Family business legitimacy and foreign subsidiary establishment mode choice: An institutional and mixed gamble approach

Abstract

The internationalisation of family firms is increasingly argued to be influenced by institutions external to the firm. In this paper, drawing on institutional and mixed gamble theories, we argue that family firms' choice of foreign subsidiary establishment mode varies based on the degree of family business legitimacy (FBL) in their home and host countries. We propose that both the individual and combined effects of home and host FBL influence this choice. Additionally, we contend that cultural distance between the home and host countries moderates the aforementioned effect. Our hypotheses are tested using a sample of 147 family firms over the period 2011–2019. Overall, our research contributes to a greater understanding of the role of external institutions on the foreign subsidiary establishment mode choice of family firms.