Board openness and family firm internationalization: a social capital perspective

Organizational social capital is embodied in the composition of the board of directors, suggesting that different board compositions are related to different levels of bonding (internal) and bridging (external) social capital, which affects key strategic outcomes, such as internationalization. Despite its importance, the role of social capital in explaining family firm (FF) internationalization has been overlooked by previous literature. We fill this gap by drawing on social capital theory and studying how board openness to non-family directors affects a firm’s FDI geographic scope. We argue that the coexistence of both family and non-family directors can be a double-edged sword. Indeed, it can be related to low levels of interaction and integration within the boardroom (low bonding social capital), thus leading to a low level of FDI geographic scope. Moreover, we hypothesize that firm age has an important moderating role in the U-shaped relationship between the family board ratio and firm FDI geographic scope. Our analysis of a panel dataset of 7,707 Italian FFs suggests that the development of bonding social capital is more likely in young firms, whereas a balanced juxtaposition of family and non-family directors is detrimental in more mature firms. Therefore, except for young FFs, the board leads to a higher level of internationalization when it is dominated by one group (either family or non-family); however, boards dominated by non-family directors always lead to a higher FDI geographic scope. We provide important practical insights as well as theoretical implications for FFs’ internationalization, social capital, and corporate governance researc