Family control and influence on JV investment – the moderating effect of JV type and IC components
| DOI | https://doi.org/10.1108/JIC-12-2020-0376 |
| Published date | 19 August 2021 |
| Date | 19 August 2021 |
| Pages | 68-91 |
| Subject Matter | Information & knowledge management,Knowledge management,HR & organizational behaviour,Organizational structure/dynamics,Accounting & finance,Accounting/accountancy,Behavioural accounting |
| Author | Giovanna Gavana,Pietro Gottardo,Anna Maria Moisello |
Family control and influence on JV
investment –the moderating effect
of JV type and IC components
Giovanna Gavana
Department of Economics, University of Insubria, Varese, Italy, and
Pietro Gottardo and Anna Maria Moisello
Department of Economics and Management, University of Pavia, Pavia, Italy
Abstract
Purpose –This paper aims to investigatethe effect of the nature of ownership and board characteristics on the
investment choices in joint ventures (JVs) from the dimensional point of view, controlling for the effect of JV
type and other components of intellectual capital.
Design/methodology/approach –The authors study a sample of Italian, Spanish, German and French
nonfinancial listed firms over the 2010–2018 period, controlling for the fixed effects of the company’s sector of
operation and the year. The authors also analyze the effect of family control and influence on JV investment
size, taking into consideration certain board characteristics, the type of JV, human capital efficiency, structural
capital efficiency and capital employed efficiency while also controlling for a firm’s profitability and size. To
test the hypotheses, GLS panel data was used.
Findings –The results indicate that the size of the investment in JVs is smaller for family firms than for
nonfamily businesses. The presenceof CEO duality has an opposing effect on the size of the investment in joint
ventures as it has a lowering effect in family businesses while it exerts an amplifier influence in nonfamily
businesses. Moreover, the type of joint venture has a significant effect for family firms: the choice of a link joint
venture reduces the size of the investment. The authors find that human capital efficiency increases JV
investment size for all firms.
Originality/value –This study is the first to analyze the effect of the main dimension of socioemotional
wealth –family control and influence –on a firm’s JV investment size. It controls for the effect of JV type –link
or scale –and the interplay of the other IC components.
Keywords Joint venture, Family firms, Link JVs, Scale JVs, Board characteristics, Intellectual capital
Paper type Research paper
1. Introduction
Family companies are a leading organizational form in economies across the world.
According to the Family Firms’Institute, two-thirds of all companies around the world are
family-managed and more than 70% of global GDP annually is produced by family
businesses that provide 50–80% of the world’s employment [1].
Engaging in new ventures is a priority for family companies trying to survive, achieve
profitability and growth; a connection with other companies would allow them to gain the
knowledge necessary to stimulate entrepreneurship and avoid the effect of conservatism that
can threaten family firms’financial sustainability (Zahra, 2010;Basly, 2007). Family firms are
characterized by a unique social capital (Arregle et al., 2007), relevant in leveraging the firm’s
absorptive capacity to transform and use external knowledge (Anders
en, 2015). Moreover,
there is evidence that alliances and partnerships, such as joint ventures (JVs), play a relevant
JIC
22,7
68
© Giovanna Gavana, Pietro Gottardo and Anna Maria Moisello. Published by Emerald Publishing
Limited. This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone
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The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1469-1930.htm
Received 14 December 2020
Revised 14 April 2021
25 May 2021
Accepted 25 June 2021
Journal of Intellectual Capital
Vol. 22 No. 7, 2021
pp. 68-91
Emerald Publishing Limited
1469-1930
DOI 10.1108/JIC-12-2020-0376
role in forming company legitimacy and their sustainable technologies (Kishna et al., 2017;
Mu~
noz de Prat et al., 2020).
JV literature has addressed several topics such as JV performance, innovation and
internationalization. A stream of this literature has taken into account the effect of the nature
of a firm’s ownership on JV investment choices, mostly focusing on the internationalization
perspective and entry mode choices (Sestu and Majocchi, 2020;Debellis et al., 2021;Scholes
et al., 2016;Kuo et al., 2012;Claver et al., 2007), and innovation (Feranita et al., 2017). These
exploratory studies have analyzed the behavior of family businesses by comparing them
with nonfamily businesses as homogeneous groups. Family firms are not a homogeneous
group, and their heterogeneity depends not only on companies’ownership structure but also
on the degree and kind of influence the family exerts on a company’s strategic decisions
(Chrisman et al., 2015;Calabr
oet al., 2019). The effect of ownership structure heterogeneity on
JV has been analyzed by literature (Pongelli et al., 2016), but, to the best of our knowledge,
literature has not yet investigated family firms’investment in JVs through the lens of the
second type of heterogeneity, a relevant gap that deserves to be addressed.
Moreover, literature has pointed out the influence of the unique bundle of resources
generated by the interaction of family and business (Habbershon and Williams, 1999)ona
firm’s intellectual capital (Cabrera-Su
arez et al., 2001). As a matter of fact, family firms rely on
specific human capital intangibles provided by the family’s involvement in the firm and
related to the founder’s personality, the values shared by family members or the knowledge
acquired from previous generations (Sirmon and Hitt, 2003;Claver-Cort
es et al., 2015). The
family’s moderating role on the relationship between IC and innovation (Di
eguez-Soto et al.,
2016), its effect on relational capability development (McGrath and O’Toole, 2018), as well as
family firms’unique characteristics in creating and governing joint ventures (Debellis et al.,
2021) have been highlighted by the literature.
JVs are the expressionof a peculiar componentof a company’s intellect ual capital (IC), i.e . its
relationalcapital that representsthe part of knowledgeembedded in relationshipswith external
stakeholders(Sharabati et al., 2010;Zambon, 2002).According to the type of alliance –link or
scale –partners contribute different, or similar, capabilities (Hennart, 1988) facing different
risks and producing different outcomes (Dussauge et al.,2000,2004;Khamseh and Jolly, 2014).
Recent research has also highlighted the importance of pointing out the possible
interactions and synergies between the different components of IC (Crupi et al., 2020): they
influence each other and certain components of IC can benefit from the improvement of other
components (Johnson, 1999;Reed et al., 2006). However, to the best of our knowledge, the
literature has not yet analyzed the effect of IC and JV type in family business investment in
joint ventures.
This paper addresses the following research question: Does family control and type of
influence affect investment size in JVs? If so, does JV type and the interplay of other IC
components moderate this effect?
We investigate how different types of family influence (CEO, CEO duality, number of
family members on the board) affect firms’investment size in JVs, taking into account the
effect of IC and JV type. The extent to which family members occupy board positions is a
major source of heterogeneity in family businesses (Nordqvist et al., 2014;Di
eguez-Soto and
Mart
ınez-Romero, 2016) and the characteristics and background of board members affect a
firm’s strategic choices (Hambrick, 2007;Mueller and Barker, 1997;Sciascia et al., 2013). We
address the research question by basing it on the socioemotional wealth (SEW) concept. This
refers to the stock of affect-related value that a family derives from its controlling position in a
firm (Gomez-Mejia et al., 2007;Berrone et al., 2012). It shapes firms’decisions (Gomez-Mejia
et al., 2011) and may affect investment in JVs in different ways.
We analyze a sample of Italian, Spanish, German and French nonfinancial listed firms
over the period 2010–2018. The sample is of particular interest as these economies are widely
Family control
and influence
on JV
investment
69
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