Industrial diversification and family firm internationalization: the moderating effect of family governance structure

Abstract Despite extensive research on the internationalization of firms in emerging economies, why family firms under similar institutional conditions follow divergent global expansion paths remains poorly understood. This study examines how industrial diversification affects the scale and scope of internationalization in family firms and the moderating role of family governance structures. Using panel data from Chinese-listed manufacturing family firms from 2013 to 2020, we reveal that industrial diversification generally impedes both the scale and scope of internationalization. We address this research gap by proposing a novel theoretical distinction between “restrictive” and “broad” family governance structures. This distinction elucidates why family firms in similar institutional environments exhibit divergent internationalization paths, thereby bridging the gap in the literature on family firm strategy interactions. Specifically, we demonstrate that restrictive governance structures limit strategic flexibility and exacerbate the negative effect of diversification on internationalization, whereas broad governance structures mitigate this effect by enabling more adaptive strategic behavior. Furthermore, heterogeneity analysis further shows that the constraining effect is stronger in “natural” family firms. These findings advance our understanding of governance heterogeneity in family firms and offer practical strategic insights for family firms seeking to balance diversification and internationalization through governance reforms.