Coping with Uncertainty in FDI Entry Mode Choices: Differences between Family and Non-Family Businesses

This study examines how firms cope with internal (behavioral) uncertainty and external (environmental) uncertainty when they make FDI entry mode decisions, and the possible difference between FBs and non-FBs. Drawing from the transaction cost economics (TCE) tradition and new internalization theory, we hypothesize that all firms tend to choose joint venture (JVs) over wholly-owned subsidiaries (WOSs) when they encounter high uncertainty. We further hypothesize that, due to FBs’ concerns of socioemotional wealth (SEW), they are more likely than non-FBs to choose JVs when coping with high internal uncertainty and external uncertainty. The empirical results partially support our hypotheses, suggesting that FBs and non-FBs cope with internal uncertainty differently: FBs exhibit a higher tendency to choose JVs when they cope with internal uncertainty. However, FBs and non-FBs make similar FDI entry mode decisions when coping with external uncertainty. Findings in this study contribute to FDI entry mode studies, as well as FB internationalization research and new internalization theory.