This research project relied on data triangulation and therefore used a mix of data
sources (as suggested by Eisenhard, 1989; Brymen & Bell, 2009; Meyers, 2013; Yin,
2014). The biggest and most important contribution of data came from qualitative, in-
depth, semi-structured personal interviews. The researcher chose semi-structured
interviews, because they produce richer data than any secondary data, especially
because processes (using “how?” or “why?” questions) can be well investigated
(Easterby-Smith et al., 1994; Eisenhardt, 1989; Yin, 2014). Other available interview
formats, such as open interviews or structured interviews did not offer the above
benefits (Myers, 2013) and were not employed. Also, published information on FBs is
often rare, which further increased the value of interviews.
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Apart from interviews, supporting documents, such as company reports and archival
records were also used, following the suggestion of Brymen & Bell (2009) and Yin
(2014) in seeking data triangulation, as explained in Table 7, including concrete
examples and the strength of the respective type of evidence.
Table 7: Sources of evidence used for this study
Source of evidence Example Strength of this source
Interviews
Semi-structured interviews with key
decision makers in FBs
Semi-structured interviews with
industry experts
Directly addresses the core topic
(Yin, 2014)
Insightful and provides views of the
actual protagonists (Yin, 2014)
Supporting
documents
Company internal strategy papers
Values and mission statements from
websites
Corporate governance guidelines
Family charters
Stable and exact as information can
be reviewed over and over and
information are provided in great
detail (Yin, 2014)
Broad coverage of different topics
(Yin, 2014)
Unobtrusive, as documents are not
created for the research (Yin, 2014)
Archival records Asian internationalisation related
documents
Precise and quantitative (Yin, 2014)
As for documentation (Yin, 2014)
Other data sources
Press articles
Business journals
Data bases
Up-to-date perspective
Intensive data richness
Source: Content partly adapted from Yin (2014) while the outlay follows the example of Thai
(2008, p. 84)
The interviewees were either family members in managerial positions (in almost all
cases the interviewer spoke to family CEOs (see interviewee summary in Appendix A)
or family members that had been in a CEO position, until a few years ago. In some
cases family members were not available. In such circumstances, other senior
executives where selected. Prior to that, it was ensured either by email or telephone
that the respective senior executive had been with the company for a considerable time
and could talk about non-financial values and goals. The interviewer also needed
exposure to the companies‟ emerging Asian internationalisation.
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Most informants were only interviewed once, due to time considerations and limited
availability. However, in three cases the researcher reached out to the interviewee a
second time to confirm the emerging propositions and include data which was omitted
in the first round (see interviewee summary in Appendix A). In the second round the
interviewees or their representatives responded in writing. The interviews took place
between August 2014 and June 2015. Most interviews were conducted by telephone.
Several, however, were conducted on site, including a guided tour through the
production facilities and the opportunity to speak with different people in the company
in an open environment.
The surveyed FBs wished to remain incognito and asked for strict confidentiality. This
is not uncommon among AGS FBs. These enterprises tend to live a “hidden life” and
are very protective of company-relevant information. Several companies required a
written document certifying that the information provided would be treated
confidentially, and this wish was granted. Further, the FBs did not want to be taped
during the interviews. The interviewer therefore took detailed notes, which
subsequently allowed the composition of interview transcripts.
The interview questionnaire and study information paper were sent to the interviewees
on prior notice (both documents are depicted in Appendix C, E). As a consequence,
this thesis does not disclose the interview transcripts in the Appendix, in order to
protect the data confidentiality promised to the interviewees. All interview transcripts,
including the expert interviews were made available to the supervisor and the co-
supervisor of this PhD thesis prior to submission.
The semi-structured interviewee questionnaire (see Appendix E) was structured in a
way to cover general administrative topics first and then continued with general
questions on the company development and non-financial values and goals. This was
to break the ice and make the interviewee feel comfortable, before detailed questions
on non-financial values and goals and their influence of the internationalisation
process to emerging Asia followed. The questions were open-ended and used “what?”,
“when?” and “how?” questions, as is common in qualitative studies (Myers, 2013).
The interviews were held as open discussions in which the interview questionnaire
only served as a guideline to start the conversation, and to broadly structure the topics
so that the interviewees could talk freely. During these conversations the researcher
carefully included the emerging propositions from earlier interviews or tested parts of
the emerging theoretical construct. The interviews took on average 60-90 minutes.
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During this process, the researcher continually conducted a literature review to
compare the literature findings to the actual data and to search out constructs, not yet
known to the researcher but existent in the literature. It is important to note that this
literature review did not generate propositions. It was actually used to follow Strauss
and Corbin‟s (1998, pp. 49-52, as cited in Thai, 2008) suggestion of:
1. Comparing properties and dimensions of concepts in the literature to primary
observations to differentiate and find innovation in the emerging concept
2. Searching out the pattern of concepts in the literature and data
3. Finding hints as to which questions should be asked in the interviews
4. Seeing how conditions change the properties and dimensions of concepts and
relationships
5. Searching interviews and own notes for events, settings, actions and the actors‟
perspective in the given circumstance
6. Stimulating questions during the analysis
7. Collecting hints for theoretical sampling choices
8. Confirming findings and looking for flaws or black holes in the literature
4.6.3 Data analysis procedures
The analysis in grounded theory is an ongoing process during data collection, which
aims at uncovering concepts behind the actualities, categorising them and linking the
categories to develop the new theory (Thai, 2008). This section describes how the
single coding steps of open, axial and selective coding, as suggested by Strauss &
Corbin (1998) and especially by Thai et al. (2012), were carried out. The data analysis
was done by using MAXQDA, a text analysis software program, which is specifically
designed for qualitative studies in social sciences. It is helpful to organise and analyse
large amounts of qualitative data. To make the analysis processes easier to
comprehend, the code hierarchy can be found in Appendix F. In grounded theory, data
is analysed immediately after it is obtained (Strauss & Corbin, 1998). This concerns all
data sources, such as interviews or company documents.
4.6.3.1 Open coding
The first step in Straussian coding procedure is open coding (Corbin & Strauss, 1990).
For this, the researcher transcribed the interviews based on his manual notes, written
during the interviews. Secondary sources, such as company reports were also
analysed. The idea of open coding is to discover concepts behind the data by observing
the possibly smallest logic text unit (Thai et al., 2012). For this, the researcher
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analysed every document line-by-line, and paragraph per paragraph (as shown in
Table 8).
Table 8: Example of the open coding process
Case
company Line # Interview text
Line-by-line
coding
Paragraph
coding Code memo
Case 24
14 “In our company, we
think sustainability is
a main value.”
Sustainability
Role of
sustainability
Sustainability
considerations make
FBs refuse short-term
thinking and plan
their decisions for
long time horizons
15 “It does not make
sense to think on the
short term.”
Refusal of
short-term
thinking
16 “Decisions need to
be made, based on a
long-term perspective
Long-term
decision
Source: Author’s own creation
Every concept that emerged from this process was given a code, which was an abstract
representation of the text sequence‟s meaning. Codes were either conceptual, which
meant that their labelling was driven by concepts discovered in the literature, or in-
vivo, which meant that the exact same words were used by the interviewee (Thai et al.,
2012). Each code had a unique meaning. Open coding does not follow pre-defined
coding criteria but makes sense from the data only. The code system in open coding
quickly increases in size and develops repetitive explanations and descriptions, which
is why the system was continuously trimmed down. This process is only natural, as
codes may have similar meanings and the relation between the codes becomes quickly
observable.
As this research is process-oriented, the author broke the text segments and paragraphs
into specific events to isolate the meaning and circumstances of the segments in the
given context (as suggested by Thai et al., 2012). After understanding the single
events, the whole event chain was analysed to see the greater context. A good example
is the severe change in market entry behaviour regarding psychic distance after the
mid-1990es. Originally, FBs entered Asian markets in waves and through countries
such as Japan, Singapore or Hong Kong. FBs that internationalised after the mid
1990es did not test their products in these markets before, but went straight to markets
with higher psychic distance, such as China. These time shifts and their meaning only
became understandable by breaking the events into single items and reconnecting the
chain of events.
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After identifying concepts, the researcher started to look for patterns and similarities in
the data. All concepts that showed a logic relation were grouped and structured under a
new code describing the overall phenomenon. This new code was either chosen among
the existing codes or by creating a new code. The main code therefore became a
category and single concepts assigned to this category formed the properties.
4.6.3.2 Axial coding
Open coding is about defining categories with concepts as properties. Axial coding
takes the analysis one step further by relating categories to subcategories. This
happens at the level of properties and dimension (Strauss & Corbin, 1998; Thai et al.,
2012). Moreover, this step accounts for interrelationships between the single
categories which form the basis of theory construction (Goulding, 2002). Strauss &
Corbin (1998) and Thai et al. (2012) suggest defining the properties of each category
and its dimensions as a first step. The researcher therefore concentrated on the
conditions, context and action/interaction strategies, as well as the consequences of
any given event that had been coded in the open coding process, by systematically
going through the code system, while trimming it down if former categories lost their
meaning. Also here, MAXQDA offers the possibility to write statements, which
describe the nature and relation of the categories. This made it possible to see the first
macro links emerge between the data points. Moreover, the data itself was very helpful
in discovering the nature and relationships between properties and their parent
categories.
Especially helpful for this task was the previously-mentioned memo function of
MAXQDA, which allowed any code to be quickly re-read, as well as re-reading the
coded text segment itself, improving the understanding of the concepts and therewith
the smallest unit of the emerging code system. To improve the understanding of
relationships and to realise the emerging columns of the new theory, this process was
driven by questions, such as “why?”, “where?”, “when?”, “by whom?”, “how?” and
“with what result?” (as suggested by Thai et al., 2012). These questions bore the
benefit that two perspectives could be observed: the structural and the process
perspective. While the “why?”, “where?”, “when?” and “by whom?” questions shed
light on the structure, the “how?” and “with what result?” questions unveiled the
underlying process. This gave an inside perspective on the chain of events over time in
the given context.
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4.6.3.3 Selective coding
Selective coding is the last step of theory generation in Straussian coding techniques.
Its aim is to integrate the previously established categories to build and refine the
emerging theory (Glaser & Strauss, 1967). This is done by relating the categories of
former coding steps to a core category of the research area. The core category could,
for example, be internationalisation resources while the subcategories (or properties)
would be organisational capabilities or financial resources. Selective coding therefore
produces the most abstract description of relations within the code system (Thai et al.,
2012). To discover these core concepts the researcher used three strategies. Firstly, the
researcher searched for core categories in the literature and in the interview transcripts
and included them, if there was a match logic relationship in the code system.
Secondly, the memo function of MAXQDA revealed hidden relationships. Thirdly,
visualisations (e.g. correlation tables or diagrams) in MAXQDA helped to understand
the remaining hidden relations across the data population. It is important to note that
also the memos were continually trimmed down and rewritten.
This process already produced results after the first few interviews and analysis of
secondary material had been conducted, and was continued by using logic sampling
method, until scientific saturation was reached, as was the case after 25 FBs had been
surveyed. These observations included personal interviews with the company
management and sometimes further interviews with other people in the company (see
Appendix A), and extensive secondary material, ranging from company internal
documents to webpage information. This process resulted in the formation of a new
theory on the influence of non-financial values and goals on the internationalisation
process of AGS FBs to emerging Asia, which is presented in Chapter 6.
4.6.4 Pilot case
A pilot case study was conducted (Ghauri & Gronhaug, 2010; Yin, 2014) to test the
overall research design and the interview guide. The pilot case tests the questionnaire
by showing how well the interviewee understands the research topic and its questions.
Ideally, this verifies the interview guide and contributes to the refinement of the data
collection plan (Yin, 2014). According to Bryman & Bell (2009) the pilot case can be
understood as a quality test of the research instrument as a whole.
The pilot case was selected, accounting for availability, convenience and geographic
proximity, as suggested by Yin (2014). A professor at the University of St. Gallen,
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who sits on the supervisory board of a Swiss FB, introduced the researcher to the
company and made an interview with the family CEO possible. The interviewee was
the third generation family CEO of his company. The company owed an iconic brand
in the sweets & confectionary industry, which was active in all emerging Asian
markets, through local distributors. This company was known in the public for its
distinct value oriented leadership style. The interview took approximately one-and-a-
half hours. The interview covered the whole interview guide.
The analysis of the pilot case took place immediately after the interview had been
transcribed, which was on the same day. The analysis was performed using Straussian
grounded theory coding techniques. Based on the pilot case analysis, several
alterations of the original interview guide (provided in Appendix D and E) were made.
Several main corrections to the interview guide are shown in Table 9.
Table 9: Changes in the interview guide
Pilot case question Final question Explanation
Non-existent How many people do you
employ?
When was your company
founded?
Added because information on the
number of employees and founding
date were collected in the internet
for the pilot case, but proved to be
incorrect. This ensured that the
correct information was used.
Which opportunities and
risks do you see in general,
when you think about
internationalisation?
Dropped The question was too high-level
and not specific enough on
emerging Asia.
How important is a positive
company reputation for you
and how does this affect the
internationalisation process
to Asia? Explain, in what
way your company
reputation might be affected
by internationalising to
emerging Asia?
Topic quality and reputation:
Please comment on the role
of quality and on the
importance of your
company‟s reputation in
emerging Asia. Also, which
effect do you see for your
home market coming from
internationalising to
emerging Asia?
Please comment on your
marketing strategy in
emerging Asia. What roles
does “Made in” and/or
“Made by” play for you?
Question split into two parts. It
became clear that reputation was
strongly driven by quality and price
considerations. For many FBs
“Made in AGS” is an integral part
of their own reputation. This meant
that decisions of where to produce
had to be aligned with quality
considerations and checked against
the marketing strategy.
71
Pilot case question Final question Explanation
Explain how altruistic
considerations toward family
members influence your
internationalisation process
to Asia?
Dropped The question was misunderstood by
the interviewee and needed too
much explanation. Also, the
phenomenon of altruism could not
be seen to have any effect on
internationalisation. This was also
verified in the subsequent cases.
Source: Author’s own creation
The changes listed in Table 9 show that several corrections were needed. The
inclusion of administrative questions, such as “How many people do you employ?”
made sure that crucial frame data was available to the researcher. The other questions
were focused on the internationalisation process and the influence of non-financial
values and goals. In the case of Question 3 (of the example above) the interviewer
only then understood what drives reputation and that it was closely linked to the
marketing strategy. Obstructive questions, such as the last question were dropped to
avoid confusion.
The pilot study was helpful in two ways. Firstly, it added to the quality of the
interview guide by changing incorrectly stated questions or dropping those that were
obstructive. Secondly, the literature understanding of non-financial values and goals in
FBs is very weak. Mainly, the pilot study helped understanding how these non-
financial values and goals actually play out in reality and how the interview guide
questions could be altered accordingly. As the data from the pilot study provided a
solid base and its quality was high, it was used as the first official case of the 25
companies surveyed.
4.6.5 Expert interviews
In addition, to the interviews with FBs, this study conducted a suit of expert interviews
to test the results of the 25 surveyed cases. The aim was to gain an independent, cross-
industry and outside perspective on how non-financial values and goals of AGS FBs
influence the internationalisation process to emerging Asia. The underlying rationale
for adding this set of interviews was threefold. Firstly, it was a measure to further
increase construct validity of the new theory. Secondly, grounded theory studies may
lack from retrospective biases of the interviewees. This was especially the case for this
study, because internationalisation processes to emerging Asia often started a long
time ago (often 30-60 years ago or even longer). It was therefore only natural that the
72
interviewees may not be able to recall all details and/or events, or may have
overlapping experiences and memories. Thirdly, grounded theory encourages
researchers to interview as many interviewees as possible twice (Strauss & Corbin,
1998). Due to time considerations of the interviewees, this was not always possible.
Expert interviews therefore offered a valuable quality test and enhancement to mitigate
these shortcomings.
For the construction of these interviews, the researcher employed an eclectic approach
by using techniques and suggestions from research methodologies which aim for
similar purposes. The closest methodological resemblance was found with Delphi
Panels (Nielsen & Thangadurai, 2007) and Focus Groups (Myers, 2013), which try to
gather expert opinions of 5-12 experts on a given subject in a structured way. These
interviews may happen in one or several consecutive interview sessions with pre-
defined breaks between the sessions.
Delphi Panels and Focus Groups have the following strengths (Okoli & Pawlowski,
2004; Nielsen & Thangadurai, 2007; Myers, 2013):
Address qualitative research questions
Well-suited for contextual studies which require interview participants to be
familiar with complex economic, social and political issues
Can be used as add-on methodology or in a classical mixed method approach
Can be used at any given time during the data collection process
All above-mentioned factors apply to the nature and needs of this research endeavour
and add to the robustness of the new theory. Further expert opinions were valuable as
non-financial values and goals in FBs are a highly complex field requiring personal
experience. Also, FBs tend to be very secretive and might not reveal all relevant
information. In addition, the regions of emerging Asia are highly complex and diverse,
which called for deep economic, social and political understanding, nurtured by many
years of experience and intensive work.
In order to conduct the expert interviews, the author had to identify suitable panellists
(Pawlowski, 2004). This was done by identifying areas of expertise that added value to
the study. To uncover how non-financial values and goals affect the
internationalisation process of AGS FBs to emerging Asia, the author identified the
following criteria as necessary:
73
Deep understanding of the markets of emerging Asia, proven through long
work experiences in or with this region
Deep understanding of FBs and their non-financial value and goal system,
which meant that the interviewees must have had interacted eye-to-eye with
family management members of FBs internationalising to emerging Asia
With these criteria a shortlist of candidates was developed, based on internet research
and personal contacts. The researcher decided to invite 5 experts for interviews. All
five accepted. The reasons for choosing five interviews were twofold. Firstly, this
study only used expert interviewees as a measure to increase construct validity.
Secondly Straussian grounded theory represents a qualitative methodology that
acquires a large and rich body of data from both primary and secondary sources.
Therefore, 5 expert interviews seemed sufficient for testing the propositions.
Table 10 summarises key information of the expert interviewees. Their professional
background and job titles are presented. The comment column comments on the
qualification of the respective expert. To create consistency with the data presentation
of FBs, also the details of the chosen experts were anonymised.
Table 10: Key information on the expert interviewees
Expert ID Type of affiliation Title Comment
Expert 1
Industry association
(most members are
FBs)
Area manager for
China and
ASEAN
Worked with FBs internationalising
to ASEAN on a daily basis
Long track record for working in
China and ASEAN
Expert 2
Consultancy and
accountancy firm
(itself a FB)
Partner
Worked for many years in China
Regularly advised FBs management
that internationalise to China on tax,
legal and business matters
Regularly consulted by FBs
especially about non-financial
values and goals and their impact on
governance issues
Expert 3 Consultancy and
university
Partner and
professor
Has worked and lived for many
years in China and Taiwan
Co-owned a consultancy with focus
on Greater China and regularly
advises FB management members
74
Expert ID Type of affiliation Title Comment
Expert 4 Governmental trade
promotion agency
Area manager for
ASEAN
Had intensive knowledge on the
ASEAN markets and was
specialised on internationalisation
Regularly advised FBs in all phases
of internationalisation
Expert 5 Multiple Swiss FBs,
law firm
Member of the
supervisory board
of several FBs
and professor
Sat on several supervisory boards of
FBs that have internationalised to
emerging Asia
Regularly consulted by FBs
especially when it was about values
and goals and their impact on
governance
Source: Author’s own creation
The expert interviews were held with each expert separately and by telephone (see list
of expert interviews in Appendix B). Before the interview the experts received the
study information paper (see Appendix C) and the expert interview guide (see
Appendix G), which listed all propositions established from the 25 cases and
developed under Straussian coding procedures. The experts were asked to approve or
decline each single proposition and explain their reasons for doing so. These
interviews took 60 minutes on average and were carried out between 22 July and
17 August. The researcher took detailed notes and transcribed the interviews.
Two techniques were used to analyse the interviews. Firstly, the author used a cross-
interviewee table (provided in Appendix H) in which it could be evaluated, if a
proposition was approved or declined. This provided a good overview of the
robustness of the new theory. Secondly, the interviews were included in the code
system in MAXQDA of the 25 cases and coded according to Straussian coding
techniques and hence became part of the new theory, presented in Chapter 7.
Out of 1117 propositions (see Appendix H) only two were not fully supported by the
interviewees. The explanations of the experts provided a guideline for the researcher to
check the propositions. In this process the author realised that there had not been flaws
in the data but errors in the code relations of these two propositions. The refined
propositions were presented again to the experts (during the interview) and accepted
17
Chapter 6 presents 13 propositions which were developed from the propositions tested in
expert interviews. The original propositions were rephrased or split up to make better
statements (without changing the meaning of the original proposition)
75
this time. The necessary corrections could therefore be made quickly, without the need
for further empirical research.
4.6.6 Ensuring validity and reliability
The four common tests on construct validity, internal validity, external validity and
reliability as suggested by (Yin, 2014) were used to ensure and enhance the quality of
research. The actions for each validity and reliability test are summarised in Table 11.
