International entrepreneurship and Mexican listed family firms' CEO/Board characteristics/Emprendimiento internacional y caracteristicas de los Consejos de Administracion y Directores Generales de las empresas familiares listadas en Mexico/Empreendedorismo internacional de empresas familiares mexicanas listadas e caracteristicas do CEO /Conselho de administracao.
| Autor | Watkins-Fassler, Karen |
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Introduction
After Brazil, Mexico is the largest economy in Latin America (International Monetary Fund, 2017). It is also the leading export country in this geographical area. In 2017 Mexico's export value was 410 billion U.S. dollars (ranked 13th in the world), followed by Brazil with 215 billion U.S. dollars and coming 27th in the global ranking (The World Factbook, 2018). Although Mexico is a key player in the global arena, little research has been developed on Mexican companies' international entrepreneurship (IE).
International entrepreneurship is understood as the exploitation of business and financial opportunities present in external markets, in order to attain competitive advantages and increase profits (Oviatt & McDougall, 2005). IE is therefore a type of entrepreneurial activity that implies venturing into external markets. Internationalization opportunities take place whenever gaps in external markets can be filled by local companies (Karra & Phillips, 2004).
Entrepreneurship, including IE, is an strategy that depends on companies' top management and board of directors (Perks & Hughes, 2008). It has been documented that board diversity and certain Chief Executive Officer (CEO) characteristics favor entrepreneurship (Wincent, Thorgren, & Anokhin, 2014; Ahn, Minshall, & Mortara, 2017). Previous literature demonstrates a positive relationship between IE and top management international work experience, foreign education, and academic achievements (Zahra & George, 2002; Herrmann & Datta, 2005). However, related studies for family firms (especially for listed family-owned companies) are scarce (Wright, De Massis, Scholes, Hughes, & Kotlar, 2016; Ramon-Llorens, Garcia-Meca, & Durendez, 2017). This paper studies the influence of CEOs' and board members' attributes with regard to IE, taking into account large (listed) family firms in Mexico - an emerging market economy where most listed companies are family-owned, and where ownership concentration is above all high (on average 54%). Entrepreneurial behavior of family firms has a family and a firm level component (Martin & Lumpkin, 2003; Zellweger, Nason, & Nordqvist, 2012). The family element incorporates considerations of security and control, stability, and long-term orientation (Wright et al., 2016). Family involvement influences entrepreneurship (and IE), however the direction of this association is not trivial (Eddleston, Kellermanns, & Zellweger, 2010; Daspit, Chrisman, Sharma, Pearson, & Long, 2017).
The objective of this research is to determine the influence of CEO and board of directors' characteristics on international entrepreneurship (IE), taking into account listed family firms in Mexico. The pursuit of this type of entrepreneurship depends, among other factors, on the particularities of boards and top management. Specifically, the influence of board diversity (gender, independent directors, family and non-family members) and CEO characteristics (membership or non-membership of the family), tenure, international exposure, academic background and achievement) on international entrepreneurship are analyzed.
The present study contributes to the literature, as most studies on international entrepreneurship deal with English-speaking economies (Meyer, Libaers, Thijs, Grant, Glanzel, & Debackere, 2014). Corporate governance practices of Mexican firms are quite different from those prevailing in English-speaking nations. Accounting principles, legal requirements, and information disclosure standards are stricter in those more developed countries. Mexican companies that intend to become international face greater costs, as they must meet more stringent requirements in terms of corporate governance. The latter somehow reduces the benefits of exploiting opportunities abroad. In addition, in Mexico a larger percentage of corporations are family owned, with higher ownership concentration and predominance of family members in strategic positions. It is not clear in the literature whether decision centralism and excessive power harms or helps entrepreneurial actions and firm performance (Molina-Parra, Botero-Botero, & Montoya-Restrepo, 2017). These, among other distinctive factors, influence international entrepreneurship (Bai, Tsang, & Xia, 2019).
The paper is organized as follows: section 2 reviews relevant literature on international entrepreneurship and CEO/Board characteristics, from which hypotheses are derived. Section 3 describes the data, variables, and methodology employed to test the hypotheses. Results are presented in section 4, and section 5 offers some conclusions.
