Taking the Beat Further Afar: The Globalization of Family-Linked Enterprises

1. Taking the Beat Further Afar: The Globalization of Family-Linked Enterprises Henry Wai-chung Yeung Associate Professor in Economic Geography Department of Geography, National University of Singapore (Email: HenryYeung@nus.edu.sg; Homepage: http://courses.nus.edu.sg/course/geoywc/henry.htm)

2. Taking the Beat Further Afar: The Globalization of Family-Linked Enterprises • Outline of Presentation • Introduction • Prior Knowledge of Foreign Markets • Major Challenges and Solutions in the Internationalization of FLEs • Conclusion

3. 1. Introduction • Some examples of famous family-linked enterprises • > 75% of all registered companies in developed countries = family businesses • 30% of listed companies in the Fortune 500 have families at their helm • Ford, Fiat, Porsche and Michelin in automobiles • Ericsson and Hutchison Whampoa in telecommunications • News Corp. in media • Wal-Mart Inc. in retailing • Hutchison Whampoa and OOCL in ports and shipping • Samsung in electronics • Examples of early regionalization of family-linked enterprises from Singapore • Hock San Yuen Food Manufacturing in Qingdao as early as in 1975 to manufacture food and beverages • Sunwa Construction & Interior Pte Ltd. (formerly Siew Yong Garments) established a garment factory in Guangzhou in 1979 and subsequently moved it to Shenzhen in 1981

4. 1. Introduction • The internationalization of family-linked enterprises during the 1980s and the 1990s • Results from my survey of 54 family-linked enterprises in Singapore (see Table 1) • Concentration in Hong Kong, Indonesia, Malaysia before 1985 • Continual focus on the Asian region in the 1990s

6. 2. Prior Knowledge of Foreign Markets • Incremental learning of foreign markets • Developing prior network relations with foreign customers, suppliers, trading partners and so on • Gradual entry into foreign markets: knowledge accumulation • Capitalizing on network connections in internationalization • Examples of 73 FLEs from Hong Kong and 54 FLEs from Singapore (see Table 2) • Heavy reliance on business connections • Declining significance of family networks • Major advantages of prior network connections - access to local information and knowledge - easier coordination with local operations - access to new distribution channels and markets

8. 3. Major Challenges and Solutions in the Internationalization of FLEs • Major problems encountered by FLEs in foreign markets (Table 3) • Lack of home government support • Host government regulation in Asia: opaque rules and restrictive regulation • Lack of personal experience (Europe) and sufficient financial assets (North America): the role of open and competitive business environments

10. 3. Major Challenges and Solutions in the Internationalization of FLEs • Different solutions for different problems (Table 4) • Reliance on local partners and adopting local practices in Asia • Professionalization of management: the role of trusted managers and their adaptability to different business environments

12. 4. Conclusion: Can We Take the Beat Further Afar? • Growing beyond three generations of FLEs • Inherent limits to the growth of FLEs beyond three generations are misleading and misplaced: paternalism, nepotism, personalism and fragmentation • Challenges to FLEs when they go international • Balancing the equity share, form, and structure of ownership in foreign affiliates • Identifying different ways of establishing foreign operations and the need for nonfamily members to deal with day-to-day management issues • Empowering local affiliates in areas of marketing, sourcing, and human resource management practices • Transferring technology and managerial expertise from parent firms and their local development in host countries • Diversifying the sources of finance beyond the family pool