Table 11. Actions to ensure validity and reliability
Validity consideration Mitigating technique
Construct validity
Multiple sources of evidence to achieve data triangulation
Compare emerging theory to raw data and present it to
interviewees
Expert interviews
External & internal validity Simple sampling logic
Strict use of Straussian coding techniques
Reliability
Detailed interview protocols
Develop database
Memo function in MAXQDA
Source: Author’s own creation based on Yin (2014) validity tests and Thai et al.’s (2012)
validity suggestions for grounded theory research
Construct validity tests the identification of correct operational measures for the
studied concepts (Yin, 2014). This was fostered by collecting data from multiple
sources to achieve data triangulation, as recommended by Yin (2014) and Bryman &
Bell (2009). In addition, the emerging theory was cross-compared with the ongoing
literature review and presented to the interviewees (if they agreed for a second
interview or reading a written report), to understand their level of identification with
the results (suggested by Strauss & Corbin (1998) for studies using grounded theory
design). To further increase construct validity and mitigate retrospective biases a suite
of five expert interviews were conducted to verify the propositions.
External validity addresses the extent to which the findings can be generalised, while
internal validity tries to establish casual relationships, because certain conditions are
believed to lead to other conditions (Yin, 2014). Both tests were addressed by using
sampling logic for the interview cases (Strauss & Corbin, 1998) and by strictly
employing the Straussian coding techniques of open, axial and selective coding (Thai
76
et al., 2012). External validity was further enhanced by conducting a cross-case
analysis, which is provided as a cross-case table in Section 5.3.
The reliability test attempts to demonstrate that the operative process of the data
collection and analysis can be repeated by a different researcher on the same data set,
arriving at the same results (Yin, 2014). Reliability was ensured by writing interview
transcripts and creating an in-depth database (Yin, 2014). In addition, the researcher
wrote detailed memos for each code in the MAXQDA code system, which can be seen
over and over again by using the data retrieval function in the software.
4.7 Limitations of this research
Like all research endeavours, this study suffers from limitations:
Firstly, the use of Straussian grounded theory brings the disadvantage of limited
generalisability, which all qualitative methodologies share (Ragin, 1994). Especially
the use of grounded theory and sampling logic may lead to a situation in which the
established propositions only hold in the context of the study (Myers, 2013).
Secondly, the study may be subject to cultural/geographical bias, because it focuses
exclusively on FBs from AGS. The findings may therefore only apply in this specific
context and have a geographical bias. Also, this study treats FBs from AGS equally.
However, also FB AGS have differences, mainly regarding their legal structures.
Thirdly, there may be a possible bias from the retrospective nature of some of the
qualitative data, like views expressed and actions remembered by interviewees that
happened a long time ago. The use of various sources of data and especially the expert
interviews tried to minimise this risk but cannot guarantee the total absence of
retrospective bias.
As the overall goal of this research endeavour was to generate a new theory for a
specific context for subsequent testing, the above limitations are acknowledged by the
author, but do not pose a threat to the objectivity of this study.
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5. Findings from the cases
This chapter presents the findings of the conducted 25 company observations, under
Straussian grounded theory rules, as outlined in Chapter 4. To provide an optimal
structure, this chapter is organised following sub-RQ1 1 and sub-RQ 2 (as outlined in
in Chapter 3.3). Therefore the first section 5.1 is concerned with non-financial values
and goals in AGS FBs. The second section 5.2 summarises the findings on
internationalization. The overall research question on the influence of values and goals
on the internationalisation process of AGS FBs to emerging Asia is addressed in
Chapter 6, as it presents a newly-developed theory and forms the core contribution of
this research project. Finally, a cross-case analysis is provided in section 5.3 to
facilitate understanding and comparison of the empirical data.
5.1 Non-financial values and goals of AGS FBs
Sub-RQ 1 was “What are non-financial values and goals in AGS FBs, and what is the
difference between the two?” The findings from the cases revealed that AGS FBs
were strongly rooted in non-financial values and goals. Herein values constituted
general ethical foundations of human conduct, whereas goals were distinct aims
resting on value foundations.
5.1.1 Non-financial values of AGS FBs
“This is what we are working for in a family business – it’s about
transmitting and living values!”
(Family CEO of Company 11)
FBs reported that they considered their personal values as the foundation of their
private life, as well as their business decision-making. The source of these values was
personal convictions, and in many cases Christian views. The interviewees referred to
a distinct ethos, well-known in AGS countries, the so-called “honourable merchant”.
The term describes a business behaviour shaped by moral values and incorporating
entrepreneurial goals as exemplified by the family CEO of Company 3 “(…) we stick
to the role model of the honourable merchant (…)”. Three core values constitute the
ethos of the honourable merchant: honesty, reliability and trust.
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Honesty
FBs reported that it is their aim to act in an honest way and to be perceived as honest
by their business partners. In practice, honesty is shown by adhering to agreements,
paying on time and transferring information to business partners. The same principle is
applied to all other inside and outside stakeholders.
Reliability
The family CEO of Company 14 explained that “My employees but also my suppliers,
and business partners could and can rely on me. I truly keep my word.” This
exemplifies the will of FBs to honour personal and business agreements, which are
perceived as the same thing in FBs. Consequently, FBs honour agreements, such as
credit periods or quality standards. In addition, reliability is directly connected to the
FB‟s reputation.
Trust
FBs understand trust as an intangible credit of confidence they give to someone they
evaluate as worthy. The longer and the better they know the person who fulfilled the
criteria of honesty and reliability, the more trust they grant him/her in return. “The
most important value we have is trust”, said family chairman of Company 18. Every
business relationship needs to be based on trust in order to be sustainable. FBs try to
establish trusting relationships both inside the company and with outside stakeholders.
As the family chairman of Company 18 stated, “Our customers can trust us. That also
includes our business partners such as banks and suppliers. We always try to create a
strong and trusting relationship.”
Relationship between the values
The interviews revealed that all three values stand in casual relationships with each
other. To be perceived as trustful, an actor must be honest and reliable. Hence, values
act together and are interdependent. This can be visualised by using the analogy of
three pillars carrying the roof of a house, as depicted in Figure 12. If one pillar were
removed, the roof would collapse.
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Figure 12: Principals of the honourable merchant
Source: Author’s own creation
5.1.2 Non-financial goals of AGS FBs
“We rely on the same values and goals in foreign markets, wherever
they might be (...)”
(Family CEO of Company 2)
FBs reported that non-financial values provided the foundation for non-financial goals.
However, the heterogeneity of non-financial goals is considerable, since the latter
depends on the specific family, e.g. its size, generational stage and company history.
The border line between non-financial values and goals is difficult to locate because
values and goals are woven into each other. Also, the interviewees stated that it was
not possible to rank their goals, as they are all linked with each other.
Nevertheless, all surveyed FBs agreed that mainly six non-financial goals influenced
their internationalisation strategies. In fact, 21 FBs (out of 25) presented their goals on
the corporate website. Often, these FBs had a family charter or constitution in which
they had manifested their values and goals and used it as a guide for decision-making:
80
“Already 20 years ago, XX and XY18
took the initiative and put the values and goals of
the company into written form (…)” (CEO of Company 3).
The following section only lists non-financial goals that were found to have a direct
influence on internationalisation. They are presented in their generic nature in this
chapter, before explaining their effects on the internationalisation process in Chapter 6.
Trans-generational ownership
The interviews revealed that FBs wanted to keep the ownership of the company within
the family. The family CEO of Company 23 emphasised “(…) I think my job is to
secure the company for the next generation“. The business is not only seen as a source
of wealth, but provides a common destiny for the family. This is achieved by pursuing
two sub-goals. The first is family control in the form of managerial participation. With
direct family control, FBs ensure that the company and family stay together, but also
that the invested family wealth is under supervision. In addition, this ensures that the
family‟s non-financial values are lived and its goals pursued in the organisation.
Secondly, FBs strive for independence. FBs do not want to be dependent on anybody
(e.g. external creditors). Otherwise, outsiders would be able to influence the destiny of
the business and the family. Also, lacking independence could reduce other non-
financial goals, because outsiders may not have the same value appreciation and
differing goals.
Employee appreciation
FBs consider employees to be members of the extended family and feel responsible for
them. FBs try to establish long-standing, deep-rooted and trusting relationships with
their employees. The consequence is low employee turnover. Often, employees spend
their entire career with a FB. All this is achieved by creating a family-like atmosphere
in the company. This is a means to make sure that the employees accept and live the
non-financial values and goals of the FB: “I think the people I am working with should
have the same value set as the company” (Managing CEO of Company 16). Therefore,
FBs establish flat hierarchies and close personal contact. Perks are used as further
incentives to the employees. In addition, FBs invest heavily in the education of their
employees and ongoing training. This requires substantial and long-term financial
commitment of the FBs.
18
The original quote reveals the names of the company owners. Due to confidentiality
reasons, the original names are replaced by XX and XY
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Quality
For FBs, quality relates to the quality standard of the FB‟s production process,
products and after sales services. However, interviewees report that quality also has a
strong non-economic component. Quality is a matter of trust, reliability and personal
honour. This attitude has several reasons. Firstly, FBs have an emotional relationship
with their products. FBs are proud of their products and the family history connected
to it. In numerous cases, this is driven by the history of the company, revolving around
a family ancestor and his/her innovative product. Quality is therefore a way to stay in
touch with the family history. Secondly, product quality is considered a direct carrier
of the families‟ and companies‟ reputation. Bad quality would harm the company and
the family. Thirdly, FBs evaluate quality as a prerequisite for trusting and reliable
partnerships, linking back to their values. A main instrument enabling FBs to maintain
the quality level is constant innovation. Several FBs stress this by stating “everything
can be improved” in their company motto. FBs see quality not as a status quo, but as
an ongoing process.
Sustainability and long-term orientation
FBs want to pass the company on to the next generation and hence need to work on a
sustainable, long-term basis. The family CEO of Company 23 commented “We have a
company motto which says that we want long-term success and not short-term profit.
This motto is written on every business card of the company”. This orientation leads to
a business behaviour that focuses on the long-term horizon and evaluates business
decisions against their impact on the company in the long run. This is especially true
for key strategic decisions, such as M&A activities or internationalisation, as well as
for relationship building with employees or other stakeholders. Sustainability
considerations make FBs follow a once-set strategy even through times of economic
difficulty. However, this mind-set produces a general risk adversity and cautiousness
in business decisions.
Customer and partner orientation
Central to FBs are their customers. This relationship is not only shaped by the need to
sell products, but by their values and goals. Therefore, FBs aim for sustainable, long-
standing relationships with their customers. The interviews revealed that these
relationships are based on trust, reliability and honesty. The quality and innovation
orientation of FBs is a means to create such long-enduring partnerships. Many FBs
communicate this partnership directly with them. It is held in high regard and can be
82
relied upon. Also, this was mentioned explicitly in several family charters, for example
in Company 19: “We are close to our customers, wherever they are in the world”.
Reputation
FBs perceive positive company reputation and positive family reputation as the same
thing. This is especially apparent in FB‟s bearing the family name. This makes
reputation a top one priority for business decisions as stated by the family CEO of
Company 3 “Yes, reputation is extremely important, and any action that threatens our
good reputation would not be in accordance to our values”. Two main types of
reputation can be distinguished; General reputation and brand reputation. General
reputation concerns the social impact of the FB. This specifically relates to how the FB
is perceived in its home region and by its employees. Several FBs control what their
family members say and how they behave in public to avoid a bad reputation in the
home village. In addition, FBs are socially embedded in their native regions, e.g. by
supporting local communities such as the village municipality or sports clubs. These
are also measures to strengthen their positive reputation.
Regarding brand reputation, FBs try to create premium brands known for long-term
reliability, trustworthiness, quality and innovativeness. Brand reputation is seen in
close connection with the family because a decreasing brand reputation would directly
harm the family as well. Therefore, brand reputation is directly influenced by the three
honourable merchant values and other goals such as quality and customer/partner
appreciation.
5.1.3 Summary of findings on non-financial values and goals of AGS FBs
The findings show that AGS FBs follow a moral codex comprising honesty, reliability
and trust which can be described as the ethos of the honourable merchant. This
provides the foundation for non-financial goals, which are transgenerational
ownership, quality, sustainability and long-term orientation, employee appreciation,
customer/partner orientation and reputation. Values and goals are found to be in casual
relationships and acting simultaneously. Therefore, the order of importance of single
values can be found as they appear together and depend on the specific context.
Building on the analogy of the honourable merchant ethos as being a house, non-
financial goals can be described as the tiles on the roof, as visualised in Figure 13 and
described in the preceding sections.
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Figure 13: Non-financial values and goals of AGS FBs
Source: Author’s own creation
5.2 Internationalisation process of AGS FBs to emerging Asia
To recapitulate, Sub RQ2 asked “What is the nature of the internationalisation process
of AGS FBs to emerging Asia?” This comprised two objectives. Firstly, to uncover
the internationalisation strategies of these companies by looking at their
internationalisation path, market entry modes and target markets and secondly to learn
about their internationalisation strategy-making process, by looking on decision-
making processes, decision drivers and decision timing.
5.2.1 Internationalisation strategies of AGS FBs to emerging Asia
The internationalisation strategies of AGS FBs to emerging Asia were divided into
internationalisation paths, market entry modes, including market selection. In order to
do this, the internationalisation process of each of the 25 FBs was analysed separately.
5.2.1.1 Internationalisation paths of AGS FBs
“I can definitely say that we internationalised very early, at least 100 years ago, to
European countries and about 60 years ago to Asia, starting with Japan.“
(Non-family CEO of Company 6)
This section identifies the internationalisation paths to emerging Asia pursued by the
25 FBs surveyed. Each internationalisation path was considered separately. This
comparison identified two groups of internationalisation paths, which closely resemble
84
the Uppsala and BG models of internationalisation, as explained in Section 3.2.2.2 and
3.2.2.3 and listed in Table 12.
Table 12: Internationalisation paths of AGS FBs to emerging Asia
Company ID
Internationalisation
path (Uppsala=21;
Born Global=4)
First
activities
in Asia
First Asian19
market entered
Current & highest
internationalisation
mode in emerging Asia
Company 1 Uppsala 1970 Hong Kong,
Singapore
Local non-owned
distributors
Company 2 Uppsala 1980 Japan Local non-owned
distributors
Company 3 Born Global 1850 China, Japan Wholly-owned sales
subsidiaries
Company 4 Uppsala 1969 Indonesia,
Thailand Local production
Company 5 Uppsala 1974 Japan Wholly-owned sales
subsidiary
Company 6 Uppsala 1955 Japan Local production
Company 7 Born Global 1985 Malaysia Exporting
Company 8 Born Global 1981 Japan Local non-owned
distributors
Company 9 Uppsala 1990 Japan Wholly-owned sales
subsidiary
Company 10 Uppsala 1975 Indonesia Local production
Company 11 Uppsala 1999 Hong Kong,
Japan
Local non-owned
distributors
Company 12 Uppsala 1986 China Local production
Company 13 Uppsala 1970 Indonesia Local production
Company 14 Born Global 1998 India,
Bangladesh Local production
Company 15 Uppsala 1964 n.a. Local production
Company 16 Uppsala n.a. Japan, Hong
Kong, Singapore
Local non-owned
distributors
Company 17 Uppsala 1975 Japan Wholly-owned sales
subsidiary
Company 18 Uppsala 2003 n.a. Local production
Company 19 Uppsala 1980 n.a. Local production
Company 20 Uppsala 1950 n.a. Local production
19
This section comments on the first market entry in Asia. It therefore also considers
countries which are not part of emerging Asia (as understood by this study), for example,
Japan, India or Bangladesh
85
Company ID
Internationalisation
path (Uppsala=21;
Born Global=4)
First
activities
in Asia
First Asian19
market entered
Current & highest
internationalisation
mode in emerging Asia
Company 21 Uppsala 1958 n.a. Local production
Company 22 Uppsala 1986 Japan Local production
Company 23 Uppsala 1998 Singapore Local production
Company 24 Uppsala 1910 China Local production
Company 25 Uppsala 1996 Thailand Local production
Source: Author’s own creation
The first group showed a typical Uppsala shaped internationalisation path to emerging
Asia. Uppsala internationalises formed the clear majority in the data set, with 21FBs
(out of 25) following this pattern. This internationalisation path was characterised by
stepwise internationalisation of increasing commitment. In addition, all FBs
internationalised to psychically close countries first. Internationalisation knowledge
was accumulated over time in an informal, learning-by-doing way. Asked about his
company‟s knowledge gaining process, the family CEO of Company 20 replied “This
really happened step by step. We build it up over decades of international
involvement“. Networks, especially becoming part of such networks, were a major
issue for FBs as stated by the non-family CEO of Company 16: “Networks are by far
the most important thing in Asia. If you don’t know the right people, there’s no chance
that you can make it. Also, networks are an investment, and that takes a lot of time“.
The second group showed a BG like internationalisation path to emerging Asia. This
group was in clear minority in the data set, with only four FBs (out of 25) following
this pattern. This internationalisation path exhibited fast and aggressive
internationalisation, not more than four years after the company was established. The
reasons for this were heterogeneous. One company had an iconic brand (Company 3),
while Companies 8 and 14 benefited from the internationalisation expertise their
family CEO brought from previous jobs, before they had established the FB.
The data revealed that AGS FBs internationalised to psychically and geographically
close countries in Europe (23 out of 25), or to similar western countries (3 out of 25
internationalised to the USA, Canada or Australia, due to specific family history
reasons) first, before they targeted more distant markets. This applied not only to
Uppsala internationalisers, but also to BGs, with the exception of Company 8, which
instantly exported to Japan, too. 11 FBs (out of 25) entered Asia through a developed
86
Asian market20
and used this as a stepping-stone to emerging Asian countries. Only 9
(out of 25) directly internationalised to an emerging Asian market.
5.2.1.2 Market entry modes and target markets of AGS FBs to emerging Asia
“(…) the first internationalisation step is always the hardest.”
(Family CEO of Company 3)
This section identifies the market entry mode choices of the FBs surveyed. Depicted in
Table 13 are the most recent market entry mode choices of these companies. The
interviews revealed that no FB had ever withdrawn from an emerging Asian market or
considerably reduced its commitment. The only observable change in entry mode
selection was successive commitment increase.
For all 25 FBs surveyed, the first internationalisation entry mode to Asia was sporadic
exporting. Eleven FBs (out of 25) internationalised to established Asian markets, such
as Japan21
first. These markets were used as a stepping-stone to emerging Asian
countries, as the CSO of Company 11 exemplified “(…) we started in Hong Kong and
Japan and then quickly penetrated all the other major markets there“. These
businesses were mostly based on chance or network contacts. Eight FBs (out of 25)
directly entered emerging Asian markets through exporting activities. Five FBs (out of
25) were unable to track their first internationalisation targets in Asia any more due to
lack of documentation.
Very quickly, exporting was done in a strategic way mostly by partnering with local
non-owned distributors or by setting up wholly-owned sales subsidiaries. The
establishment of a distribution network was among the key issues for the FBs. FBs
showed a clear preference to work with other FBs as distributors: “We established
partnerships with local family-owned businesses that acted as distributors.” (Family
CEO of Company 16).
Regarding the targeted markets, Table 13 gives an overview of the FBs international
activities in emerging Asia. 13 FBs (out of 25) relied on local non-owned distributors.
Wholly-owned sales subsidiaries were set up by 18 FBs (out of 25) in total. In all cases,
20
Japan, South Korea, Singapore and Hong Kong 21
Japan is not part of emerging Asia for the purposes of this study. Nevertheless, it is
mentioned here to highlight that many AGS FBs have used Japan as a bases to
internationalise to emerging Asian countries
87
these sales subsidiaries covered China. If more than one subsidiary existed, there was
always a subsidiary in Singapore. The interviews showed that Singapore, and in many
cases also Hong Kong, were used as business centres for the region, because both
cities served as important business hubs and casual meeting points.
Most strikingly, Table 13 shows that 15 FBs (out of 25) set up local production
facilities in emerging Asia. All FBs with production facilities chose China as host
country. Only one FB had an additional production facility in Vietnam. These
production plants were typically greenfield investments and established in the late
1990s or 2000s, after the Chinese government had substantially liberalised joint
ventures laws. The family CEO of Company 20 reported, “The reason for this was that
we did not want a joint venture option and back then, there was still the joint venture
law in place“. Strategic alliances or other partnership agreements were not chosen. In
two cases (Company 6 & 13) local competitors were acquired, both of them in China.
Company 20 acquired a Chinese distributor together with which it had previously
worked. However, in all three acquisitions the FBs had already established local
production or sales subsidiaries in China.
