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Does Family Control Affect Trade Performance? Evidence for Italian Firms

Giorgio Barba Navaretti (), Riccardo Faini and Alessandra Tucci ()
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Alessandra Tucci: Centre for Economic Performance, LSE and Centro Studi Luca d\'Agliano

No 260, Development Working Papers from Centro Studi Luca d'Agliano, University of Milano

Abstract: This paper examines whether the export decision of firms is affected by their ownership structure, specifically it looks at whether family control is an obstacle to entering foreign markets. The underlying assumption is that family firms are risk averse. Risk aversion may be an obstacle to entering foreign markets, as far as these are perceived as more volatile and risky than the domestic one, particularly when such choice entices bearing relatively high sunk costs. We develop an illustrative theoretical model that shows how the combination between high risk aversion and low initial productivity may hinder family firms’ decision to enter foreign markets, particularly distant ones. The empirical analysis, based on a detailed panel data set of Italian firms covering the years from 1995 to 2003, confirms such predictions by showing that family controlled firms do indeed export less than other type of companies even after controlling for firm heterogeneity in productivity, size, technology and access to credit.

JEL-codes: F1 F14 L2 (search for similar items in EconPapers)
Pages: 36
Date: 2008-10-27
New Economics Papers: this item is included in nep-eff
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Working Paper: Does Family Control Affect Trade Performance? Evidence for Italian Firms (2008) Downloads
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