Innovation mediating and moderating internationalization in family and non-family businesses: embeddedness in Egypt, Madagascar, Morocco and Turkey

Abstract

Purpose of the paper: According to most previous research, family businesses tend to internationalize less than non-family businesses. However, previous research has been conducted mainly in developed countries, where strong institutions support non-family businesses more than family businesses. Conversely, in developing countries with weak institutions, family businesses may conceivably have a comparative advantage for internationalization, especially if they are innovative. This paper focuses on how innovation may mediate and moderate the effect of governance upon internationalization in the form of exporting, as this dynamic is embedded in developing societies with weak institutions.

Methodology: The research method is quantitative data analysis. Our account is based on a representative sample of 4,004 family and non-family businesses in Egypt, Madagascar, Morocco, and Turkey, surveyed for the Global Entrepreneurship Monitor.

Findings: Analyses show that governance hardly affects innovativeness, but affects internationalization, in that exporting is especially high for family businesses in Morocco. Moreover, innovativeness boosts exporting in family business more than in non-family business. Furthermore, the comparative advantage of family businesses is larger in Morocco than in Egypt, Madagascar, and Turkey.

Research limits: Although an essential feature of our research design is based on a  comparative approach, rather than the typical single-country studies, we compared four similar societies in developing countries with weak institutions. Therefore, a significant limitation is that our findings concerning the internationalization of family businesses should not be generalized to all kinds of societies. Moreover, due to the small number of countries (four developing countries), it is statistically impossible to test the effects of the macro-institutional factors affecting family firms exporting. Therefore, we can only measure country contexts' overall impact without elaborating effects of specific institutional factors enhancing or hampering the internationalization process.

Practical implications: The practical implication is relevant for family firms' policies to know that innovation in family firms is not a waste of investment, but innovation especially can boost exporting in family business more than in non-family firms, thereby enhancing the economic performance of family firms.

Originality of the paper: These results contribute to understanding internationalization in family businesses as shaped by innovation and as embedded in society's context.