Table 13: Overview of international activities of AGS FBs in emerging Asia
Company ID
Local
production
(n=15)
Wholly-owned sales/service
subsidiaries (n=18)
Local non-owned distributors
and/or sales agents (n=13)
Company 1 none none in every market
Company 2 none none Singapore
Company 3 none none in every market
Company 4 China
China, Hong Kong,
Philippines, Indonesia,
Singapore, Brunei, Vietnam,
Thailand, Taiwan, Myanmar
none
Company 5 none China Indonesia, Malaysia, Philippines,
Singapore, Taiwan, Thailand
Company 6 China
China, Indonesia, Cambodia,
Myanmar, Philippines,
Singapore, Taiwan, Vietnam,
Thailand
none
Company 7 none none China
Company 8 none none in every market
88
Company ID
Local
production
(n=15)
Wholly-owned sales/service
subsidiaries (n=18)
Local non-owned distributors
and/or sales agents (n=13)
Company 9 none China Singapore, Thailand, Taiwan
Company 10 China China, Taiwan, Thailand,
Vietnam, Singapore
Hong Kong, Philippines,
Indonesia, Malaysia, Myanmar
Company 11 none none China, Philippines, Singapore,
Indonesia
Company 12 China China Malaysia, Vietnam, Indonesia
Company 13 China China, Hong Kong, Singapore,
Vietnam, Taiwan none
Company 14 China China none
Company 15 China
China, Hong Kong, Taiwan,
Vietnam, Malaysia, Singapore,
Indonesia
Thailand, Brunei
Company 16 none none Hong Kong, Singapore
Company 17 none China
Hong Kong, Indonesia, Malaysia,
Philippines, Singapore, Thailand,
Vietnam
Company 18 China China none
Company 19 China China, Singapore none
Company 20 China,
Vietnam
China, Hong Kong, Taiwan,
Singapore, Vietnam, Indonesia none
Company 21 China China, Singapore none
Company 22 China China none
Company 23 China China, Hong Kong, Thailand,
Singapore none
Company 24 China China none
Company 25 China China none
Source: Author`s own creation
The interviewees revealed a clear preference for activities in China, as it was the
biggest and most attractive market. No FB had de-internationalised from emerging
Asia. All FBs reported that they planned to increase their commitment in emerging
Asia in the near-coming future – “I think we have only scratched the surface so far.
There is still huge potential” (Family CEO of Company 6).
89
5.2.2 Internationalisation strategy development of AGS FBs to emerging
Asia
To analyse the international strategy development of AGS FBs three single
components were observed; Firstly, how strategies and decisions were made;
secondly, which drivers stood behind these decisions; third, the timing of
internationalisation decisions.
5.2.2.1 The strategy- and decision-making process
The case studies revealed that internationalisation strategy-making was a process kept
under strict and direct supervision of the owning family, especially the family CEO.
The interviewees reported that internationalisation-relevant decisions were always
taken by the family management and often discussed in the family circle outside the
business. Especially in the early phases of internationalisation to emerging Asia, such
decisions were made almost exclusively by the family, often by the family patriarch,
without consulting non-family members of the board (if existent at all) or other key
employees in the company.
It was observable that FBs started with very low levels of strategy-making
formalisation in the early days of internationalisation –“I know I probably should not
say it this way, but in these days there was not really a big strategy behind it” (Family
CEO of Company 1) and “Just think about how we started our subsidiaries. These
were pure gut decisions.” (Family CEO of Company 21). Also, these decisions were
made with a low level of professional information or market intelligence. However,
over the years FBs formalised this process continuously, especially with increasing
size and expertise.
The family successor and future family CEO of Company 8 commented that “Today
we plan and think a lot more” and the non-family CEO of Company 12 stated “We
have a very structured process for that, including the obligatory board committees”. It
was observed that today wider circles within the company are consulted on matters of
internationalisation. Company size showed to have an impact on the level or decision-
making formalisation. Larger FBs had more formalised processes than smaller FBs.
Regardless of the business size, however, the interviews revealed that next to official
decision-making processes stood hidden decision-making mechanisms. These led to
90
situations in which family members still exercised significant influence on
internationalisation decisions. Such mechanisms were not manifested in tangible
governance structures, but based on informal agreements between the family and
outside managers or board members.
5.2.2.2 Decision drivers
“Yes, we have a code of conduct, where we define our values. Decisions are checked
against these values”. (Family CEO of Company 5)
Apart from the process of decision-making, the interviews also revealed what drove
these decisions and which factors were taken into account.
The interviewees reported that internationalisation was not just one among many
strategic options for growth, family perpetuation and increasing family wealth, but the
most attractive at hand. Their non-financial values and goals served as a guideline for
decision-making.
In addition, three economic drivers shaped their decision-making. Firstly, the strong
competition and small market size of the AGS markets forcing FBs to internationalise
to emerging Asia in order to find new sources of growth: “Switzerland is a very small
market, so we need to internationalise” (Family CEO of Company 2). Secondly, the
market potential was evaluated as very high. FBs evaluated the attractiveness of a
market by its current and future potential. However, this assessment was not based on
detailed market analysis, but on gut feelings. Most of the surveyed companies started
their expansion to emerging Asia in the 60s to 90s, when this region was still poor but
emerging. They saw strong growth opportunities for their products. Even today, FBs
report that their market potential in China and the ASEAN is still enormous. The non-
family CEO of Company 12 said, “Asia is the market of the future. We always say, the
future lies between Moscow and Japan’s boarders. I think we have not even really
started yet.”
Market attractiveness is not only shaped by pure economic demand, but also by
products from AGS which enjoy a high-quality reputation in Asia, creating a positive
perception overall. Thirdly, FBs internationalised to emerging Asia to diversify their
risk profile. Many surveyed FBs traditionally depended on Europe and the Americas
as core markets. FBs reported that they saw this as unnecessary risk of their family
wealth, invested in the business, which made them foster internationalisation.
91
5.2.2.3 Internationalisation timing
“By the end of the 60s we started exporting to Indonesia and Thailand, because these
markets could be served from Australia. After that came China in the 70s, but this was
already a very strategic approach.” (Family CEO of Company 3)
Data on the first year of internationalisation involvement showed that many FBs only
internationalised in the 1950s or later (14 out of 25). The distribution of the FBs first
international activities is shown in Figure 14. However, these results should be
considered carefully. It was difficult in four cases to track the exact date of first
exporting activities (Company 2 & 5 could not be tracked and Company 24 & 25 made
estimations). The reasons for this were that the interviewees could not remember this
information, company records were no help or the initial internationalisation happened
before World War II and the records were destroyed during the war.
Figure 14: First international activities of AGS FBs22
Source: Author’s own creation
22
Two companies could not recall their first internationalisation activities
92
On average, 20.5 years lay between the first internationalisation step to a foreign
market and the first exports to emerging Asia. The dates of the first international
activities to a foreign market are characterised by heterogeneity (depicted in Figure
14). The dates of the first activities in Asia23
show a more homogeneous distribution
(depicted in Figure 15). The majority of FBs (20 out of 25) internationalised to
emerging Asia between the 1960s and late 1990s.
Figure 15: First market entry of AGS FBs in Asia
Source: Author’s own creation
The interviews revealed two main reasons for this timing. Firstly, company-internal
reasons: FBs classified as Uppsala internationalisers (see Table 12), only
internationalised to Asia after they had established themselves in their home market
and targeted other non-Asian markets: “It is important that if you become the leading
exporter in your field, you will also to be the leading company in the home market.”
(Family CEO of Company 2) and “The competitive landscape in the home country
actually forces you to internationalise.” (Family CEO of Company 2).
Secondly, geopolitical reasons played a role. In the early 1950s to 1970s the majority
of markets in emerging Asia were partially or completely closed to foreign investors.
23
Next to emerging Asia, this includes Japan, which has been used by several FBs as a basis
for further internationalisation to emerging Asia
93
For example, China and Vietnam had tariff barriers in place that made trade
uninteresting. Others were too poor and economically underdeveloped to provide a
market for the FBs‟ products (e.g. Indonesia and the Philippines). Internationalisation
activities were stepped up in the 70s when major Asian markets, e.g. China, opened
itself to foreign companies.
Apart from market entry timing decisions there are commitment increase decisions.
This means deciding when to move from one stage of internationalisation (e.g. from
exporting to setting up a wholly-owned subsidiary) to the next. These decisions are
based on market capacity. If exports are going well and there is a growing demand,
FBs will decide to go one step further. The same is true for decisions of local
production, which are also decided on the basis of existing demand.
5.2.3 Summary of findings on the internationalisation process of AGS FBs to
emerging Asia
Findings on the internationalisation path of AGS FBs revealed that a majority of FBs
showed an Uppsala-shaped internationalisation path, while a minority exhibited
similarity to the BG path model. On market entry modes, it was found that all FBs
started with exporting. 24 companies increased their commitment over time by
establishing ties with local distributors, setting up wholly-owned sales subsidiaries
and, in 15 cases, local production facilities. As a market, China ruled supreme over all
other ASEAN nations. Internationalisation decision-making and strategy-making had
been informal in the past but showed an increasing formalisation over time.
Internationalisation decisions were driven by non-financial values and goals, but also
economic factors. Finally, the timing of international activities showed that increasing
internationalisation went hand in hand with the opening of formerly closed markets in
emerging Asia.
94
5.3 Cross-case analysis
In the following a cross-case analysis (depicted in Table 14) is presented in tabular
form to facilitate easier understanding and comparison of the information of the
studied FBs. For reading and interpreting the table, the following issues should be
considered:
1. As stated previously, the surveyed FBs were very secretive and had strong
objection to make their data public. The interviewer agreed with the
interviewees on the following data protection measures:
a. To ensure that the company name remains anonymous, all names have been
replaced by a Case Company ID
b. “Country” only reveals the case company‟s home country. The name of the
city or direct municipality could have threatened the data confidentiality.
The municipality in combination with other provided information could
have revealed the company identity to an insider
c. “Number of employees” does not provide the exact number of employees,
as this information could reveal the company identity. Number of
employees is therefore presented in categorisations, e.g. 100-500
employees. In addition, number of employees replaces company size,
measured in revenues, as FBs did not agree to reveal any financial
information
2. “Business model” explains the company customer relationship. B2B means
business to business whereas B2C means business to customer
3. “Family stage” relates to the number of subsequent generations, which have
owned the company. It should be noted that a company might have had several
owners since establishment
4. Internationalisation path describes the type of internationalisation pattern, as
explained in 5.2.1.1
5. Latest and highest internationalisation mode in emerging Asia describes the
most recent and highest commitment level in any emerging Asian market
95
Table 14: Cross-case analysis24
Company ID Founded Country Interviewee position No. of
employees Industry Business model Family stage
Company 1 1930 Switzerland Family CEO 100–500 Food &
beverages B2C Third generation
Company 2 1910 Switzerland Family CEO 100–500 Food &
beverages B2C, B2B Third generation
Company 3 1846 Germany Family CEO 100–500 Food &
beverages B2C Fifth generation
Company 4 1924 Germany Family CEO and his son
who is family successor 500–1,000 Medical devices B2B Third generation
Company 5 1950 Switzerland Family CEO 100–500 Manufacturing B2B Second generation
Company 6 1860 Switzerland Managing CEO 10,000 + Manufacturing B2B Fifth generation
Company 7 1979 Switzerland Family CEO 50–100 Manufacturing B2B Second generation
Company 8 1981 Germany Family successor 100–500 Medical devices B2B Second generation
Company 9 1961 Switzerland Family CEO 50–100 Manufacturing B2B Second generation
Company 10 1945 Austria Managing CEO 1,000–5,000 Manufacturing B2B Third generation
Company 11 1877 Switzerland Head of Sales 100–500 Food &
beverages B2C, B2B Fourth generation
Company 12 1892 Austria Managing CEO 1,000–5,000 Manufacturing B2B Fourth generation
Company 13 1923 Germany Family CEO 10,000 + Manufacturing B2B Third generation
Company 14 1994 Germany Family Chairman 10,000 + Trade B2C Second generation
24
Source: Author`s own creation
96
Company ID Founded Country Interviewee position No. of
employees Industry Business model Family stage
Company 15 1896 Austria & NL Family CEO 10,000 + Trade B2C, B2B Fourth generation
Company 16 1912 Switzerland Managing CEO 50–100 Luxury goods B2C Third generation
Company 17 1953 Germany Family successor 500–1,000 Manufacturing B2B Third generation
Company 18 1989 Germany Family Chairman 5,000–10,000 Trade B2C Second generation
Company 19 1927 Austria Family CEO 1,000–5,000 Automotive B2B Third generation
Company 20 1852 Germany Family CEO 5,000–10,000 Manufacturing B2B Fifth generation
Company 21 1887 Germany Family CEO 1,000–5,000 Manufacturing B2B Fifth generation
Company 22 1912 Germany Family Chairman 10.000 + Automotive B2B Fourth generation
Company 23 1935 Germany Family CEO 1,000–5,000 Manufacturing B2B Third generation
Company 24 1785 Germany Family CEO 5,000–10,000 Automotive B2B Fifth generation
Company 25 1607 Germany Family Chairman 100–500 Manufacturing B2B Second generation
97
Company
ID
Non-financial values
& goals mentioned
on corporate
website
First exporting
activities
First foreign market/s
entered
First
exports to
Asia
First Asian
market entered
First internationalisation
mode
Company 1 yes 1960 Germany 1970 Hong Kong,
Singapore Exporting
Company 2 yes n.a. Germany, France 1980 Japan Exporting
Company 3 yes 1846 Several western European
countries 1850 China, Japan Exporting
Company 4 yes 1930 Several western European
countries 1969
Indonesia,
Thailand Exporting
Company 5 yes n.a. Several western European
countries and USA 1974 Japan Exporting
Company 6 yes 1900 Several western European
countries 1955 Japan Exporting
Company 7 yes 1979 Several western European
countries 1985 Malaysia Exporting
Company 8 no 1981 Several western European
countries, USA and Japan 1981 Japan Exporting
Company 9 yes 1970 Germany 1990 Japan Exporting
Company 10 no 1960 Denmark 1975 Indonesia Exporting
Company 11 yes 1900 Several western European
countries 1999
Hong Kong,
Japan Exporting
Company 12 no 1957 Australia 1986 China Exporting
Company 13 yes 1963 Switzerland 1970 Indonesia Exporting
Company 14 yes 1995 Austria 1998 India,
Bangladesh Exporting
Company 15 yes 1960 Several western European
countries 1964 n.a. Exporting
98
Company
ID
Non-financial values
& goals mentioned
on corporate
website
First exporting
activities
First foreign market/s
entered
First
exports to
Asia
First Asian
market entered
First internationalisation
mode
Company 16 no 1926 Several western European
countries and USA n.a.
Japan, Hong
Kong, Singapore Exporting
Company 17 yes 1967 Switzerland 1975 Japan Exporting
Company 18 yes 1995 Poland 2003 n.a. Exporting
Company 19 yes 1960 Germany 1980 n.a. Exporting
Company 20 yes 1928 Several western European
countries and USA 1950 n.a. Exporting
Company 21 yes 1926 USA 1958 n.a. Exporting
Company 22 yes 1970 Several western European
countries 1986 Japan Exporting
Company 23 yes 1970 Canada and USA 1998 Singapore Exporting
Company 24 yes 1900 Several western European
countries 1910 China Exporting
Company 25 yes 1980 Several western European
countries and USA 1996 Thailand Exporting
99
Company
ID
International-
isation path type
Highest and most recent
internationalisation mode in
emerging Asia
Local
production in
emerging Asia
Wholly-owned sales
subsidiaries in emerging
Asia
Local distributors/sales
agents in emerging Asia
Company 1 Uppsala Local non-owned distributors none none in every market
Company 2 Uppsala Local non-owned distributors none none Singapore, one Swiss
distributor
Company 3 Born Global Wholly-owned subsidiaries none none in every market
Company 4 Uppsala Local production China
China, Hong Kong,
Philippines, Indonesia,
Singapore, Brunei, Vietnam,
Thailand, Taiwan, Myanmar
none
Company 5 Uppsala Wholly-owned sales
subsidiary none China
Indonesia, Malaysia,
Philippines, Singapore,
Taiwan, Thailand
Company 6 Uppsala Local production China
China, Indonesia, Cambodia,
Myanmar, Philippines,
Singapore, Taiwan, Vietnam,
Thailand
none
Company 7 Born Global Exporting none none China
Company 8 Born Global Local non-owned distributors none none in every market
Company 9 Uppsala Wholly-owned sales
subsidiary none China Singapore, Thailand, Taiwan
Company 10 Uppsala Local production China China, Taiwan, Thailand,
Vietnam, Singapore
Hong Kong, Philippines,
Indonesia, Malaysia, Myanmar
Company 11 Uppsala Local non-owned distributors none none China, Philippines, Singapore,
Indonesia
Company 12 Uppsala Local production China China Malaysia, Vietnam, Indonesia
Company 13 Uppsala Local production China China, Hong Kong,
Singapore, Vietnam, Taiwan none
100
Company
ID
International-
isation path type
Highest and most recent
internationalisation mode in
emerging Asia
Local
production in
emerging Asia
Wholly-owned sales
subsidiaries in emerging
Asia
Local distributors/sales
agents in emerging Asia
Company 14 Born Global Local production China China none (all covered from China)
Company 15 Uppsala Local production China
China, Hong Kong, Taiwan,
Vietnam, Malaysia,
Singapore, Indonesia
Thailand, Brunei
Company 16 Uppsala Local non-owned distributors none none Hong Kong, Singapore
Company 17 Uppsala Wholly-owned sales
subsidiary none China
Hong Kong, Indonesia,
Malaysia, Philippines,
Singapore, Thailand, Vietnam
Company 18 Uppsala Local production China China none
Company 19 Uppsala Local production China China, Singapore none
Company 20 Uppsala Local production China, Vietnam
China, Hong Kong, Taiwan,
Singapore, Vietnam,
Indonesia
none
Company 21 Uppsala Local production China China, Singapore none
Company 22 Uppsala Local production China China none
Company 23 Uppsala Local production China China, Hong Kong, Thailand,
Singapore none
Company 24 Uppsala Local production China China none
Company 25 Uppsala Local production China China none
101
6. Influence of non-financial values and goals on the
internationalisation process of AGS FBs to emerging Asia
Chapter 6 presents the new theory on the influence of non-financial values and goals
on the internationalisation process of AGS FBs to emerging Asia. It answers the
overall research question set forth in Chapter 3.3 This question can be answered by
looking on the questions of what, how, why, where, when, who and by whom. The
new theory was created employing Straussian grounded theory. Data was analysed and
coded (using MAXQDA software) using Straussian-grounded theory coding
techniques. This allowed the researchers to deduce a set of 13 propositions, presented
in the sections 6.1-6.4 The chapter concludes with a comprehensive proposition table
in section 6.5, in which all propositions of the new theory are summarised, to facilitate
the understanding to the reader and to make the content easier accessible.
Also the content of this chapter roots in the Straussian code system developed for this
research, explaining how non-financial values and goals influence the
internationalisation process of AGS FBs to emerging Asia. The code hierarchy is
provided in Appendix F. The first code category describes the non-financial values
and goals existent in AGS FBs. Its sub-codes delineate the categories and respective
properties of these values and goals, which describe their nature in more detail.
Further, codes of the internationalisation of AGS FBs to emerging Asia category lay
out the specifics of strategy-making in this geographical context. This applies
specifically to the two sub-categories of internationalisation pattern and international
management. Internationalisation patterns hereby comments on the timing of
internationalisation decisions, as well as market choices and the overall
internationalisation path pursued. International management on the other hand takes a
look at different relevant management functions such as international HR management
or international financial management and explains in how far the strategies were
shaped by the FB‟s non-financial value and goal setting.
102
6.1 Non-financial values and goals of AGS FBs
The world of AGS FBs is shaped by non-financial values and goals that are developed
and lived in the family, and which are transmitted to the company context. Through
the company, non-financial values and goals affect outside stakeholders, such as
customers, business partners as well as the wider society as a whole.
AGS FBs understand non-financial values as universally applicable modes of social
conduct that are independent from space and time and are geared to the greater good of
all stakeholders. The family CEO of Company 14 said, “That is what we are working
for in a family business – it’s about transmitting and living values!” Non-financial
values can be subdivided into three factors: honesty, reliability and trust. All three
constitute factors of the honourable merchant ethos which describes ethical business
conduct and is inspired by religious principles. These factors are interdependent and
stand in causal relationships with each other. Following the rationale of this ethos,
there can only be trust if there is honesty and reliability. However, trust becomes most
visible, especially in relationships between actors in and outside FBs.
Non-financial goals emerge through the family-business relationship. Unlike non-
financial values, their importance and influence may vary in different contexts. This
study found six non-financial goals, which are transgenerational ownership (and its
sub-goals of independence and family control), quality, sustainability and long-term
orientation, employee appreciation, customer/partner orientation and reputation. The
attributes of these goals were elaborated in section 5.1.2 Non-financial goals likewise
root in the honourable merchant ethos. For example a positive reputation requires
honesty, reliability and trust. Also, goals cause and affect each other. For example, a
positive company reputation can only be achieved if FBs produce and market high
quality products over a long period of time while family ownership can only be
transgenerational if the company is managed sustainably and with a long-term focus.
Therefore, close causal linkages exist between these goals. Figure 16 repeats the non-
financial values and goals in AGS FBs.
103
Figure 16: Non-financial values and goals of AGS FBs
Source: Author’s own creation
When FBs take internationalisation decisions, they consider their non-financial values
and goals as an anchor point on which the future strategic path of the firm is
contingent. Although FBs always consider non-financial values and goals in their
entirety during the decision-making process, single goals may have a more obvious
impact on management functions than others.
Proposition 1: AGS FBs have a distinct non-financial value set which can be
described as the ethos of the honourable merchant. Besides this, influential non-
financial goals exist. Non-financial values and goals are in close causal and
interdependent relationships. Non-financial values and goals are the main anchor
point for all internationalisation-related decision-making in the firm.