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Literature review and hypotheses
This section begins with a literature review on international entrepreneurship (IE -subsection 2.1). The relationships between IE and different CEO/Board characteristics are presented in subsections 2.2-2.5. The CEO/Board traits (variables) considered are family involvement, CEO tenure, foreign exposure, education, and board diversity (gender, independency, participation of non-controllers). Hypotheses were constructed for each of these variables and their relationship with IE.
2.1 International entrepreneurship (IE)
Entrepreneurship involves the ability and disposition to bear uncertainty and take advantage of business opportunities, developing new products or markets to increase profits (Venkataraman, 1997). Entrepreneurship deals with autonomy, competitive aggressiveness, innovation, proactivity, risk-taking, venturing, and strategic renewal (Lumpkin & Dess, 1996; Zahra, 1993). In an attempt to unify the definition for entrepreneurship, Sharma and Chrisman (1999) propose the following: "Entrepreneurship encompasses acts of organizational creation, renewal, or innovation that occur within or outside an existing organization" (p.17).
International entrepreneurship (IE) is a type of entrepreneurship that extends local boundaries. It seeks opportunities beyond domestic markets to increase competitiveness and returns. As such, internationalization is an entrepreneurial action, which involves innovation, risk-taking, and strategic change (Schumpter, 1934). International entrepreneurship has been defined as "a combination of innovative, proactive, and risk-seeking behavior that crosses national borders and is intended to create value in organizations" (McDougall & Oviatt, 2000, p. 903). IE includes "cooperative alliances, corporate entrepreneurship, economic development initiatives, entrepreneur characteristics and motivations, exporting and other market entry modes, new ventures and initial public offerings (IPOs), transitioning economies, and venture financing" (McDougall & Oviatt, 2000, p. 903).
International entrepreneurship involves both opportunities and challenges. It is a venture full of risks, where market and relational knowledge are vital (Casillas, Barbero, & Sapienza, 2015). IE comprises top management motivation, commitment, and firm preparation; generally companies gradually become international, although some follow a rapid path and others are born global (Wright & Etemad, 2001). The IE literature mentions three different internationalization dimensions: "time (to internationalization), market presence, and mode" (Dimitratos, Johnson, Plakoyiannaki, & Young, 2016, p. 1212).
2.2. Family involvement and international entrepreneurship
Family firms, compared to non-family companies, face both restrictions and advantages in order to become international (Calabro & Mussolino, 2013). Long-term orientation, high commitment, and a greater number of communication channels constitute positive family level components for IE. However, higher risk aversion and the search for alternative objectives (related to socio-emotional wealth) create barriers for IE. Therefore, the relationship between family involvement and IE is unclear (Daspit et al., 2017; Pukall & Calabro, 2014).
Within family firms, inconclusive evidence has been found which suggests that the presence of family members in strategic positions impacts international entrepreneurship. Internationalization is complex and full of uncertainties. Family-member CEOs tend to have better information and more experience in their companies than non-family CEOs. This provides knowledge that can be used for new insights and innovation (Le Breton-Miller, Miller, & Bares, 2015), which gives companies headed by family-member CEOs an advantage when undergoing internationalization (Weerawardena, Sullivan, Mort, Liesch, & Knight, 2007).
However, a family-member CEO might not have the adequate managerial skills in order to pursue international entrepreneurial acts (Pinheiro & Yung, 2015). Family CEOs might make more conservative strategic decisions, being more cautious about internationalization ventures (Binacci, Peruffo, Oriani, & Minichilli, 2016; Chirico & Nordqvist, 2010). Furthermore, family CEOs have limited exposure to the external environment, as most of their professional experiences lie within the family business. This limits CEOs' aptitudes when visualizing novel prospects and promotes the conservation of the status quo (Hambrick & Fukutomi, 1991). In contrast, a non-family CEO offers the firm additional contacts and managerial/market knowledge (Arregle, Hitt, Sirmon, & Very, 2007; Claver, Rienda, & Quer, 2009). The nomination of a non-family CEO favours the adoption of more risky initiatives and stimulates decisions based on logic and rational analysis (Block, 2011). Accordingly, hypothesis 1 is proposed:
* H1: companies headed by family-member CEOs are less likely to become international.
2.3. CEO tenure and international entrepreneurship
Tenure is an indicator of experience and human capital; it enlarges the ability to process information and make decisions (Herrmann & Datta, 2005). Longer tenure facilitates the understanding and managing of complexities related to internationalization, which improves the odds of pursuing international entrepreneurship (Jaw & Lin, 2009...
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