International Diversification and Performance in Family Firm: Exploring Nonlinear Relationships with the Governance Structure in an Emerging Economy

Abstract

In this study we researched the relationship between international diversification and performance in family firms in an emerging economy. Likewise, from the perspective of the governance structure, we investigated non-linear relationships between business group membership, concentration of ownership as well as pyramid ownership with the performance of internationally diversified family firms.

Considering a sample of 83 companies that have been listed on the Santiago de Chile Stock Exchange during the period between 2003 and 2013, we find an inverted U relationship between international diversification and performance; a U relationship between international diversification and performance in family firms; an inverted U relationship between the performance of internationalized family firms and affiliation to a business group; a U relationship between the performance of internationalized family firms and concentration of ownership; and a non-linear relationship in the inverted U form between the performance of internationalized family firms and high divergence between control and cash flow rights and U in the case of low divergence.

Keywords: Family Ownership, International Diversification, Firm Performance, Emerging Economy

JEL Classification: G30, F00