6.2 Internationalisation pattern to emerging Asia
6.2.1 Timing
The timing of internationalisation endeavours to emerging Asia is driven by company
internal factors as well as by geopolitical/macroeconomic factors.
Regarding the former, the market position in the home market plays a critical role.
AGS first establish themselves in their home market and try to become leaders in their
respective market and product segment. When this establishment process has
progressed they consider internationalising to foreign markets. The pressure to look
outside the home market can be considered especially high in small domestic markets
104
(e.g. Austria and Switzerland). As a first step of internationalisation, FBs target
psychically close countries. After that internationalisation to emerging Asia becomes
an issue amongst other foreign markets.
Furthermore, geopolitical/macroeconomic factors have a significant influence on
internationalisation timing. In fact, it was found that AGS FBs only internationalise to
emerging Asia if geopolitical factors, such as the political system (communism vs.
capitalism) and tariff barriers as well as macroeconomic factors such as market growth
or income levels render a market sufficiently and sustainably attractive. Non-financial
values and goals do not seem to have a direct impact on the internationalisation timing
decision of AGS FBs to emerging Asia.
Based on the above, the following proposition is put forward.
Proposition 2: AGS FBs start internationalising to emerging Asia once they have
established themselves in their home market and have internationalised to psychically
close countries first. In addition, their internationalisation timing is influenced by
geopolitical and macroeconomic factors in the respective emerging Asian market.
Table 15 summarises the internationalisation timing of AGS FBs to emerging Asia.
Table 15: Internationalisation timing of AGS FBs to emerging Asia
Function Influencing value
and/or goal Situation/ Effect Proposition
Internationa-
lisation
timing
None Internationalisation timing
to emerging Asia is
influenced by:
1. The FB position in the
home market
2. By non-Asian
internationalisation
3. By geopolitical factors
in emerging Asia
4. By macroeconomic
factors in emerging
Asia
AGS FBs start internationalising
to emerging Asia once they have
established themselves in their
home market and have
internationalised to psychically
close countries first. In addition,
their internationalisation timing
is influenced by geopolitical and
macroeconomic factors in the
respective emerging Asian
market.
Source: Author’s own creation
105
6.2.2 Market pattern
Market pattern relates to geographic choices of markets in emerging Asia. Before AGS
FBs internationalise to emerging Asia they internationalise to psychically close
countries (e.g. other AGS states or Western European countries). The concept of
psychic distance is therefore relevant to explain pre-Asian internationalisation.
In Asia, market entry choices are shaped by geopolitical and macroeconomic
considerations. FBs that internationalised before the opening of major markets in
emerging Asia (e.g. China in the 1970s) chose established markets outside emerging
Asia, such as Japan or emerging Asian markets such as Singapore and Hong Kong.
These markets are characterised by high similarities to Western business culture,
professional styles as well as similarities in the legal system. In addition, these markets
were open for foreign businesses (meaning FDI was legally possible). However these
choices were influenced by the fact that major markets were closed or market entry
was unattractive due to hostile economic policies (e.g. China was closed until 1979,
some Indochinese states were even closed until recently – e.g. Myanmar only opened
in 2011). FBs that internationalised later tended not to exhibit preferences for countries
with similarities to western culture and legal standards but rather focused on market
accessibility and the growth potential of emerging Asian markets. China is therefore
the number one internationalisation destination for AGS FBs.
From the above, the following proposition is put forward.
Proposition 3: Pre-Asian international market patterns are shaped by psychic
distance. Market patterns in emerging Asia follow geopolitical and macroeconomic
considerations. Market potential is an important decision criterion.
Table 16 summarises the internationalisation market pattern of AGS FBs to emerging
Asia.
106
Table 16: Internationalisation market pattern of AGS FB to emerging Asia
Function Influencing value
and/or goal Situation/ Effect Proposition
Internationali-
sation market
pattern
None Pre-Asian international
market patterns are shaped
by psychic distance. Within
emerging Asia geopolitical
and macroeconomic
considerations drive the
market pattern. As soon as
markets open up to foreign
companies, FBs target
growth markets, then
neglecting psychic distance
considerations. China is the
preferred market due to its
market size and growth
opportunities.
Pre-Asian international
market patterns are shaped by
psychic distance. Market
patterns in emerging Asia
follow geopolitical and
macroeconomic
considerations. Market
potential is an important
decision criterion.
Source: Author’s own creation
6.2.3 Internationalisation path
The internationalisation path refers to the choice and/or sequence of
internationalisation entry modes in emerging Asia. AGS FBs chose paths of gradual
commitment increase, which can be described as the establishment chain of
international production to emerging Asia. This approach is reflected by the family
CEO of Company 2, stating “I think markets should be accessed step by step”. In line
with this statement the internationalisation path can be divided into four distinct steps.
The execution and pursuance of these steps is shaped by the two non-financial sub-
goals of transgenerational ownership, namely independence and family control as well
as by quality and reputation goals (as depicted in Figure 17)
107
Figure 17: The establishment chain of international production to emerging Asia
and influencing non-financial values and goals
Source: Author’s own creation
The first internationalisation step to emerging Asia is exporting. Before exporting to
emerging Asia, AGS FBs internationalise to psychically close markets. These markets
may be other AGS countries or countries of the European Union, or even North
American markets. Exporting is done sporadically. In this stage the non-financial goals
of independence and family control do not yet become apparent because neither is
threatened by early internationalisation activities.
The second internationalisation step is exporting through local distributors in emerging
Asia. This may also be done through sales agents working on commission basis
although distributors are more common. This step may be frog-leaped by FBs planning
to produce in emerging Asia in the future as these FBs may immediately proceed to
stage three. The choice of local distributors is primarily taken by FBs which offer
products that do not require after sales service (e.g. FMCG) but still have high quality
and reputation considerations. For those FBs, financial resources play an important
role. FBs that exclusively rely on local distributors and do not increase their
internationalisation commitment in emerging Asia have to be thrifty with financial
108
resources. Cooperating with local distributors is less costly than setting up wholly-
owned sales subsidiaries.
The third internationalisation step is internationalisation through wholly-owned sales
subsidiaries. The decision to establish wholly-owned sales subsidiaries is based on
several considerations. Firstly, FBs that engage in local production in later stages of
internationalisation establish wholly-owned sales subsidiaries first. This is a common
approach of market testing which FBs do very cautiously. In the beginning the sales
subsidiary may not be wholly-owned, however FBs strive to hold a majority stake to
manifest their independence and family control aspirations. FBs appear to seek
independence from distributors and full control over the business.
Secondly, wholly-owned sales subsidiaries make it possible to offer after sales
customer service. To most FBs, after sales customer service is part of their product
offer and touches upon their non-financial goals of quality and reputation. In
particular, after sales service not only accommodates to the emotional attachment of
FB‟s to the quality of their products, but moreover allows to signal global availability
as a means to enhance the firm‟s reputation vis-à-vis strategically relevant external
parties. Leaving customer service in the hands of someone else is hence not considered
an option, as the CEO of Company 6 put it “(…) we never walk away from a customer
wherever he might be in the world”.
The fourth internationalisation step is local production. The decision to establish local
production subsidiaries is driven by the will to exploit local market opportunities.
However, this strategy is only chosen if the following non-financial goals are
protected. Firstly, the FB needs to be confident that it can produce at the same quality
standard in emerging Asia in order to avoid potential reputation losses due to inferior
quality. If that is not given, the FB actively decides against production in emerging
Asia.
Secondly, independence and family control must be protected. Joint ventures or
strategic alliances are not common entry modes for AGS FBs in emerging Asia. Still,
some FBs may enter the Chinese market by engaging in joint ventures. However, these
joint ventures are not based on their own decision, but on legal requirements imposed
by the Chinese government on foreign investors (joint venture law – see section 2.3.1).
Some FBs evaluated the advantages of a market entry as more promising than the
disadvantages of a joint venture. In general however, FBs only established local
109
production subsidiaries in China after the joint venture law was softened or entirely
abolished for many industries. FBs understand joint ventures as a direct threat to their
independence as a FB, including strong concerns about issues such an IP violations
etc., financial independence and the transmission of their non-financial values and
goals. Such entry modes that rely heavily on external parties are therefore alien to
AGS FBs which prefer to stay independent and in control.
From the above the following proposition is put forward.
Proposition 4: AGS FBs internationalising to emerging Asia follow an
internationalisation path of gradual commitment increase over time. FBs choose
internationalisation entry modes that protect their non-financial goals of
independence and family control as well as quality and reputation.
Table 17 summarises the above-elaborated influences of non-financial values and
goals on the internationalisation pattern to emerging Asia.
Table 17: Internationalisation pattern of AGS FB to emerging Asia
Function Influencing value
and/or goal Situation/ Effect Proposition
International-
isation path to
emerging Asia
1. Transgenerational
ownership
a. Independence
b. Family control
2. Quality
3. Reputation
FBs undergo four steps of
international establishment
when they internationalise to
emerging Asia.
1. Stage one constitutes
sporadic exporting
2. Stage two includes local
distributors or sales agents
3. Step three relies on wholly-
owned sales subsidiaries
4. Step four involves forms of
local production
In this process FBs consider to
protect their independence and
family control, as well as quality
and reputation goals. Only entry
modes are chosen that allow and
protect these goals.
AGS FBs
internationalising to
emerging Asia follow an
internationalisation path
of gradual commitment
increase over time. FBs
choose
internationalisation entry
modes that protect their
non-financial goals of
independence and family
control as well as quality
and reputation.
Source: Author’s own creation
110
6.3 International management
6.3.1 Planning and strategy-making
Planning and strategy-making refers to the “how” and “by whom” of
internationalisation strategy-making in the context of emerging Asia. Two properties
of this management function can be distinguished, namely the formality of
internationalisation planning and strategy-making to emerging Asia (how) as well as
the decision drivers of the latter (by whom).
Internationalisation planning- and strategy-making is a process of gradual refinement
and increasing formalisation over time. As FBs typically internationalise to non-Asian
markets first, they tend to adopt pre-Asian internationalisation strategies for emerging
Asia. These are then adapted to the local context. A change in internationalisation
strategy is therefore rare. Planning and strategy execution become more formal and
sophisticated over time. In the early phases of Asian internationalisation, strategy
making is still informal as stated by the family CEO of Company 21:”Just think about
how we started our subsidiaries. These were pure gut decisions”. Despite informal
processes FB CEOs put considerable thought into their strategy-making as the family
CEO of Company 4 reported “It may seem less formalized or a development by
chance but I ensure you that a lot of planning and thinking goes into this”. Increasing
company size and internationalisation duration is accompanied by an increase of
planning proficiency and formalisation.
With respect to the decision-drivers of internationalisation to emerging Asia, the
influence of the owning family becomes evident. This is connected to the family goal
of transgenerational ownership and its sub-goal of family control. The planning and
strategy-making process is the family‟s most decisive approach to steer emerging-Asia
internationalisation and ensure that its non-financial values and goals are pursued.
111
Figure 18: Development of family influence on internationalisation planning and
strategy-making over time
Source: Authors own creation
Early internationalisation stages (e.g. export) are characterised by strong direct family
influence. Often the family CEO is the main decision-maker, steering
internationalisation in a top-down manner. This tendency is additionally reinforced by
existing decision-making structures which tend to be underdeveloped in smaller firms.
With increasing firm size and deepening internationalisation commitment planning
and decision-making structures are successively adapted and professionalised.
The direct influence of the owning family decreases with the introduction of more
formal decision-making mechanisms (e.g. appointment of additional non-family
managers). Consequently, there may be various decision- making organs (e.g. board of
management, board of chairmen or family councils) that are involved in the decision-
making process. Besides, as firm size increases local emerging Asian subsidiaries
become more involved and consulted in the decision-making process.
At the same time, hidden planning and decision-making structures evolve or remain in
place, thereby ensuring that the family remains in control about decisions relevant to
the internationalisation strategy, especially if these decisions affect other family goals.
These informal planning and decision-making systems are built on an unspoken accord
112
between the family management (and or the family as a whole) and non-family
management members as stated by the family chairman of company 25 “Of course, all
final decisions lie with my son and with me. We work closely together and trust each
other’s decisions as we trust our board members.”
From the above the following proposition is carried forward.
Proposition 5: AGS FB internationalisation planning and strategy-making is
gradually refined and professionalized over time. Pre-Asian internationalisation
strategies are implemented for emerging Asia and are slightly adapted to the local
context. Pursuing family control as a primary objective, the family shapes the
decision-making process either directly or indirectly.
Table 18 summarises the above-elaborated influences of non-financial values and
goals on the internationalisation planning and strategy making to emerging Asia.
Table 18: Internationalisation planning and strategy-making of AGS FBs to
emerging Asia
Function Influencing value
and/or goal Effect Proposition
International-
isation planning
and strategy-
making
Transgenerational
ownership
a. Family control
Internationalisation
planning and strategy
becomes more formal
over time. Decision
driver is the owning
family either through
direct or indirect
decision-making
structures.
AGS FB internationalisation
planning and strategy-making is
gradually refined and
professionalised over time. Pre-
Asian internationalisation strategies
are implemented for emerging Asia
and are slightly adapted to the local
context. Pursuing family control,
the family shapes the decision-
making process either directly or
indirectly.
Source: Author’s own creation
6.3.2 International knowledge management
A keystone of internationalisation is internationalisation knowledge which refers to the
“what”, “how”, “why” and “who” of strategy-making and daily business conduct in
multicultural contexts.
Internationalisation knowledge does not exist per se – it needs to be acquired. Lacking
internationalisation knowledge proves to be a considerable obstacle for AGS FBs in
113
their internationalisation process to emerging Asia. In order to gain internationalisation
knowledge, FBs use an experimental learning approach.
Through pre-Asian internationalisation FBs gain experiences in how to access, and
understand market critical information, as well as about the internationalisation
process itself. The family CEO of Company 3 stated “Once you have made it through
the first market it will be much easier in the second, so there is a clear learning
curve”. Nevertheless, FBs have to learn many things from scratch when they
internationalise to emerging Asia, particularly as pre-Asian internationalisation
knowledge is less helpful than in other geographical contexts. This is due to the greater
perceived psychic distance and foundationally different geopolitical and
macroeconomic factors. It is noteworthy to mention that there is no change in the
internationalisation knowledge acquisition process over time. It remains an
experimental learning process through all stages of internationalisation.
The overall internationalisation knowledge acquisition process does not exhibit
noteworthy impact of non-financial values and goals. This is somewhat different if a
closer look on the sources of internationalisation knowledge is taken. Still, non-
financial values and goals only play a marginal role in this process. Three influencing
non-financial values and goals can be distinguished respectively, comprising the ethos
of the honourable merchant (hereby in particular its factor of trust) and the goals of
family control, customer/partner orientation and employee appreciation.
Firstly, there is strategic travelling and self-preparation. This approach typically plays
an important role in the early stages of internationalisation (e.g. exporting) when low
levels of pre-Asian internationalisation knowledge exist and financial resources are
scarce. As a consequence, family members take it upon themselves to travel to
emerging Asian countries to obtain knowledge of the local market and culture. Often
the family CEO travels himself. This is supplemented by intensive self-preparation
such as reading books about the target market and by talking to locals. FBs feel more
comfortable to invest in a foreign country if they know the place. This approach
appears to reflect the non-financial goal of family control. It is important for the
owning family to steer and supervise this process, since private wealth is invested in
the company and exposed to risks through the internationalisation endeavour.
Secondly, networks are an important source of internationalisation knowledge.
Networks remain crucial through all stages of internationalisation (explained in detail
114
in section 6.3.6). This applies to the same extent to networks in the home market as
well as to networks in emerging Asia. FBs may be part of industry associations or
have close ties to other friendly companies/customers. This is where the FB receives
relevant information and valuable additional business intelligence. Experiences are
shared in informal gatherings given that trusted relationships have been established in
previous gatherings. Also the networks of distributors or foreign sales agents provide
significant sources of internationalisation knowledge, as do distributors and sales
agents themselves. These partners already have an established network and know the
market and can provide necessary information to the FBs.
This source is influenced by the non-financial value ethos of the honourable merchant
as well as the non-financial goal of customer/partner appreciation. For the honourable
merchant it is clear that he can rely on the experiences of business partners and their
help as long as he remains willing to provide the same assistance to a partner in a
similar situation. The relationship is therefore inevitably built on honesty, reliability
and trust. Apart from the afore-mentioned, customer and partner orientation plays a
role. Customer/partner orientation is focused on the long-term and includes working
collaboratively on problems and tasks, if necessary.
Thirdly, employees are an important source of internationalisation knowledge, such as
sales employees either from the domestic sales department or wholly-owned sales
subsidiaries in emerging Asia. Sales people in fact need to travel extensively and talk
regularly with local partners and customers. It is from these conversations that
important information is collected. In these talks they learn about market conditions,
product innovations and network developments. This process seems informal;
however the goal of employee appreciation leads to very close contact between the
family management and its employees. Furthermore, FBs strongly trust their
employees to convey information critical to internationalisation. In addition, the
family management tends to know their employees for a very long time and has a
close, personal relationship with them. Internationalisation experiences are discussed
in small circles between the sales staff and the family management.
Some resourceful FBs may employ consultancies to help bridging the knowledge gap.
However, consultancy services are primarily used for information, intelligence and
networking purposes rather than for international strategy creation. The reason for this
is that FBs want to remain in control over their own strategy-making.
115
These findings allow the following proposition:
Proposition 6: AGS FBs follow an experimental learning process of knowledge
acquisition when internationalising to emerging Asia. Pre-Asian internationalisation
knowledge is only helpful to a limited extent in emerging Asia. The use of the sources
of internationalisation knowledge is influenced by the honourable merchant ethos and
the non-financial goals of customer/partner orientation and employee appreciation.
Table 19 summarises the impact of non-financial values and goals on the international
knowledge management of AGS FBs in their internationalisation process.
Table 19: International knowledge management of AGS FBs
Function Influencing value
and/or goal Situation/effect Proposition
International
knowledge
management
Only to a limited
extend influenced by
non-financial goals
and values
1. Honourable
merchant
(especially trust)
2. Customer/partner
appreciation
3. Employee
appreciation
FBs undergo an experimental
learning process.
Internationalisation knowledge is
an important success factor. There
are three sources of knowledge.
Firstly, FBs undergo intensive
self-preparation, which is led
by the families control goal.
Secondly, customer/partner
appreciation gains access to
knowledge from domestic and
foreign networks.
Thirdly, the FBs own
employees, especially sales
employees, are important
sources of internationalisation
knowledge, which is accessed
through trusted relationships
with appreciated employees.
AGS FBs follow an
experimental learning
process of knowledge
acquisition when
internationalising to
emerging Asia. Pre-
Asian
internationalisation
knowledge is only
helpful to a limited
extent in emerging Asia.
The use of the sources
of internationalisation
knowledge is influenced
by the honourable
merchant ethos and the
non-financial goals of
customer/partner
orientation and
employee appreciation
Source: Author’s own creation
6.3.3 International cultural management
Cultural differences refer to different languages, tastes, styles and perception between
cultures and societies. When AGS FBs internationalise to emerging Asia, they
experience strong cultural differences. These differences cause misunderstandings and
problems as the family CEO of Company 5 stated: “The biggest problem working with
people there, is the local culture”. Within emerging Asia, FBs experience the highest
level of cultural differences with China. However several markets in emerging Asia
have notably lower levels of cultural differences, namely Hong Kong and Singapore,
116
due to a high level of economic development and the colonial history, which has
brought many similarities to western culture, especially in business norms.
At the same time, FBs gradually learn how to deal with cultural differences. In
addition, FBs try to align their own non-financial values and goals with the local
culture – “One has to adapt and make the values acceptable to the local culture”
(Family CEO of Company 23).
The main problem source is the local language. This applies specifically to countries
with high population percentages without foreign language skills (e.g. China and most
ASEAN states – excluding Taiwan, Hong Kong and Singapore). In fact, often no
employee of the FB speaks an Asian language. Cultural problems do not only emerge
in spoken language but in differing styles and tastes, as well as in the implicit meaning
of words and their interpretation.
Moreover, the different interpretation of values can lead to misunderstandings. Non-
financial values like trust or goals such as quality are generally the same in the
Germanic and the Sino-Asian culture. “It is always about the value itself because that
is the very same everywhere but how it is lived is a different matter” (Family CEO of
Company 23). Good examples in this context are intellectual property violations by
Chinese market players. The AGS FB and their Chinese customer/business partner
have the same perception of quality as something positive and close to perfection.
While in Chinese culture copying products is considered a way of showing
appreciation, AGS FBs see this as a violation of their rights and the honourable
merchant ethos.
FBs use two HR driven strategies to bridge cultural differences. These are shaped by
the honourable merchant ethos (mainly trust) and the non-financial goal of long-term
orientation.
To mitigate cultural problems with customers and partners FBs hire locals for sales
positions. FBs recognise that it is crucial to be able to communicate directly with their
customers and partners in their own language and cultural ways. Not having Asian
sales staff creates a competitive disadvantage for FBs. Therefore, FBs include this
thinking into their long-term HR strategy and attempt to build trusted relationships
with their Asian sales staff. However, especially smaller companies with limited
resources cannot afford to hire Asian sales staff and find it more difficult and time
117
consuming to bridge cultural differences. Smaller FBs therefore tend to rely on
existing sales structures of distributors in emerging Asia. Such distributors may have
cross-cultural experience because they import from all sorts of non-Asian companies.
A second strategy is to give intensive training to the FBs own European workforce,
comprising intensive coaching by cultural experts. Language courses over a longer
period may likewise be part of it. Also, family members try to prepare themselves
intensively by reading books about cultural differences, attending information sessions
of industry associations or travelling to emerging Asia to learn about the local cultures.
For FBs this means considerable resource commitments in terms of financial
investment and time. In their view, such costs are justified because they consider the
long-term prospects and seek to operate in emerging Asia for a long time.
In conclusion it can be stated that FBs try hard to reduce cultural tensions, given their
limited resources. Many non-financial values and goals closely resemble Sino-Asian
culture. This specifically applies to FBs long-term orientation which Asians interpret
as a sign of trustworthiness and continuity, as well as direct personal relationships with
the employees. Finally, cultural differences do not decrease over time, but the
understanding on both sides grows gradually.
From the above the following proposition can be derived.
Proposition 7: When AGS FBs internationalise to emerging Asia they face
considerable cultural differences. Based on their non-financial value ethos of the
honourable merchant and the goal of long-term orientation they try to strategically
mitigate and manage cultural problems, which may reduce cultural tensions gradually
over time.
Table 20 summarises the impact of non-financial values and goals on the international
cultural management of AGS FBs in their internationalisation process to emerging
Asia.
118
Table 20: International cultural management of AGS FBs
Function Influencing value
and/or goal Situation/effect Proposition
International
cultural
management
1. Honourable
merchant ethos
(especially trust)
2. Sustainability/long-
term orientation
FBs face considerable cultural
problems and differences in
emerging Asia. They try to
mitigate these problems by
building trusted relationships and
by taking a long-term approach.
They rely on two strategies:
1. Hiring native Asian sales staff
that they try to establish
trustful relationships with.
2. FBs spend considerable
resources on training
themselves and their
employees on cultural
differences and how to deal
with them. They evaluate this
as appropriate, given their
long-term strategy orientation.
When AGS FBs
internationalise to
emerging Asia they
face considerable
cultural differences.
Based on their non-
financial value ethos
of the honourable
merchant and the goal
of long-term
orientation they try to
strategically mitigate
and manage cultural
problems, which may
reduce cultural
tensions gradually
over time.
Source: Author’s own creation
6.3.4 International financial management
Internationalisation is a holistic process that may require substantial financial
resources. This applies especially to markets where higher physical and psychic
distance entails increased uncertainty and financial risk.
AGS FBs finance their internationalisation activities to emerging Asia from their free
cash flow. For FBs this directly correlates with their non-financial values. An
honourable merchant would not let himself into too much debt, otherwise he could not
repay it and this would undermine his values of reliability and trust. In addition the
non-financial goal of transgenerational ownership and its sub-goals of independence as
well as long-term planning show direct impact on international financial management.
In FB thinking, external capital would endanger their ownership, decrease their
independence and dilute family control, therefore posing a threat to the
transgenerational vision of the FB. Furthermore, external capital is seen as an
unsustainable source of financing. This attitude prevails during all internationalisation
stages in emerging Asia.
An exception may be governmental insurance and liquidity management offers.
Governmental export promotion institutions are held in high regard amongst FBs and
are among the first to consult if credit lines are needed. Governmental foreign trade
119
institutions charge low interest rates compared to market standards. Their purpose is to
reduce uncertainty and mitigate payment default dangers of business partners. Such
credit lines can therefore not be described as typical long-term liabilities or outside
equity, which would have a diluting effect on the equity side of the FB‟s balance sheet.
Classical debt financing is therefore not regarded as an option for FBs when
internationalising to emerging Asia. FBs use governmental export financing typically
during the exporting stage.
When AGS FBs establish local Asian sales subsidiaries they stock them with a basic
level of equity. As sales subsidiaries have low running cost they have to break even on
their own. Equity is provided from the parent company to the subsidiary in the form of
a company internal credit payment, which has long credit periods. If the FB has local
production subsidiaries in emerging Asia, these are also financed through headquarters
using company credits with long lasting credit periods. External debt may be used to
meet short-term demands of liquidity management for which FBs are prepared to work
with local banks. Still, FBs prefer branches of banks that they already have business
relationships with.
The descriptions provided above allow deducing the following proposition:
Proposition 8: When AGS FBs internationalise to emerging Asia they strongly rely on
company internal financing. This is driven by their non-financial value ethos of the
honourable merchant and the non-financial goals of transgenerational ownership,
independence, control, and sustainability/long-term orientation.
Table 21 summarises the impact of non-financial values and goals on the international
financial management of AGS FBs in their internationalisation process.
120
Table 21: International financial management of AGS FBs
Function Influencing value
and/or goal Situation/Effect Proposition
International
financial
management
1. Honourable
merchant ethos
2. Transgenerational
ownership
a. Independence
b. Family control
3. Sustainability and
long-term
orientation
FBs avoid financing their
internationalisation activities
in emerging Asia with
external capital. They entirely
rely on company internal
financing. Only minor
liquidity credit lines and
governmental export
insurance offers are accepted.
External subsidiaries are
stocked with long lasting
company internal credit
payments.
When AGS FBs
internationalise to emerging
Asia they strongly rely on
company internal financing.
This is driven by their non-
financial value ethos of the
honourable merchant and the
non-financial goals of
transgenerational ownership,
independence, control, and
sustainability/long-term
orientation.
Source: Author’s own creation
6.3.5 International human resources management
International human relations management (HR) describes which HR related policies
AGS FBs employ in their internationalisation process to emerging Asia.
The importance and resources committed to HR depend on the chosen
internationalisation entry mode. Two main groups can be distinguished, i.e.
internationalisation modes that do not require local employees in emerging Asia (e.g.
strategic exporting) and internationalisation entry modes that require employees to be
in emerging Asia (e.g. wholly-owned sales subsidiaries or local production
subsidiaries).
When it comes to HR strategies, non-financial values and goals become clearly
visible. In the case of the honourable merchant ethos, this specifically applies to the
value of trust. Regarding non-financial goals, long-term orientation and employee
orientation show an impact. The family CEO of Company 9 commented “Regarding
our employees we focus on the long term as well, for example our Chinese employees
are all still working for us except one and this for years now”. Generally, FBs want a
trustful relationship with their employees which requires honesty and reliability. Also,
FBs want the relations with their employees to be long-term focused. Both criteria
make FBs cherish their employees by showing high employee appreciation because
they understand their workforce as enlarged family.
During the exporting stage (either sporadic or strategic) only the FB‟s sales employees
are directly affected by the internationalisation to emerging Asia as FBs rely on in-
121
house sales departments. Sales employees are usually of AGS nationality. However,
this increases the market entry barrier for emerging Asian markets because such
employees do not have the same level of cultural understanding or network contacts,
not to mention language proficiency, than a local would have. Hiring Asian sales staff
is difficult because it is expensive and access to international sales experts might be
limited.
FBs that set up local wholly-owned subsidiaries or invest in production facilities in
emerging Asia develop more sophisticated HR strategies. One question in this regard
is how to structure the board of the Asian subsidiary. For such positions FBs aim for
trustful, long-term oriented employer-employee relationships. This specifically applies
to the Chief Executive Officer (CEO), the Chief Financial Officer (CFO) and the Chief
Sales Officer (CSO) positions.
FBs try to fill the CSO position with local Asians. The reason for this is that
Europeans do not have the same cultural understanding of the target market and do not
have the same network as local sales managers. Network contacts may even become a
core-hiring requirement. However, it is common that the CSO has a common history
with the FB and they know each other for many years. This ensures that a trustful
relationship exists.
Different criteria are used to choose the CEO. The decision on this position is mainly
driven by the assigned responsibilities. Often, single responsibilities may be
overlapping, for example a CEO of an emerging Asian production subsidiary might
also be responsible for financial reporting. If the CEO position is sales driven, FBs
will prefer to fill it with an Asian (for the reasons elaborated previously). If, however,
the position is financially or technically driven FBs try to fill it with an employee from
headquarters (mostly of AGS nationality) whom they know for a very long time and
have a trustful relationship with. In this case it is rare that Asian nationals hold this
position.
The CFO position is primarily given to employees from headquarters. FBs want to
have a trustful and long-standing relationship with the CFO to manifest their control
ambitions. This position is rarely given to Asian nationals.
122
If managers are hired from outside the company, which happens rarely, FBs rely on
their own networks to find the right candidate. Executive search companies are rarely
used because FBs evaluate their own networks as more trustworthy and efficient.
Furthermore, FBs need to be in touch with their local employees in emerging Asia. In
order to achieve the former FBs seek to establish the same working culture and
employer-employee relationship as in AGS. The family CEO of Company 19 pointed
out “We try to create the same employer-employee culture that we have in Austria
(...).” This idea is influenced by the non-financial goal of employee appreciation
which aims at creating a family feeling in the company and providing the grounds for
a positive employer-employee relationship. The family CEO of Company 9
highlighted that “(…) we try to create a family feeling in our company and with our
employees. I realise that this is well received in Asia. Asians are often astonished that
we treat them like family”.
In this context FBs may offer non-financial perks, such as kindergartens or housing or
financial incentive packages in an attempt to create and manifest this type of
atmosphere. Above all, the local management is supposed to implement a similar
corporate culture by representing the FBs non-financial values and goals and making
the employees feel appreciated. It is hence important that the local management shares
the same understanding and appreciation of the FB‟s non-financial values and goals
and is in close personal contact with the employees. FBs communicate their non-
financial values and goals clearly to their Asian employees, e.g. through learning and
training sessions as well as giving them the feeling that they belong to a larger
company family.
Based on the elaborated findings of the HR management of AGS FBs
internationalising to emerging Asia, the following proposition is put forward:
Proposition 9: Internationalisation HR strategies aim at establishing trusting, long-
term relationships with the employees. Top management positions are primarily given
to trusted employees. AGS FBs take an active approach in establish a family-like
culture to fulfil their non-financial goal of employee appreciation.
Table 22 summarises the impact of non-financial values and goals on the international
human resources management of AGS FBs in their internationalisation process to
emerging Asia.
123
Table 22: International HR of AGS FBs
Function Influencing value
and/or goal Situation/Effect Proposition
International
HR
management
1. Honourable
merchant ethos
(especially trust)
2. Long-term
orientation
3. Employee
appreciation
FBs try to establish trusting, long-
lasting relationships with their
employees. Trust and long-term
relationships are the driving force of
management position appointments
in emerging Asia. Also, FBs foster
the establishment of a family-like
working culture to fulfil their goal
of employee appreciation. A key
requirement is that the local
management is able to live the FBs
non-financial values and goals and
to convey them to the local
employees.
Internationalisation
HR strategies aim at
establishing trusting,
long-term
relationships with the
employees. Top
management positions
are primarily given to
trusted employees.
AGS FBs take an
active approach in
establishing a family-
like culture to fulfil
their non-financial
goal of employee
appreciation.
Source: Author’s own creation
6.3.6 International network management
An important part of FBs internationalisation to emerging Asia is networking.
Networking refers to the personal contact and interaction between the FB and external
partners. FBs reckon that good network relationships are crucial for successful
entrepreneurship in emerging Asia. The family CEO of Company 23 stated in this
regard “In China, networks are even more important. They say, not “know-how” but
“know-who” is important”. Networks are generally important for internationalisation
but their importance is higher in emerging Asia than in the rest of the world. China
shows the highest level of network importance and the highest network entrance
barriers. The reason for this lies in the explicit value that Sino-Asian cultures attribute
to networks and long-term relationships.
Relevant networks are twofold. Firstly, networks in AGS and second, networks in
emerging Asia.
Network partners in AGS are industry associations, governmental bodies, customers
and competitors. Internationalisation critical information and experiences are shared in
informal meetings. Often, new sales agents or strategic HR positions in emerging Asia
are first searched for in these networks, as FBs place trust in established network ties.
Many FBs follow the international network of their own customers in emerging Asia
instead of building up their own network from bottom up. The same applies to
124
networks in emerging Asia where FBs network with embassies, governmental trade
promotion agencies, local authorities, local companies and partners of their sales
network and industry associations of all sorts.
This leaves the question of how FBs approach and infiltrate networks. In their home
markets these networks have already been existent for a long time. In emerging Asia
FBs need proactive approaches to become part of networks. For this, FBs use three
main approaches which are shaped by their non-financial values and goals.
Overarching all approaches is the FBs long-term orientation which makes them think
not in years, but in decades and generations.
The first approach uses HR management. In order to access local Asian networks,
Asian employees with access to these networks are hired. Many FBs make it a key
hiring criterion how well the candidate‟s network is developed. Not having access to
such local employees may consequently prove a major obstacle to access networks.
The second approach can be termed “family way of networking”. This means that FBs
try to establish close, long-lasting, family-like network ties with their partners in
emerging Asia. They communicate that network relationships are meant for the long-
term and that continuity of leadership over long periods of time provides a sense of
reliability to the network partner. To establish this family feeling, FBs and their
network partners spend time together in less informal settings. Often, this is the source
of lasting friendships. FBs and their network partners may even spend vacations
together, organise leisure events or invite each other to their family homes. With this,
FBs convey their values of the honest merchant and show that they seek long-lasting
relationships characterized by a high appreciation of their network partner.
This strategy serves FBs to target cultural mainstream values in Sino-Asian societies.
These cultures prefer to have the same business partner for a long time to build up
trust. Further, they cherish close personal ties. These cultural preferences closely
resemble the non-financial value and goal set of AGS FBs. Contrary to that,
multinationals and non-privately owned companies cannot offer the same continuity of
leadership and do not put the same effort into personal, long-term and trustful network
creation. FBs are aware of this advantage and stress their non-financial values and
goals clearly when they engage with new Asian network partners. In addition, AGS
FBs prefer, if they have a choice, to cooperate with Asian FBs in the respective target
markets because they perceive their non-financial value and goal set as similar and
have therefore more trust in their leadership capabilities. In conclusion, their non-
125
financial values and goals provide AGS FBs with a competitive networking advantage
in emerging Asia.
Thirdly, FBs commit substantial time and financial resources. Especially, FB CEOs
dedicate a considerable amount of time during their Asia trips for the care and
maintenance of their network relationships. The same applies to the local management
in emerging Asia in order to develop and nurture a trustful relationship and convey the
non-financial value and goals set to network partners. Further, FBs try to become
locally embedded at the place/region they are situated in in emerging Asia. This only
applies to FBs that have local production subsidiaries and which try to implement the
same or similar social engagement forms, comparable to their home market. This may
include funding schools or research chairs at universities. The family CEO of
Company 20 stated, “Our relationships are actually so good that our Chinese CEO
gets regularly invited to the meetings of the local branch of the Communist Party. He
is a delegate without voting rights, but still! He is very well connected“, hereby
underpinning the regularity and continuity of network maintenance.
From the above, the following proposition on FB networking in Asia can be made:
Proposition 10: Access to internationalisation critical networks is a condition sine qua
non for AGS FBs in emerging Asia. The honourable merchant ethos and the non-
financial goals of long-term orientation and customer/partner appreciation shape the
FB’s networking strategy. Both, non-financial values and goals closely resemble Asian
cultural preferences and constitute valuable resources in network creation and
maintenance.
Table 23 summarises the impact of non-financial values and goals on the international
network management of AGS FBs in their internationalisation process to emerging
Asia.
126
Table 23: International network management of AGS FBs
Function Influencing value
and/or goal Effect Proposition
International
network
management
1. Honourable
merchant ethos
(especially trust)
2. Long-term
orientation
3. Customer/partner
orientation
FBs rely on their non-
financial values and goals to
enter and maintain networks.
They establish close, long
lasting, family like ties with
their Asian network partners
and show a preference to
work with local FBs. Asian
network partners cherish this
way of networking because it
closely resembles Sino-
Asian cultural values. This
gives AGS FBs a
competitive networking
advantage in Asia.
Access to
internationalisation critical
networks is a condition
sine qua non for AGS FBs
in emerging Asia. The
honourable merchant ethos
and the non-financial goals
of long-term orientation
and customer/partner
appreciation shape the
FBs‟ networking strategy.
Both, non-financial values
and goals closely resemble
Asian cultural preferences
and constitute valuable
resources in network
creation and maintenance.
Source: Author’s own creation
6.3.7 International control management
International control management describes which approaches FBs use to control their
activities in emerging Asia during the internationalisation process.
In order to protect transgenerational ownership and independence, FBs try to strictly
control their business in emerging Asia. The circumstances of physic and psychic
distance increase the perceived need for control because emerging Asian countries are
far away from the FB‟s geographic roots and the local culture may likewise not be
familiar to the family management. Therefore the family management takes an active
control approach to ensure that its non-financial values and goals are protected and
correctly pursued.
The level of control efficiency correlates with the depth of market entry modes
following the international establishment chain to emerging Asia. The logic applies
that the higher the internationalisation commitment, the higher will be the control
efficiency and herewith the non-financial value and goal protection. Evaluating more
specifically on which non-financial values and goals influence international control
approaches the following can be identified; Honourable merchant ethos (mainly trust)
and long-term orientation. Two international control strategies can be identified.
127
The first strategy is employed during the first three steps of the international
establishment chain to emerging Asia (strategic exporting through local distributors/
own sales agents or by setting up wholly-owned sales subsidiaries). FBs face the
challenge that they need to control the distributor‟s product pricing, product placement
and product marketing. The same applies to wholly-owned sales subsidiaries. The
CEO of Company 16 stated: “I usually travel there and check the stores. When you
have the right partner problems do not even emerge. It is very hard to control the
branding strategy though”. This example shows that control is mainly exercised
through personal check ups and meetings. FBs admit that this level of control does not
extend very deep, especially since check-up appointments are usually scheduled
beforehand. To ensure that FBs can control to the best of their abilities, they staff the
local sales subsidiaries with trusted employees. Local distributors have to be chosen
carefully, based on the prospect of having a long-term oriented, trustful cooperation.
The main influencing value therefore is trust, while long-term orientation is the
dominating non-financial goal in this strategy.
In the second case, FBs decide to deepen their activities in emerging Asia (e.g. by
wholly-owned production subsidiaries). Such FBs employ a much more rigid control
approach through strict HR policies and full headquarter process implementation. Also
in this case the local HR decisions are influenced by the FBs preference for trust
building and long-term relationships, as mentioned in the section on international HR
management (section 6.3.5). Positions in the Asian subsidiary are preferably given to
trusted employees, which have spent time at headquarters and with whom the family
has a trusted relationship. Often these employees have been with the company for
many years, or even their whole career.
Secondly, process transfers play an important part in FB control. This however is
driven by economic considerations to simplify control and reporting processes but also
to guarantee the same level of control quality throughout the company. This includes
strict financial reporting, using a variety of industry specific key performance
indicators, similar decision-making structures, introducing IT solutions that favour
instant control access and standardizing production and quality reassurance processes.
It must be mentioned that FBs do not seem to differ considerably in this point from
comparable non-FB companies.
Based on the outlined case findings on international control approaches the following
proposition can be made:
128
Proposition 11: AGS FBs try to keep tight control of their internationalisation
activities in emerging Asia. In low commitment market entry modes, trust and long-
term orientation shape the control process. In high commitment market entry modes
placement of trusted employees and holistic headquarter process transfers secure
control.
Table 24 summarises the impact of non-financial values and goals on the international
control management of AGS FBs in their internationalisation process to emerging
Asia.
Table 24: International control management of AGS FBs
Function Influencing value
and/or goal Situation/effect Proposition
International
control
management
1. Honourable
merchant
(especially trust)
2. Family control
3. Long-term
orientation
FBs try to control their
internationalisation to
emerging Asia very strictly.
1. In low commitment
strategies Asia, FBs rely
on long-term and trustful
relationships with their
local partners.
2. In high commitment
strategies they exercise
control through trusted
employees. Also they
unify control processes
across geographies.
AGS FBs try to keep tight
control of their
internationalisation
activities in emerging
Asia. In low commitment
market entry modes, trust
and long-term orientation
shape the control process.
In high commitment
market entry modes
placement of trusted
employees and holistic
headquarter process
transfers secure control.
Source: Author’s own creation
6.3.8 International marketing management
International marketing management describes FBs strategies to manage their brands
and how this translates into pricing decisions in emerging Asia.
International product branding is an important challenge in marketing management.
Two non-financial goals shape the international branding process for emerging Asia,
namely quality and positive reputation. Regarding quality, FBs often have sentimental
ties to their products, which is an important non-financial driver to achieve high
quality standards. In addition, the company and its products often bear the same name
as the family. The brand is therefore not just a marketing tool, but ambassador of the
family‟s reputation.
129
Due to both goals, AGS FBs position their brands in the high quality segment.
However, the branding strategy is also influenced by the perceived quality value that
customers in emerging Asia have about products coming from AGS. Many Asian
customers associate the AGS region with high quality products and iconic brands.
Often this perception comes from the general image of these countries, specifically
from cultural and historic stereotypes. FBs know about this positive perception and
employ it for their branding strategy. Two main approaches can be distinguished: The
“Made in AGS” and the “Made by” approach.
Followers of the “Made in AGS” approach export their goods to emerging Asia and
distribute them either through local distributors or through wholly-owned sales
subsidiaries. These FBs have a very high appreciation of their own quality level and
strong sentimental ties to it. Producing in emerging Asia could harm the quality of the
product, e.g. because of low-quality suppliers that cannot comply with quality
standards of the FB in the home market. In addition, “Made in AGS” is part of their
branding approach to capitalize on the positive reputation of their home country to
increase the perceived customer value next to their own quality aspirations. The
Family CEO of Company 7 stated “(…) Made in Switzerland is certainly a factor and
Asians are impressed by our quality“. These FBs only export the same prime brands
they offer in their home markets to emerging Asia. They do not create brands
specifically for the emerging Asian market.
Within the “Made in AGS” group is a subgroup. This group also exports its home
prime brand to emerging Asia, either through local distributors or through wholly-
owned sales subsidiaries which is driven by quality and reputational considerations. In
addition, this group establishes wholly-owned production subsidiaries in emerging
Asia. FBs produce a second brand, especially designed for emerging Asian markets to
cope with their notable price sensitivity (e.g. China). This second brand is cheaper and
may not offer the same application functions as the home prime brand. Also the brand
has a different name to disconnect it from the original company name. The second
brand does not rely on the “Made in AGS” advantage as FBs in this case are
concerned about the quality and reputation of their home brand and company name.
The second group can be called “Made by” branders. This group establishes local
production subsidiaries in emerging Asia. The prime brand is sold under the same
name in emerging Asia as in the home market and is also produced in emerging Asia.
“Made by” refers to the fact that FBs are able to guarantee the same quality all over
130
the world. The company name and its reputation are therefore synonym for quality and
reliability. The core approach is to guarantee the customer that all products
manufactured and assembled in their Asian production facilities fulfil the same quality
criteria like AGS products. Often however, customers have concerns about products
manufactured in Asia and thus need to be convinced of the quality standard. FBs only
follow the “Made by” strategy if they increase in size and can afford local production
subsidiaries. Also, FBs need to be able to transfer all necessary processes from their
headquarters to the production subsidiary in emerging Asia as to guarantee the same
quality level. Followers of this group emphasize that they would not employ this
strategy if they could not guarantee for the same quality standards. In addition, “Made
by branders” may add a second brand to cover price sensitive markets and segments in
emerging Asia. Also in this case these low cost brands are not connected to the
original company name to avoid reputational losses.
To conclude, quality and reputation considerations directly influence not only the
branding strategy but the question whether or not to produce in emerging Asia. The
influence of quality and reputation considerations on the branding strategy is
visualized in Figure 19.
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Figure 19: The influence of quality and reputation goals on the branding strategy
Source: Author’s own creation
Quality and reputation goals translate into a high price strategy for prime brands in
emerging Asia. This has several reasons. Firstly, FBs following the first group export
their products to emerging Asia and are therefore more expensive than local
competitors. Secondly, FBs that produce locally still link their products to the high
standards of the AGS markets and clearly aim for a quality leadership position in
emerging Asia, as stated by the Family CEO of Company 23: “(…) we are a quality
leader and want to keep this title“. Therefore, AGS FBs usually price 15% to 25%
above the market price in Asia. FBs were only observed to employ low price strategies
if they had local production and produce a low cost brand for the respective market.
Nevertheless, they price above the market (up to 10%) as their quality level is still
notably higher than the market average.
From the above the following proposition can be stated:
Proposition 12: The branding strategy is shaped by the non-financial goals of quality
and positive reputation. AGS FBs either brand their products as “Made in AGS” or
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“Made by”. The choice of branding strategy actively influences the market entry mode
decision. FBs try to aim for high premium price segments.
Table 25 summarises the impact of non-financial values and goals on the international
marketing management of AGS FBs in their internationalisation process.
Table 25: International marketing management of AGS FBs
Function Influencing value
and/or goal Situation/Effect Proposition
International
marketing
management
1. Quality
2. Reputation
FBs either choose the “Made in
AGS” or “Made by” branding
strategy. Both strategies are
directly influences by their
quality and reputation goals. The
strategy choice, and herewith the
non-financial goals, directly
influence the market entry mode
choice.
FBs target premium price
segments due to their quality
leadership aspirations.
The branding strategy is
shaped by the non-
financial goals of quality
and positive reputation.
AGS FBs either brand
their products as “Made
in AGS” or “Made by”.
The choice of branding
strategy actively
influences the market
entry mode decision. FBs
try to aim for high
premium price segments.
Source: Author’s own creation
6.4 Incremental process of AGS FB internationalisation to emerging
Asia and the dynamic influence of non-financial values and goals
The internationalisation strategy development of AGS FBs to emerging Asia is the
sum of their non-financial values and goals, company specific factors25
and external
factors as visualized in Figure 20. The internationalisation live cycle shows strong
similarities among the surveyed FBs. Based on the findings this can also be attributed
to the non-financial values and goals of these FBs. Their values and goals provide a
compass to navigate through the treacherous seas of internationalisation. This leads to
a high degree of consistency of strategy-making and materializes in incremental
internationalisation commitments protecting the FB‟s non-financial values and goals
while capitalizing on economic growth opportunities.
25
Not discussed here, as this would be beyond the scope of research
133
Figure 20: The influence of non-financial values and goals on an AGS FB’s
internationalisation strategy formulation to emerging Asia
Source: Author’s own creation
As the sections 6.2 to 6.3 showed, the internationalisation pathways are not only
influenced by external (e.g. geopolitical and macroeconomic) conditions and internal
factors26
but also by the non-financial value and goal agenda. This affects the whole
strategy of internationalisation pathways (e.g. low vs high commitment choices).
Similarly, AGS FBs show high consistency in strategy-making across geographies and
time.
After entering emerging Asian markets in the selected entry modes, FBs establish their
commitment in incremental steps, reflected by long planning horizons. The strategies
are adapted to local needs to a certain extend. In that sense it can be spoken of as a
contextual incremental strategy development. The basic patterns of this process,
however, remain stable. This points to the influence of non-financial values and goals
as the anchor point of decision-making. Naturally, this is echoed in the strategies for
single management functions.
Each of these management functions (as presented in the sections before) is influenced
by non-financial values and goals. While the influence of the value ethos remains
26
Which are beyond the scope of this research
134
constant across contexts and time in every single management function, the influence
of non-financial goals yields contrasting implications. While these goals remain
unchanged in their nature they may become influential and visible in different stages
of internationalisation and vary in impact levels and can hence be described as
dynamic (regarding their influence not their nature). As demonstrated, the goals of
independence and family control translate into an all-internal cash-flow-financed
internationalisation strategy during the whole process of internationalisation. Contrary
to that, the non-financial goals of quality and reputation only become influential
location and strategy decision drivers during certain steps of the international
production chain to emerging Asia. This exemplifies the changing implications of non-
financial goals.
The incremental process of AGS FBs and the dynamic influence of their non-financial
values and goals can therefore be summarised in the following proposition.
Proposition 13: The international strategy formulation of AGS FBs to emerging Asia
is an incremental process rooting in the FBs non-financial value and goal agenda,
causing high consistency among strategies of international management functions.
Strategy changes are rare and only adaptive in nature. While non-financial values
exercise influence beyond the scope of contexts and time, non-financial goals remain
unchanged in nature but have dynamic influences on the process at different points in
time.
6.5 Proposition table
The proposition table summarises all propositions carried forward in this research
project on the influence of non-financial values and goals on the internationalisation
process of AGS FBs. All necessary contents were elaborated in the sections 6.1-6.3.
The table aims to give the reader an easy overview of the proposed theory.
135
Table 26: Proposition table27
Function Influencing non-financial
value and/or goal Situation/effect Proposition
Non-financial values and
goals of AGS FBs
All AGS FBs take their non-financial value
and goals set as key pivotal reference point
for decision-making
Proposition 1: AGS FBs have a distinct non-financial
value set which can be described as the ethos of the
honourable merchant. Besides that, influential non-
financial goals exist. Non-financial values and goals
are in close causal and interdependent relationships.
Non-financial values and goals are the main anchor
point for all internationalisation-related decision-
making in the firm.
Internationalisation
timing
None Internationalisation timing to emerging
Asia is influenced by:
The FB position in the home market
By non-Asian internationalisation
By geopolitical factors in emerging
Asia
By macroeconomic factors in
emerging Asia
Proposition 2: AGS FBs start internationalising to
emerging Asia once they have established themselves
in their home market and have internationalised to
psychically close countries first. In addition, their
internationalisation timing is influenced by
geopolitical and macroeconomic factors in the
respective emerging Asian market.
Internationalisation
market pattern
None Pre-Asian international market patterns are
shaped by psychic distance. Within
emerging Asia geopolitical and
macroeconomic considerations drive the
market pattern. As soon as markets open up
to foreign companies, FBs target growth
markets, then neglecting psychic distance
considerations. China is the preferred
market due to its market size and growth
opportunities.
Proposition 3: Pre-Asian international market
patterns are shaped by psychic distance. Market
patterns in emerging Asia follow geopolitical and
macroeconomic considerations. Market potential is
an important decision criterion.
27
Source: Author`s own creation
136
Function Influencing non-financial
value and/or goal Situation/effect Proposition
Internationalisation path
to emerging Asia Transgenerational
ownership
o Independence
o Family control
Quality
Reputation
FBs undergo four steps of international
establishment when they internationalise to
emerging Asia.
Stage one constitutes sporadic
exporting
Stage two includes local distributors or
sales agents
Step three relies on wholly-owned
sales subsidiaries
Step four involves forms of local
production
In this process FBs consider to protect their
independence and family control, as well
as quality and reputation goals. Only entry
modes are chosen that allow
Proposition 4: AGS FBs internationalising to
emerging Asia follow an internationalisation path of
gradual commitment increase over time. FBs choose
internationalisation entry modes that protect their
non-financial goals of independence and family
control as well as quality and reputation
Internationalisation
planning and strategy-
making
Transgenerational
ownership
o Family control
Internationalisation planning and strategy
becomes more formal over time. Decision
driver is the owning family either through
direct or indirect decision-making
structures.
Proposition 5: AGS FB internationalisation planning
and strategy-making is gradually refined and
professionalized over time. Pre-Asian
internationalisation strategies are implemented for
emerging Asia and are slightly adapted to the local
context. Pursuing family control, the family shapes
the decision-making process either directly or
indirectly.
137
Function Influencing non-financial
value and/or goal Situation/effect Proposition
International knowledge
management
Only to a limited extend
influenced by non-financial
goals and values
Honourable merchant
(especially trust)
Customer/partner
appreciation
Employee appreciation
FBs undergo an experimental learning
process. Internationalisation knowledge is
an important success factor. There are three
sources of knowledge.
Firstly, FBs undergo intensive self-
preparation, which is led by the families
control goal.
Secondly, customer/partner appreciation
gains access to knowledge from
domestic and foreign networks.
Thirdly, the FB‟s own employees,
especially sales employees, are important
sources of internationalisation knowledge,
which is accessed through trusted
relationships with appreciated employees.
Proposition 6: AGS FBs follow an experimental
learning process of knowledge acquisition when
internationalising to emerging Asia. Pre-Asian
internationalisation knowledge is only helpful to a
limited extent in emerging Asia. The use of the
sources of internationalisation knowledge is
influenced by the honourable merchant ethos and the
non-financial goals of customer/partner orientation
and employee appreciation.
International cultural
management Honourable merchant
ethos (especially trust)
Sustainability/long-term
orientation
FBs face considerable cultural problems
and differences in emerging Asia. They try
to mitigate these problems by building
trusted relationships and by taking a long-
term approach. They rely on two strategies:
Hiring native Asian sales staff that
they try to establish trustful
relationships with.
FBs spend considerable resources on
training themselves and their
employees on cultural differences and
how to deal with them. They evaluate
this as appropriate, given their long-
term strategy orientation.
Proposition 7: When AGS FBs internationalise to
emerging Asia they face considerable cultural
differences. Based on their non-financial value ethos
of the honourable merchant and the goal of long-
term orientation they try to strategically mitigate and
manage cultural problems, which may reduce
cultural tensions gradually over time.
138
Function Influencing non-financial
value and/or goal Situation/effect Proposition
International financial
management Honourable merchant
ethos
Transgenerational
ownership
o Independence
o Family control
Sustainability and long-
term orientation
FBs avoid financing their
internationalisation activities in emerging
Asia with external capital. They entirely
rely on company internal financing. Only
minor liquidity credit lines and
governmental export insurance offers are
accepted. External subsidiaries are stocked
with long lasting company internal credit
payments.
Proposition 8: When AGS FBs internationalise to
emerging Asia they strongly rely on company internal
financing. This is driven by their non-financial value
ethos of the honourable merchant and the non-
financial goals of transgenerational ownership,
independence, control, and sustainability/long-term
orientation.
International HR
management Honourable merchant
ethos (especially trust)
Long-term orientation
Employee appreciation
FBs try to establish trustful, long-lasting
relationships with their employees. Trust
and long-term relationships are the driving
force of management position
appointments in emerging Asia. Also, FBs
foster the establishment of a family-like
working culture to fulfil their goal of
employee appreciation. A key requirement
is that the local management is able to live
the FBs non-financial values and goals and
to convey them to the local employees.
Proposition 9: Internationalisation HR strategies aim
at establishing trustful, long-term relationships with
the employees. Top management positions are
primarily given to trusted employees. AGS FBs take
an active approach in establishing a family-like
culture to fulfil their non-financial goal of employee
appreciation.
International network
management Honourable merchant
ethos (especially trust)
Long-term orientation
Customer/partner
orientation
FBs rely on their non-financial values and
goals to enter and maintain networks. They
establish close, long lasting, family like ties
with their Asian network partners and show
a preference to work with local FBs. Asian
network partners cherish this way of
networking because it closely resembles
Sino-Asian cultural values. This gives AGS
FBs a competitive networking advantage in
Asia.
Proposition 10: Access to internationalisation
critical networks is a condition sine qua non for AGS
FBs in emerging Asia. The honourable merchant
ethos and the non-financial goals of long-term
orientation and customer/partner appreciation shape
the FBs’ networking strategy. Both, non-financial
values and goals closely resemble Asian cultural
preferences and constitute valuable resources in
network creation and maintenance.
139
Function Influencing non-financial
value and/or goal Situation/effect Proposition
International control
management Honourable merchant
(especially trust)
Family control
Long-term orientation
FBs try to control their internationalisation
to emerging Asia very strictly.
In low commitment strategies Asia,
FBs rely on long-term and trustful
relationships with their local partners.
In high commitment strategies they
exercise control through trusted
employees. Also they unify control
processes across geographies.
Proposition 11: AGS FBs try to keep tight control of
their internationalisation activities in emerging Asia.
In low commitment market entry modes, trust and
long-term orientation shape the control process. In
high commitment market entry modes placement of
trusted employees and holistic headquarter process
transfers secure control.
International marketing
management Quality
Reputation
FBs either choose the “Made in AGS” or
“Made by” branding strategy. Both
strategies are directly influences by their
quality and reputation goals. The strategy
choice, and herewith the non-financial
goals, directly influence the market entry
mode choice.
FBs target premium price segments due to
their quality leadership aspirations.
Proposition 12: The branding strategy is shaped by
the non-financial goals of quality and positive
reputation. AGS FBs either brand their products as
“Made in AGS” or “Made by”. The choice of
branding strategy actively influences the market
entry mode decision. FBs try to aim for high premium
price segments.
The incremental process
of AGS FB
internationalisation to
emerging Asia and the
dynamic influence of
non-financial values and
goals
AGS FB‟s whole non-
financial value and goal set
None Proposition 13: The international strategy
formulation of AGS FBs to emerging Asia is an
incremental process rooting in the FBs non-financial
value and goal, causing high consistency among
strategies of international management functions.
Strategy changes are rare and only adaptive in
nature. While non-financial values exercise influence
beyond the scope of contexts and time, non-financial
goals remain unchanged in nature but have dynamic
influences on the process at different points in time.
140
7. Conclusion
This chapter outlines the contributions of the presented PhD thesis. It summarises the
main theoretical contributions of this study in section 7.1 then proceeding to
managerial implications in section 7.2 and concluding with future research in 7.3.
Prior research on FBs has described that there are certain non-financial goals or
objectives in FBs. Similar several studies have made a first attempt to characterise the
FB internationalisation process. These studies also called for a deeper understanding
of both topics and its mechanisms. What prior research has widely neglected is to
explain how non-financial values and goals may impact the FB internationalisation
process, especially by putting this field of interest in a particular cultural context, e.g.
AGS FBs internationalising to emerging Asia. Therefore, existing theories in these
fields do not have the power to provide satisfactory answers to the set research
questions.
To answer this call, this study has provided an overview and framework for
researchers and practitioners to uncover how non-financial values and goals of AGS
FBs shape the internationalisation process. Building on current debates in FB studies
and FB internationalisation research, as well as management practice, it is helpful to
consider the results of this study to understand how historical developments in the
internationalisation process contribute to our understanding of current actions.
Building on the new theory presented in Chapter 6, this chapter summarises the main
findings of the study, stressing the key theoretical and managerial implications.
7.1 Theoretical implications
This study is a first attempt to shed light on the influence of non-financial values and
goals on the internationalisation process of AGS FBs to emerging Asia by making
contributions in four particular areas of the literature. Firstly, it contributes to the
emerging literature streams of non-financial values and goals in FB research, secondly,
to FB internationalisation studies, thirdly, by establishing an intercept between the two
fields and finally, it contributes to the use of grounded theory in international business
studies under which it developed a unique data set which can now be used by other
researchers.
141
7.1.1 Non-financial values and goals in AGS FBs
This study first contributes to the debate on non-financial values and goals, by
advancing the socio-emotional wealth view (Gómez-Mejía et al., 2007). This was
achieved by clearly separating non-financial values from goals. The latter is an
important explanatory element, forgotten by previous studies in the field. Specifically,
this applies to trust, which is an observed phenomenon (Pukall & Calabró, 2013;
Scholes et al., 2015). Former studies failed to understand that trust, itself, is the result
of honesty and reliability and is not a concept per se but the result arising from this
value function.
Moreover, the number and nature of non-financial goals has varied widely in previous
studies (Gómez-Mejía et al., 2007, 2011; Berrone et al, 2012; Naldi et al., 2013). This
study proposes three values (honesty, reliability and trust) forming the honest
merchant ethos and six non-financial goals (trans-generational ownership, quality,
sustainability and long term-orientation, employee appreciation, customer and partner
orientation and reputation) to offer a comprehensive framework for non-financial
values and goals in AGS FBs. This framework is grounded in empirical data, while
earlier studies have developed their non-financial values and goals only conceptually,
and were, therefore, subject to intensive critique from the research community (Naldi
et al., 2013; Pukall & Calabró, 2013).
While values were not distinct categories in previous studies (Gómez-Mejía et al.,
2007, 2011; Berrone et al, 2012; Naldi et al., 2013) researchers have covered similar
goals such as trans-generational ownership (Gómez-Mejía et al., 2007, 2011; Berrone
et al, 2012; Naldi et al., 2013), reputation (Gómez-Mejía et al., 2007, 2011; Berrone et.
el., 2012; Naldi et al., 2013). Other non-financial goals have only been explicitly
addressed by single scholars, e.g. control by Naldi et al. (2013) or were covered
implicitly, e.g. long-term orientation (by Gómez-Mejía et al., 2007, 2011; Berrone et.
el., 2012; Naldi et al., 2013) or not at all, e.g. customer/partner orientation. The
framework in this thesis, therefore adds substance to this discussion.
Table 27 summarises the main theoretical contributions of this study on non-financial
values and goals in AGS FBs.
142
Table 27: Theoretical contributions on non-financial values and goals in FBs
Previous research Findings/contributions of this study
There are non-financial values and goals in FBs
acting as key pivotal reference points (Goméz-
Mejia et al., 2007; 2011; Berrone et al., 2012;
Naldi et al., 2013).
There is no statement on the difference of non-
financial values and goals in existing research
AGS FBs have non-financial values and
goals which are strategic reference points for
decision-making.
Values are static throughout time and
context. Non-financial goals may vary in
impact and are affected by contextual
changes.
There is no consensus over the number of non-
financial values or goals, nor over their attributes
(Goméz-Mejia et al., 2007; 2011; Berrone et al.,
2012; Naldi et al., 2013).
Previous studies only established non-financial
values and goals conceptually (Goméz-Mejia et
al., 2007; 2011; Berrone et al., 2012; Naldi et al.,
2013).
There are three values forming the
honourable merchant ethos (reliability,
honesty and trust). There are six non-
financial goals (transgenerational
ownership, quality, sustainability and long
term-orientation, employee appreciation,
customer and partner orientation and
reputation).
Their attributes were grounded in empirical
observations in a cultural specific context.
Source: Author`s own creation
7.1.2 AGS FB internationalisation processes to emerging Asia
Secondly, this study contributes to FB internationalisation studies. It followed the call
of Kontinen & Ojala (2010a) to consider a specific target market, in this instance,
emerging Asia, and found that the perception of FBs about this region differs
substantially regarding internationalisation knowledge and experience compared to
other markets. Further, in emerging Asia, internationalisation is a process of an
incremental increase in commitment, closely resembling the Uppsala model (Johanson
& Vahlne, 1977), and provides additional credibility to the growing circle of scholars
advocating the model`s applicability in the field (e.g. Okoroafo, 1999; Claver et al.,
2007; Graves & Thomas, 2008; Kontinen & Ojala, 2010b; Pukall & Calabró, 2013;
Scholes et al., 2015). This study establishes that an incremental increase in
commitment is not merely a matter of risk avoidance (Johanson & Vahlne, 1977;
Claver et al., 2008) or asset parsimony (Fernández & Nieto, 2006; Graves & Thomas,
2006) but that it is also owed to non-financial values and goals of FBs. The concept of
psychic distance (Johanson & Wiedersheim-Paul, 1975; Johanson & Vahlne, 1977)
does not seem to have strong explanatory power in this study, as AGS FB market
choice was shown to be a function of company internal, economic resources (e.g.
143
available capital) and external factors, such as macroeconomic/political factors. Table
28 summarises the theoretical contributions of this study on the internationalisation
process of AGS FBs to emerging Asia.
Table 28: AGS FB internationalisation process to emerging Asia
Previous research Findings/contributions of this study
Previous studies have studied FB
internationalisation, neglecting particular target
markets (Kontinen & Ojala, 2010a)
Considers a particular target market
(emerging Asia)
Supports growing body of research, describing FB
internationalisation as Uppsala shaped
commitment increase (Okoroafo, 1999; Claver et
al., 2007; Graves & Thomas, 2008; Kontinen &
Ojala, 2010b; Pukall & Calabró, 2013; Scholes et
al., 2015)
AGS FB internationalisation process to
emerging Asia is a process of incremental
commitment increase over time
Incremental commitment increase is a matter of
risk avoidance tendencies (Johanson & Vahlne,
1977; Claver et al., 2008) or asset parsimony
(Fernandéz & Nieto, 2006; Graves & Thomas,
2006
Incremental international commitment
increase is not only due to risk adversity and
asset parsimony but also to non-financial
values and goals of AGS FBs
Market pattern is subject to psychic distance
considerations. Companies internationalise to
culturally close countries first (Johanson &
Wiedersheim-Paul, 1975; Johanson & Vahlne,
1977)
Psychic distance is a concept ill-suited to
explain the market pattern of AGS FBs to
emerging Asia. Market patterns had to follow
macroeconomic/and political rules in the
past due to the political situation in most
countries of emerging Asia. When markets
are free, AGS FBs look for market
opportunities, neglecting psychic distance
considerations
Source: Author’s own creation
7.1.3 Influence of non-financial values and goals on the internationalisation
process of AGS FBs to emerging Asia
Thirdly, this research sheds light on the question of how non-financial values and
goals influence the internationalisation process of AGS FBs to emerging Asia.
Previous studies have recognized that non-financial values and goals act as pivotal
reference points for decision-making (Gómez-Mejía et al., 2007, 2011; Berrone et al,
2012; Naldi et al., 2013) but failed to connect this with the influence of non-financial
values and goals on the FB internationalisation process, especially when considering a
special cultural context (Pukall & Calabró, 2013; Liang, et al., 2014; Scholes et al.,
2015). This study ascertains that non-financial values are stable over time and are
144
present in any internationalisation decision. The study also highlights when and how
non-financial goals influence the internationalisation process in emerging Asia, and
finds that goals have a dynamic influence at different points in time in the
internationalisation process. By proposing these findings, this study followed the calls
of Pukall & Calabró (2013) to investigate the effect of family related factors on FB
internationalisation, and Liang et al. (2014) for a deeper investigation of how family
dynamics affect internationalisation processes. This research then proposes new
responses to these calls by setting forth the propositions presented in Chapter 6. The
study‟s main theoretical contributions on the influence of non-financial values and
goals of AGS FBs on the internationalisation process are summarized in Table 29.
Table 29: Influence of non-financial values and goals on the internationalisation
process of AGS FB to emerging Asia
Previous research Findings/contributions of this study
Certain non-financial values and goals in FBs act
as key pivotal reference points (Goméz-Mejia et
al., 2007; 2011; Berrone et al., 2012; Naldi et al.,
2013).
No statement on the difference in non-financial
values and goals in existing literature
No previous research including a cultural context
The internationalisation process of AGS
FBs is a function of internal/external
factors and the influence of non-financial
values and goals
No consensus on the number of non-financial
values or goals, nor their attributes (Goméz-Mejia
et al., 2007; 2011; Berrone et al., 2012; Naldi et
al., 2013).
No previous research. Following the calls of
Pukall & Calabró (2013) on the effect of family
related factors on FB internationalisation and
Liang et al.‟s (2014) suggestion for a deeper
investigation of how family dynamics affect
internationalisation processes
Proposes distinct set of non-financial
values and goals, relevant for
internationalisation.
Non-financial values are present in any
internationalisation decision. The influence
of non-financial goals can be closely
examined looking on single international
management functions. The influence
changes over time.
Source: Author’s own creation
7.1.4 Straussian grounded theory in FB internationalisation studies
Forth and finally, this thesis contributes to the use of Straussian grounded theory in FB
international business studies. This methodology has, as yet, not seen many
applications of this methodology, despite its strength to study organisations and their
145
underlying sociological drivers in multicultural contexts (Thai et al., 2008).
Specifically, the use of grounded theory, as this study illustrates is beneficial in the
empirical investigation and understanding non-financial values and goals. Prior studies
have to date, only developed the latter conceptually and not empirically (Gómez-Mejía
et al., 2007, 2011; Berrone et. el., 2012; Naldi et al., 2013). Moreover, Liang et al.
(2014) and Scholes et al. (2015) suggested the need to take a processual perspective of
FB internationalisation and few other methodologies are better equipped to answer this
call. Welch & Paavilainen-Mäntymärki (2014) also suggested the use of grounded
theorizing to improve our understanding of the internationalisation process as a whole.
The findings in this research illustrated that grounded theory allowed the author to
account for many complex, contextual factors which influenced the
internationalisation process, as well as to deduce clear results across cultural
boundaries and time sequences.
7.2 Managerial implications
The findings of this research project have three main implications for FB management.
Firstly, this research project has shown that FBs are well aware that there are non-
financial values and goals influencing their internationalisation process. By
considering the new theory presented in Chapter 6, FBs can understand when and how
exactly their non-financial values and goals come into force during the process. It also
illustrates how it is possible to identify non-financial values and goals and their effect
on single-decisions. These findings may assist firms to more closely assess their
impact on performance measures.
Secondly, the findings provide a deeper understanding of what constitutes non-
financial values and goals of AGS businesses. It was also shown that while FBs know
about their non-financial values and goals, they often, make decisions based on the
limited information they have on hand, without using a more formalized means of
integrating their non-financial values and goals into the international decision-making
process. It may, therefore, be more fruitful to put non-financial values and goals down
on paper in a form of constitution or family charter. This more structured approach or
checklist would allow non-financial values and goals to become part of their overall
international strategy-making for emerging Asia.
146
Thirdly, the findings show that the non-financial sub-goals of family control and
independence influence the market entry choice in favour of entry forms where full
control can be exercised by the FB. While this makes sense in the case of avoiding the
shortcomings of joint ventures (i.e. in this case, all surveyed joint ventures failed),
both goals could become too restrictive when it comes to the formation of important
strategic alliances. Such alliances could help overcome many hurdles that FBs face in
emerging Asia, such as lack of market knowledge or networks, and provide
significantly less exposure to problems, such as IP violations, inherent in joint
ventures28
. It might, therefore, be beneficial for FB managers to consider strategic
alliances by learning to understand and manage their non-financial goals more
effectively.
7.3 Future research
Although this research project has achieved its overall purpose of understanding how
non-financial values and goals of AGS FBs influence their internationalisation process
to emerging Asia, it also opens new avenues for future research. To further enlighten
this field, the author, therefore, proposes the following future research areas.
The theory presented in Chapter 6 should now be tested and validated with empirical
data from other samplings and other industry sectors since the same data used to build
a theory should not be the one to test a theory against. Also single propositions of the
theory should also be tested, which might lead to a more thorough verification of the
proposed theory.
Comparative studies could also investigate if the influences of non-financial values
and goals remained the same in an internationalisation process to a different target
market. For example, other emerging regions of the world, such as Brazil, Russia, or
India could also be studied. Similarly, it may be beneficial to choose FBs from another
non-Asian cultural background to see how their non-financial values and goals differ
and influence the internationalisation processes to emerging Asia. Both topics may
nurture our understanding of the interplay between non-financial values and goals and
different cultural backgrounds and make a statement on the generalizability of the non-
financial values and goals findings in this study across other cultural contexts.
28
Relates to joint ventures surveyed in this study
147
Finally, future investigators may find value in looking deeper into single international
management functions and examining the influence of non-financial values and goals
more closely. This investigation could focus on the influence of non-financial values
and goals not in a processual way but rather, link their influence to performance
measures. An example could be how non-financial values and goals affect financial
resources committed to network creation in emerging Asia, particularly, not only how
much is spent, but how the financing might be structured. This could, potentially,
highlight more clearly which single or bundle of non-financial values and goals has the
greater or least impact on performance measures.
148
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9. Appendix
Appendix A: FB interview schedule
Company
ID
Number of
Interviews Interviewee/s
Form of
communication Date
Company 1 1 Family CEO By telephone 28.08.2014
Company 2 1 Family CEO By telephone 16.10.2014
Company 3 1 Family CEO
First interview by
telephone
Second time in person
conversation about the
topic in informal setting
16.10.2014
and
09.12.2014
Company 4 1
1. Family CEO,
2. Family successor
(future family CEO)
In person (both
interviewees participated
in the same interview)
17.10.2014
Company 5 1 Family CEO By telephone 24.11.2014
Company 6 1 Non-family CEO By telephone 01.12.2014
Company 7 1 Family CEO By telephone 04.12.2014
Company 8 1 Family successor
(future family CEO) By telephone 04.12.2014
Company 9 1 Family CEO By telephone 17.12.2014
Company 10 1 Family CEO By telephone 17.12.2014
Company 11 1 Chief Sales Officer By telephone 12.01.2015
Company 12 1 Non-family CEO By telephone 15.01.2015
Company 13 1 Family CEO By telephone 16.01.2015
Company 14 1
1. Family CEO
2. Head of corporate
communications
By telephone,
Interviewee 2 was
present in the interview
and responded it writing
in the second round
28.01.2015 and
04.02.2015
Company 15 1 Family CEO By telephone 05.02.2015
Company 16 1 Non-family CEO By telephone 04.02.2015
Company 17 1 Family successor
(future family CEO) In person 19.02.2015
176
Company
ID
Number of
Interviews Interviewee/s
Form of
communication Date
Company 18 1 Family chairman
(former family CEO)
By telephone,
interviewee responded in
writing in the second
round
09.03.2015 and
31.03.2015
Company 19 1 Family CEO By telephone 11.03.2015
Company 20 1 Family CEO By telephone 12.03.2015
Company 21 1 Family CEO By telephone 30.03.2015
Company 22 1 Family chairman
(former family CEO) By telephone 01.04.2015
Company 23 1 Family CEO By telephone 23.04.2015
Company 24 1 Family CEO By telephone 27.04.2015
Company 25 1 Family chairman
(former family CEO) By telephone 02.06.2015
Source: Author`s own creation
177
Appendix B: Expert interview schedule
Expert ID Number of
Interviews Form of communication Date
Expert 1 1 By telephone 22.07.2015
Expert 2 1 By telephone 29.07.2015
Expert 3 1 By telephone 31.07.2015
Expert 4 1 By telephone 13.08.2015
Expert 5 1 By telephone 17.08.2015
Source: Author`s own creation
178
Appendix C: Study information paper (original in German)
University of St. Gallen
Asia Research Center
Supervisor: Prof. Dr. Li-Choy Chong
Second supervisor: Prof. Dr. Martin Hilb
PhD candidate: Stephan Erdödy
Tigerberstraße 9
9000 St. Gallen
Switzerland
PhD dissertation and research project at the University of St. Gallen
Topic „The influence of non-financial values and goals on the internationalisation process of
family businesses from Austria, Germany and Switzerland“
Background of the study
Globalisation has caused Family Businesses (FBs) to internationalise strongly. Previous
studies have shown that FBs are different and act differently in many ways from non-FBs
(Zellweger et al., 2013). This is specifically observable when FBs internationalise. Asia,
especially the emerging regions of Greater China and the ASEAN states (emerging Asia)
have been the target of considerable internationalisation activities from Austrian, German and
Swiss (AGS) FBs (PWC, 2012).
The decision drivers and strategy-making processes are often different in FBs than in non-
FBs. However, these processes are a hardly researched field, which is why this study tries to
investigate how decisions are made, which internationalisation strategies are selected and
which networks are used to access the respective Asian market.
The uniqueness of FBs is referred to in FB research as „Socioemotional Wealth (Gómez-
Mejía , 2007; Berrone et al., 2010; Zellweger et al., 2013) and relates to non-financial values
and goals which differentiate FBs from their non-FB peers. Such non-financial values and
goals may be transgenerational company ownership, seeking positive reputation and aiming
for high quality standards. How such non-financial values and goals influence the
internationalisation process of AGS FBs to emerging Asia is widely unknown.
Research methodology and selection criteria
This study uses Straussian Grounded Theory for data collection and analysis. This
methodology is primarily used to observe neglected research fields and to establish new
theories. The main source of primary data in this methodology is qualitative interviews.
179
In the following the basic selection criteria for participating companies are explained:
A company, in which the family holds the majority of the voting shares
A company in which at least one family members is active in the management or has
been active up until recently
The company must have at least exported to emerging Asia (China (including Hong
Kong and Taiwan) and/or to an ASEAN country (this study understands exporting as
the first step of internationalisation, however all later stages of internationalisation are
considered as well)
Interviews
The interviewee has to be either a member of the owning family, who has/has had (up until
recently) a managerial position in the company and who can comment on non-financial values
and goals as well as on the internationalisation process to emerging Asia, or other members
of the board of management or board of chairmen who can comment on this topic. The
interviews may either be held in person or via telephone and may last between 60-90 minutes.
The interviews will be transcribed by the PhD candidate. It is possible that the PhD candidate
may contact the company after the interview to clarify questions emerging from the data. The
interview questionnaire will be sent previous to the scheduled interview appointment. The
interview questionnaire is comprised of open-ended questions.
Declaration of data protection
The PhD candidate guarantees to handle all gathered information and company data in a
strictly confidential way. The PhD dissertation will neither reveal the name of the
interviewee, nor the name of the company. Further data anonymisation will be carried out to
avoid any chance of connecting the presented data with the original company. If required the
PhD candidate offers to sign a confidentiality agreement.
PhD and study supervision
This study is supervised by Prof. Dr. Li-Choy Chong. Prof Chong is head of the Asia
Research Centre of the University of St. Gallen. He is a distinct expert for management
research on Asia, specifically for internationalisation studies. The study is co-supervised by
Prof. Dr. Martin Hilb. Prof. Hilb is heading the International Corporate Governance Centre
at the University of St Gallen and is a widely recognised expert in the field of Corporate
Governance.
180
Appendix D: Sample of the interview guide for the pilot study (original in
German)
University of St. Gallen
Asia Research Center
First Supervisor: Prof. Dr. Li-Choy Chong
Second Supervisor: Prof. Dr. Martin Hilb
PhD Student: Stephan Erdödy
Tigerberstraße 9
9000 St. Gallen
Schwitzerland
Interview guide „ The influence of non-financial values and goals on the
internationalisation processes of Austrian, German and Swiss Family Businesses
to emerging Asia”
1. General questions:
1. Please give me a short overview of your company‟s development since inception.
2. Please talk about non-financial values and goals and which influence they have on the
company strategy? Could you explain which of these non-financial values and goals
you consider as more important than others and why?
3. Please explain which role sustainability/long-term thinking, environmental protection
and quality play in your company
4. Which possibilities and risks do you see in general regarding internationalisation?
2. Questions with respect to the internationalisation process to emerging Asia:
1. When and in which form did you start to internationalise? When and in which form
did you start to internationalise to emerging Asia? What were your reasons for doing
so?
2. Please comment on how you accessed the necessary resources (e.g. market
knowledge, capital) for internationalising to emerging Asia? Which role play cultural
differences and how do you handled them. Which role do networks play for your
Asian operations? How do you manage your networks in emerging Asia?
3. Which family non-financial values and goals do you see influencing your
internationalisation process to emerging Asia? Elaborate on the importance of these
non-financial values and goals in comparison to economic goals?
4. Explain, how important transgenerational ownership is for you and how does this
affect your internationalisation process to emerging Asia?
181
5. Topic quality and reputation: Please comment on the role of quality and on the
importance of your company‟s reputation in emerging Asia. Explain in which way
your quality aspirations and reputation may suffer from internationalising to emerging
Asia?
6. Please explain, how you control your operations in emerging Asia. How do you decide
who gets a job there?
7. Please elaborate on which role altruistic considerations toward family members play
and how does this affects the internationalisation process to emerging Asia?
3. Administrative question:
1. Could you imagine introducing me to other potential interview candidates?
2. It might happen that questions regarding today‟s interview emerge. May I contact you
again, if this should be the case?
3. Is there any further information you want to share with me?
182
Appendix E: Sample of the final interview guide after the pilot study (original in
German)
University of St. Gallen
Asia Research Center
First Supervisor: Prof. Dr. Li-Choy Chong
Second Supervisor: Prof. Dr. Martin Hilb
PhD Student: Stephan Erdödy
Tigerberstraße 9
9000 St. Gallen
Schwitzerland
Interview guide „The influence of non-financial values and goals on the
internationalisation processes of Austrian, German and Swiss Family Businesses
to emerging Asia”
1. General questions:
1. How many employees do you have?
2. When was your company founded?
3. Please give me a short overview of your company‟s development since inception.
4. How are decisions made in your company? Which factors influence this process?
5. Please talk about non-financial values and goals and which influence they have on
your company?
2. Questions with respect to the internationalisation process to emerging Asia:
8. When and in which form did you start to internationalise? When and in which form
did you start to internationalise to emerging Asia?
9. What are your reasons to internationalise to emerging Asia? How do you assess
emerging Asia‟s future market potential for your company?
10. Which problems do you encounter in emerging Asia? What do you do to overcome
these problems?
11. Please comment on cultural differences that you might have faced in emerging Asia
and how you handled them.
12. Please comment on how you accessed the necessary resources (e.g. market
knowledge, capital) for internationalising to emerging Asia?
13. Which role do networks play for your Asian operations? How do you manage your
networks in emerging Asia? Which types of networks do you access?
14. Which non-financial values and goals influence your internationalisation process to
emerging Asia? Elaborate on their impact?
183
15. Comment on your HR strategy in emerging Asia. How do you select peopele for
management positions?
16. Topic quality and reputation: Please comment on the role of quality and on the
importance of your company‟s reputation in emerging Asia. Also, which effect do you
see for your home market coming from internationalising to emerging Asia?
17. Please comment on your marketing strategy in emerging Asia. What roles does “Made
in” and/or “Made by” play for you?
18. Please explain, how you control your operations in emerging Asia.
3. Administrative question:
2. Could you imagine introducing me to other potential interview candidates?
3. It might happen that questions regarding today‟s interview emerge. May I contact you
again, if this should be the case?
4. Is there any further information you want to share with me?
184
Appendix F: Code hierarchy
The code hierarchy was developed in MAXQDA software using Straussian grounded theory.
Codes of lower levels are properties of their above parent codes (as suggested by Thai et al.,
2012 coding structure for grounded theory). The code order follows the logical structure of
the coding process. The order of sections in the chapters 5 & 6 do not necessarily follow the
same structure all the time, as their organisation is based on the logical flow of the thesis.
1. Non-financial values and goals
1.1 Non-financial values
1.1.1 Influencing factors
1.1.1.1 Christian values
1.1.1.2 Entrepreneurial orientation
1.1.1.1.1Efficiency and profitability
1.1.2 Honest merchant ethos
1.1.2.1 Trust
1.1.2.1.1 Honesty
1.1.2.1.2 Reliability
1.1.3 Family value codex
1.1.3.1 Existent
1.1.3.2 Non-existent
1.2 Non-financial goals
1.2.1 Transgenerational ownership
1.2.1.1 Family control
1.2.1.1.1 Family members in managerial positions
1.2.1.1.1.1 Internationalisation as education for the next generation
1.2.1.1.2 Family ownership
1.2.1.1.2.1 Ownership in one hand
1.2.1.1.2.1.1 Family size
1.2.1.1.2.1.1.1 Rejection of family altruism
1.2.1.1.2.1.2 Generational change
1.2.1.1.2.1.2.1 Structured change
1.2.1.1.2.1.2.2 Lassaire faire change
1.2.1.1.2.1.3 Non family future
1.2.1.2 Independence
1.2.2 Reputation
1.2.2.1 Family members and reputation
1.2.2.2 Family name equals company name
185
1.2.2.3 Regional embededdness
1.2.3 Customer and partner orientation
1.2.3.1 Proximity to the customer
1.2.4 Employees appreciation
1.2.4.1 Importance of employees
1.2.4.2 Family like relationship
1.2.4.2.1 Education & Qualification
1.2.4.2.2 Health and safety
1.2.4.2.3 Benefits policy
1.2.5 Quality
1.2.5.1 Emotional attachment to product
1.2.5.2 Innovation
1.2.5.3 Quality leadership
1.2.5.3.1 High quality production process
1.2.5.3.2 High quality resources
1.2.5.3.2.1 Local resources
1.2.6 Sustainability and long-term orientation
1.2.6.1 Continuity
1.2.6.2 Risk adversity
1.2.6.3 Long-term relationships
2 Internationalisation of AGS FBs to emerging Asia
2.1 Internationalisation pattern to emerging Asia
2.1.1 Timing
2.1.1.1 Influencing factors
2.1.1.1.1 Values and goals
2.1.1.1.2 Internal factors
2.1.1.1.2.1 Family issues
2.1.1.1.2.2 War interruption
2.1.1.1.2.3 Rapid company growth
2.1.1.1.2.4 Ownership change
2.1.1.1.3 External factors
2.1.2 Market pattern
2.1.2.1 Pre-Asian internationalisation
2.1.2.1.1 Uppsala internationaliser
2.1.2.1.2 Born global internationaliser
2.1.2.2 Asian internationalisation
2.1.2.2.1 Uppsala continued
2.1.2.2.1.1 Enter through established Asia
2.1.2.2.1.2 Enter through emerging Asia
2.1.3 Internationalisation pathway
186
2.1.3.1 International establishment chain
2.1.3.1.1 Exporting
2.1.3.1.1.1 Sporadic exporting
2.1.3.1.1.2 Strategic exporting
2.1.3.1.2 Distributors
2.1.3.1.2.1 Agencies
2.1.3.1.2.2 Local non-owned distributors or sales agents
2.1.3.1.2.2.1 Intensive relationship
2.1.3.1.2.2.1.1 Long-term relationship
2.1.3.1.2.2.1.2 Friendship
2.1.3.1.2.2.1.3 Trust building
2.1.3.1.2.2.1.4 Family-led distributor
2.1.3.1.2.2.2 Partnerships
2.1.3.1.3 Wholly-owned sales subsidiaries
2.1.3.1.3.1 M&A of sales agent
2.1.3.1.3.2 After sales customer service in Asia
2.1.3.1.4 Local production
2.1.3.1.4.1 Refusal of local production
2.1.3.1.4.1.1 Threat to company reputation
2.1.3.1.4.1.1.1 Threat to brand reputation
2.1.3.1.4.2 Approval of local production
2.1.3.1.4.2.1 Forms of local production
2.1.3.1.4.2.1.1 M&A of local competitor
2.1.3.1.4.2.1.2 Joint venture
2.1.3.1.4.2.1.3 Licensing agreements
2.1.3.1.4.2.1.4 Local production facilities
2.1.3.1.4.2.1.4.1 Quality assurance
2.1.3.1.4.2.1.4.2 Partnerships with end-customers
2.1.3.1.4.2.1.4.3 Local R&D
2.1.3.1.4.2.1.4.4 Hub for further Asia activities
2.2 International management
2.2.1 International strategy- and decision-making process
2.2.1.1 Decision-making system
2.2.1.1.1 Informal decision-making process
2.2.1.1.1 Flat hierarchy
2.2.1.1.2 Formalised decision-making
2.2.1.1.2.1 Code of conduct
2.2.1.1.2.2 Increasing formalisation of decision-making
2.2.1.1.2.3 Inclusive decision-making
2.2.1.1.2.3.1 Teamwork
187
2.2.1.1.2.4 Board structure
2.2.1.1.2.4.1 Emerging informal decision-making system
2.2.1.1.2.4.2 Management board
2.2.1.1.2.4.3 Supervisory board
2.2.1.2 Planning system
2.2.1.2.1 Internationalisation strategy
2.2.1.2.1.1 Resource commitment
2.2.2 International knowledge management
2.2.2.1 Lacking internationalisation knowledge
2.2.2.2 Step by step knowledge acquisition process
2.2.2.2.1 Sources of internationalisation knowledge
2.2.2.2.1.1 Partners
2.2.2.2.1.1.1 Consultancies
2.2.2.2.1.1.2 Network partners/competitors
2.2.2.2.1.1.3 Distributors
2.2.2.2.1.2 Travelling and self preparation
2.2.2.2.1.3 Previous internationalisation
2.2.2.2.1.4 Employees
2.2.2.2.1.4.1 Formalised knowledge acquisition
2.2.2.2.1.4.2 Informal knowledge acquisition
2.2.3 International cultural management
2.2.3.1 Denying cultural problems
2.2.3.2 Admitting cultural problems
2.2.3.1 Sources of problems
2.2.3.1.1 High psychic distance with China
2.2.3.1.2 Different styles and tastes
2.2.3.1.3 Language
2.2.3.2 Mitigation strategies
2.2.3.2.1 HR strategies
2.2.3.2.1.1 Train cultural understanding of employees
2.2.3.2.1.2 Mitigate cultural problems with local employees
2.2.4 International financial management
2.2.4.1 Internal financing
2.2.4.2 External/mezzanine financing
2.2.4.2.1 Using governmental financing offers
2.2.5 International HR management
2.2.5.1 HR problems
2.2.5.1.1 Employee qualification
2.2.5.1.2 Employee turnover
2.2.5.2 HR strategies
188
2.2.5.2.1 Training
2.2.5.2.2 Incentivation strategy
2.2.5.2.3 Management staffing
2.2.5.2.3.1 Preference for home-gown managers
2.2.5.2.3.1.1 CFO
2.2.5.2.3.1.1.1 European CFO
2.2.5.2.3.1.2 CSO
2.2.5.2.3.1.2.1 Asian CSO
2.2.5.2.3.1.3 CEO
2.2.5.2.3.1.3.1 Role technically driven
2.2.5.2.3.1.3.1.1 European CEO
2.2.5.2.3.1.3.2 Role sales driven
2.2.5.2.3.1.3.2.1 Asian CEO
2.2.5.3 Corporate culture
2.2.5.3.1 Transfer HQ employee culture
2.2.5.3.1.1 Establishing same values and goals
2.2.6 International control management
2.2.6.1 Control attributes
2.2.6.1.1 Trust
2.2.6.1.2 Quality control
2.2.6.2 High control levels
2.2.6.2.1 HR and control
2.2.6.2.2 HQ process transfer
2.2.6.2.2.1 Financial reporting
2.2.6.2.2.2 Control via IT platforms
2.2.6.3 Low control level
2.2.6.3.1 Control of distributors/sales agents and subsidiaries
2.2.6.3.1.1 Close contact
2.2.6.3.1.1.1 On site visits
2.2.7 International marketing management
2.2.7.1 Branding Strategy
2.2.7.1.1 "Made in AGS" strategy
2.2.7.1.1.1 Same brand strategy
2.2.7.1.1.2 Second brand strategy
2.2.7.1.2 "Made by XY" strategy
2.2.7.1.2.1 Potential loss of reputation
2.2.7.1.2.2 Second brand strategy
2.2.7.2 Pricing Strategy
2.2.7.2.1 High price strategy
2.2.7.2.2 Low price strategy
189
2.2.8 International network management
2.2.8.1 Importance of networks
2.2.8.2 Network types, partners and platforms
2.2.8.2.1 Non-Asian networks
2.2.8.2.1.1 Follow European customers
2.2.8.2.2 Networks in emerging Asia
2.2.8.2.2.1 Networks from previous engagements
2.2.8.2.2.2 Networking through embassies
2.2.8.2.2.3 Governmental trade organizations
2.2.8.2.2.4 Network through distributors/sales agents
2.2.8.2.2.5 Networking with the authorities
2.2.8.2.2.6 Local companies
2.2.8.2.2.7 Industry associations
2.2.8.2.3 Inter geographical trade fairs
2.2.8.2.3.1 Networking at trade fairs
2.2.8.2.3.1.1 Opportunity recognition
2.2.8.2.3.1.2 Customer care/gathering market information
2.2.8.3 Network access strategy
2.2.8.3.1 HR and networking
2.2.8.3.1.1 Hiring Asian nationals
2.2.8.3.2 Family way of networking
2.2.8.3.2.1 Preferring FB network partners
2.2.8.3.3 Close contact
2.2.8.3.3.1 Local embeddedness
2.3 External and internal internationalisation influencing factors
2.3.1 Internationalisation objectives
2.3.1.1 Growing the FB
2.3.1.1.1 Market attractiveness
2.3.1.1.1.1 Future market potential
2.3.1.1.1.2 Home market size
2.3.1.1.1.2.1 Home market competition
2.3.1.1.1.2.2 Market position in the home market
2.3.1.2 Following a non-Asian customer
2.3.1.3 Geographic diversification
2.3.1.3.1 Risk diversification
2.3.2 Internationalisation obstacles
2.3.2.1 Corruption
2.3.2.2 Uncertainty and risk perception
2.3.2.2.1 Economic situation
2.3.2.3 Red tape & regulation
190
2.3.2.4 Competition
2.3.2.5 Payment & delivery behaviour
2.3.2.6 Intellectual property
2.3.2.7 Price sensitivity
191
Appendix G: Sample of the expert interview guide (original in German)
University of St. Gallen
Asia Research Center
Supervisor: Prof. Dr. Li-Choy Chong
Second Supervisor: Prof. Dr. Martin Hilb
PhD student: Stephan Erdödy
Tigerbergstraße 9
9000 St. Gallen
Schwitzerland
Interview guide „The influence of non-financial values and goals on the
internationalisation processes of Austrian, German and Swiss Family Businesses
to emerging Asia”
1. Introduction question:
1.1 Which non-financial values and goals do you observe in Austrian, German and Swiss
Family Businesses (FBs)?
2. Please provide your opinion on the following propositions and elaborate on your
decision.
2.1 Market choice:
FBs access developed Asian markets first (e.g. Japan, Taiwan, Hong Kong or Singapore).
After that they enter emerging Asian markets (e.g. China and the ASEAN states).
2.2 Internationalisation pattern:
FBs follow a process of incremental increase of internationalisation commitment. Still, FBs
choose entry modes that do not threaten their independence, quality and succession
aspirations.
2.3 Decision-making:
Internationalisation is a holistic strategy process. For FBs this translates into increased control
needs. Often family management members try to control very strictly what happens in Asia.
This involvement is higher in Asia than in other international markets.
192
2.4 International strategy-making:
International strategy-making starts with unstructured and informal and becomes more formal
over time. FBs use to duplicate former internationalisation strategies from other markets in
Asia, if the regulatory environment allows it. The strategies are continuously adapted to the
local needs.
2.5 Cultural differences:
FBs face strong cultural differences in Asia. They are much stronger than in other foreign
markets. Within Asia, the biggest differences are found in China FBs. FBs try to manage this
with long-term orientation, self-preparation and intensive preparation of their employees.
2.6 Internationalisation knowledge:
Step by step approach when internationalisation critical knowledge is concerned.
Internationalisation knowledge from previous internationalisation is only semi-helpful,
because the Asian market is so different in economic, cultural and political terms at the time
of market entry. FBs acquire knowledge through personal contacts, network contacts or sales
subsidiaries and become more formalized over time.
2.7 International financial management:
FBs heavily rely on company-internal financing from their cash flow. This is to remain
independent and hand the company on to the next generation. External debt taking for Asian
internationalisation purposes only happens in very large FBs.
2.8 International human resources management:
FBs rely strongly on home-grown managers when thy send Expats to Asia. FBs have a long-
standing and trustful relationship with the Expat. Also, CEO and CFO position are
predominately filled with Europeans, while CSO positions are given to locals. The quality of
the business network is a key requirement for hiring new CSOs. FBs try to implement the
same corporate culture as in their home market.
2.9 Networks:
Access to local Asian networks is a condition sine qua non. FB have a competitive advantage
over non FBs, because they can plan their network strategy on the long-term and try to
establish close personal contacts. In addition, FBs offer continuity of leadership. These
qualities closely resemble the cultural preferences of network partners in China and the
ASEAN states.
2.10 Trade fairs:
Trade fairs are important platforms for networking. Trade fairs can provide important
contacts, be a source of internationalisation knowledge and a possibility for first contract
193
closings, especially in early phases of internationalisation. In later internationalisation phases,
trade fairs are more important as networking platform and for customer care purposes.
2.11 International marketing strategy:
FBs use two brand strategies; The “Made in …” or “Made..by” strategy. FBs may launch
second brands but only if they do not see a risk for their reputation. This is predominately
driven by quality considerations. FBs charge between 15-25% above the market, for their
prime brands.
194
Appendix H: Cross proposition table for expert interviews3031
Propositions Expert 1 Expert 2 Expert 3 Expert 4 Expert 5 Suggested alteration of the
proposition
1: FBs entered developed Asian
markets first (e.g. Japan, Taiwan,
Hong Kong or Singapore). These
markets served as a stepping stone for
further internationalisation. After that
they entered emerging Asian markets
(e.g. China and the ASEAN states).
- partially
supported
- partially
supported
- partially
supported
- partially
supported
- supported Historically, FBs accessed Asia
through established Asian markets
because external factors
(macroeconomic/political) forced
them to do so. Today entry barriers
do not exist to the same extent
anymore. Market pattern is therefore
influenced by company internal and
external factors and follows
economic considerations.
2: Incremental increase of
internationalisation commitment. Still,
FBs act very carefully. FBs choose
entry modes that do not threaten their
independence, quality and succession
aspirations.
- partially
supported
- supported - supported - supported - supported None
3: Internationalisation is a holistic
strategy process. For FBs this
translates into increased control
needs. Often family management
members try to control very strictly
what happens in Asia. This
involvement is higher in Asia than in
other international markets.
- partially
supported
- supported -supported - supported - supported None
30
The proposition table does not exactly reflect those propositions presented in Chapter 6. However, All propositions in Chapter 6 are based on this analysis.
Still, they may have been rephrased (without changing the meaning), shortened to make it easier for the reader, or reorganised to work with the flow of the
chapter 31
Source: Author`s own creation
195
Propositions Expert 1 Expert 2 Expert 3 Expert 4 Expert 5 Suggested alteration of the
proposition
4: International strategy-making starts
unstructured and informal and
becomes more formal over time. FBs
use to duplicate former
internationalisation strategies from
other markets, if the regulatory
environment allows it. The strategies
are continuously adapted to the local
needs.
- supported - supported - supported - supported - supported None
5: FBs face strong cultural differences
in Asia. They are much stronger than
in other foreign markets. Within Asia,
the biggest differences are found in
China FBs. FBs try to manage this
with long-term orientation, self-
preparation and intensive preparation
of their employees.
- partially
supported
- supported - supported - supported - supported None
6: Step by step approach when
internationalisation critical knowledge
is concerned. Internationalisation
knowledge from previous
internationalisation is only semi-
helpful, because the Asian market is
so different in economic, cultural and
political terms at the time of market
entry. FBs acquire knowledge through
personal contacts, network contacts or
sales subsidiaries and become more
formalized over time.
- supported - supported - supported - supported - supported None
196
Propositions Expert 1 Expert 2 Expert 3 Expert 4 Expert 5 Suggested alteration of the
proposition
7: FBs heavily rely on company-
internal financing from their cash
flow. This is to remain independent
and hand the company on to the next
generation. External debt for Asian
internationalisation purposes only
exists in very large FBs.
- supported - generally
- supported - supported
- supported None
8: FBs rely strongly on home-grown
managers when thy send expats to
emerging Asia. FBs have a long-
standing and trustful relationship with
the expat. Also, CEO and CFO
position are predominately filled with
Europeans, while CSO positions are
given to locals. The quality of the
business network is a key requirement
for hiring new CSOs. FBs try to
implement the same corporate culture
as in their home market.
- partially
supported
- partially
supported
- partially
supported
- partially
supported
- partially
supported
FBs rely strongly on home-grown
managers when they send expats to
emerging Asia. FBs have a long-
standing and trustful relationship
with the expat. The rationale behind
appointing someone to the CEO
position depends on the assigned
responsibilities. If responsibilities
are sales oriented the CEO may be a
local. If responsibilities are
production oriented FBs trust
Europeans to ensure their quality and
reputation goals. CFOs are mostly
Europeans from the headquarter to
exercise close family control. The
CSO position is primarily given to
locals. If not, this may pose a
considerable obstacle for the FB to
penetrate the given Asian market.
FBs try to implement the same
corporate culture as in their home
market.
197
Propositions Expert 1 Expert 2 Expert 3 Expert 4 Expert 5 Suggested alteration of the
proposition
9: Access to local Asian networks is a
condition sine qua non. FB have a
competitive advantage over non FBs,
because they can plan their network
strategy on the long-term and try to
establish close personal contacts. In
addition, FBs offer continuity of
leadership. These qualities closely
resemble the cultural preferences of
network partners in China and the
ASEAN states.
- supported - supported - supported - supported - supported None
10: Trade fairs are important
platforms for networking. Trade fairs
can provide important contacts, be a
source of internationalisation
knowledge and a possibility for first
contract closings, especially in early
phases of internationalisation. In later
internationalisation phases, trade fairs
are more important as networking
platform and for customer care
purposes.
- supported - partially
supported
- supported - supported - supported None
11: FBs use two brand strategies. The
“Made in …” or “Made..by” strategy.
FBs may launch second brands but
only if they do not see a risk for their
reputation. This is predominately
driven by quality considerations. FBs
charge between 15-25% above the
market, for their prime brands.
- supported - supported - supported - supported - supported None
198
Curriculum Vitae
Stephan Erdödy
Personal Details
Date and place of birth 11.6.1987, Munich, Germany
Nationality German
University Education
05/2013 – 05/2016 University of St. Gallen, Switzerland
Ph.D. Candidate in International Business at the Asia Research Centre
Supervisors: Prof. Dr. Li-Choy Chong, Prof. Dr. Martin Hilb
Thesis submitted in 12/2015; successfully defended in 03/2016
PhD courses in International Corporate Governance, Management in
Emerging Markets (Asia & Latin America) and Quantitative Research
Methods
Research focus: Family Business internationalisation; internationalisation
processes to emerging Asia; influence of non-financial values and goals
on internationalisation processes
09/2010 - 09/2011 University of Edinburgh, United Kingdom
Master of Science in International Business and Emerging Markets
Majors in International Financial Management and Doing Business in
Emerging Markets
Master thesis topic “The attractiveness of Hungary as Foreign Direct
Investment location for the biomass industry“
Consulting project for General Electric within the Doing Business in
Emerging Markets Course
09/2007 - 08/2010 Munich Business School, Germany
Bachelor of Arts in International Business
Majors in International Management and Financial Management
Bachelor thesis topic: “The use of Networks within the Acquisition
Strategy for Entrepreneurial Families in Private Banking” in cooperation
with Bank Gutmann in Vienna
Abroad semester at Corvinus University of Budapest, Hungary in 2009
Co-founder of a pro-bono charity community at Munich Business School,
called MBS SPIRIT to help the needy
199
Practical Experience
09/2014 - 09/2015 Allianz SE, Germany
Research Assistant to Oliver Bäte, CEO of Allianz SE
Part-time employment next to PhD for Allianz‟s involvement with the
World Economic Forum (WEF)
Co-project lead for writing a report for the WEF on the “Future of the
Insurance and Asset Management Industry”, together with an
international management consultancy and numerous investment
professional within Allianz Investment Management, Allianz Capital
Partners, PIMCO etc.
Preparation of an interview guide and participation in personal interviews
with more than 50 CEOs of international insurance companies, asset
managers, banks, central banks and regulatory bodies
Active support of the CEO office in preparing documents, company and
meeting briefings, content checking and writing speeches
03/2014 – 07/2014 OSRAM GmbH, Germany
Working student with the Corporate Strategy Department
Working on various internationalisation projects, mainly for Asia,
alongside the Corporate Strategy and Corporate Intelligence Department
Market competition and application analysis for the use of new light
technology in the areas of laser, medical usage and light, based indoor
positioning
09/2011 - 05/2012 Mid Europa Partners, United Kingdom and Hungary
Intern Analyst at Private Equity Investor with CEE investment focus
Intensive market research, using comparable company analysis
Due Diligence of potential targets and portfolio company management
05/2010 - 07/2010 Bank Gutmann, Austria
Intern at leading CEE Private Bank
Development of new client acquisition strategy within the bachelor thesis
Preparation and participation in client meetings
Languages & IT skills
Languages: German (native), English (fluent), Spanish (very good), Hungarian (intermediate)
IT skills: Microsoft Office (very good), MAXQDA (very good), IBM SPSS (intermediate)
200
Additional Qualifications
2014 - 2016 St. Gallen Symposium, member of the Pre-Jury (Wings of Excellency Award)
2014 University of St. Gallen, Summer School for Empirical Research Methods
2013 Member of the organizational committee of the 2013 India Symposium
2011 Consulting project for General Electric at the University of Edinburgh
2010 Participant of the WU Gutmann Seminar on Wealth Management
Personal Interests
Tennis, Travelling, History, Arts, Politics, Languages