Globalisation and firm structure: comparing a family-business and a ...

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Int. J. Globalisation and Small Business, Vol. 4, No. 2, 2011

Globalisation and firm structure: comparing a family-business and a corporate block holder in the New Zealand seafood industry Kelley Brydon* and Léo-Paul Dana Department of Management, University of Canterbury, Private Bag 4800, Christchurch, New Zealand E-mail: Leo.Dana@canterbury.ac.nz *Corresponding author Abstract: This study examines literature about firm structure, ownership structure and concentration, diversification and use of networking related to the degree of internationalisation. A case study of the New Zealand seafood industry was completed to determine whether this literature was applicable in this context. The literature relating to ownership concentration was only partly supported, suggesting an opportunity to contribute the literature. Industry characteristics played a fundamental role in the decision to internationalise, and firm structure determined the rate at which each firm expanded into foreign markets. A model is developed to highlight the key relationships between variables. Keywords: internationalisation; firm structure; seafood; New Zealand; strategy. Reference to this paper should be made as follows: Brydon, K. and Dana, L-P. (2011) ‘Globalisation and firm structure: comparing a familybusiness and a corporate block holder in the New Zealand seafood industry’, Int. J. Globalisation and Small Business, Vol. 4, No. 2, pp.206–220. Biographical notes: Kelley Brydon has her post-graduate degree from the University of Canterbury. Léo-Paul Dana has a PhD from HEC-Montreal and is tenured at the University of Canterbury. This paper was written while he was on study leave, at GSCM Montpellier.

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Introduction

Internationalisation of organisations has transformed the limits and nature of strategy, competition and competitive advantage (Sanders and Carpenter, 1998). Greater competitive pressures act to force firms to internationalise, and consequently firms respond to new levels of complexity surrounding diverse cultural, institutional and competitive environments (Gomez-Mejia and Palich, 1997). Various factors have been examined that determine the level of success a given firm has in its process towards internationalisation. Much research has focused on firm size Copyright © 2011 Inderscience Enterprises Ltd.

Globalisation and firm structure

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(see Schaper et al., 2009), and size has been correlated with export intensity, and to a lesser extent export growth (Beamish et al., 1999). Internationalisation theory posits that firms take small incremental steps to international presence, starting in their domestic market and cumulating in joint ventures, and overseas offices and research have shown that firm structure also impacts the degree to which firm internationalise (Beamish et al., 1999). Family-owned businesses have been found to suffer resource constraints, limiting their ability to enter foreign markets, while those with corporate block holders have more access to the financial support required for internationalisation (Allen and Phillips, 2000). Our research seeks to investigate this literature by comparing two firms within the New Zealand seafood industry, with two different firm structures, and testing to see whether the propositions hypothesised by the previous literature account for the differences in the level of internationalisation. The objective of this paper is to examine the effects of organisational structure on the internationalisation process and compare the results with current internationalisation literature. The research specifically examines the influences of organisational structure, ownership structure, degree of diversification and firms’ use of networking on the degree of internationalisation by examining two cases in the New Zealand seafood industry. Our objective was to see whether current internationalisation theories hold true within the context of the New Zealand seafood industry. Our research combines different facets of internationalisation theories and tests how compatible the differing theories are; possibly some change to the current theories will be necessary. Internationalisation takes many forms and it is difficult to predict which course of action a given firm will take in differing contexts. The more research acquired in regard to the factors leading to internationalisation and the rate of internationalisation, the more information is available for future managers for internationalisation decisions.

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Literature review

A firm’s degree of internationalisation is an important determinant of the complexity faced; we are concerned about the relationship between a firm’s degree of internationalisation and organisational governance and structure. Degree of internationalisation, conceptually and practically, is multidimensional. It captures the extent to which a firm depends on foreign markets for customers, factors of production and the capacity to create value, as well as the geographic dispersion of dependence (Sanders and Carpenter, 1998). Agency theory is used to explain the change in complexity as the degree of a firm’s internationalisation increases. Agency theory has examined the behavioural consequences of conflict between owners and managers, and more specifically at control mechanisms, including governance structure, that owners utilise to align managers’ interests to their own interests of profit maximisation (Eisenhardt, 1989; Jensen and Murphy, 1990; Thomsen and Pedersen, 2000). Therefore, in terms of internationalisation, agency theory posits that as the degree of internationalisation for a firm increases, there is increased complexity in the firm, increasing the information processing and monitoring demands, requiring modification of the governance structure (Sanders and Carpenter, 1998). The complexity that is created by internationalisation usually takes two forms: firstly, as firms enter foreign markets, they are exposed to a diversity of cultures, customers,

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competitors and regulations (Gomez-Mejia and Palich, 1997). Secondly, there are increased competitive pressures for firms to create efficiencies within and between markets; Sanders and Carpenter (1998) found significant effects of degree of internationalisation on corporate governance arrangements.

2.1 Internationalisation theories Several attempts have been made to create a model to conceptualise the process of firm internationalisation. Many theories have focused on this being an incremental process where firms internationalise in a series of small steps increasing activity in foreign markets. This movement originally resembled Rogers (1962) diffusion of innovation, and because of the similarities discovered, the models were referred to as innovation models of internationalisation (Andersen, 1993). The most popular and general theory of the process of internationalisation, due to its broad applicability, is the Uppsala model (Johanson and Vahlne, 1977; Johanson and Wiedersheim-Paul, 1975). It focuses on firms’ acquisition, integration and use of foreign market knowledge that incrementally increases a firm’s commitment to that foreign market. One main implication is the perceived uncertainty in entering foreign markets; therefore, the process starts with those countries considered relatively similar to the home country, or ‘psychically’ close (Oviatt and McDougall, 1997). This model has received criticism due to its cross sectional nature, not explaining the antecedents and how the process was started (Andersen, 1993). Further additions have included the changes in the way the firm manages its exports as the degree of internationalisation increases (Beamish et al., 1999). This ranges from firms managing exports, as part of their domestic market, to the establishment of a joint venture or overseas subsidiary. An issue is that these models failed to account for firms who were international from conception, and their dependency on sales – which excludes characteristics of the industry, resources or market opportunities (Beamish et al., 1999). There has been some attempt to take account of the irregular paths taken by firms in the internationalisation process. Some research found that firms reach plateaus, where they have entered a foreign market, and consolidate the move before taking the next step (Macharzina and Engelhard, 1991). International entrepreneurship, which takes into account more factors surrounding a firm’s introduction to foreign markets including aspects of personality and risk propensity, attempted to explain international start-ups (Oviatt and McDougall, 1994). There is not one model that can sufficiently account for the internationalisation of all firms; therefore, it can be assumed that a variety of factors influence a firms path to internationalisation.

2.2 Organisational structure As mentioned previously, the degree of internationalisation is expected to increase the complexity of an organisation’s structure, and in terms of the governance structure and how exports are managed. Beamish et al. (1999) determined that a firm’s degree of internationalisation was reflected in how exports were managed, with increasing commitment from being managed as part of their domestic business to the establishment of a separate export unit, leading to overseas agents, culminating in a joint venture or overseas subsidiary.


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Establishing an export manager is a sign of commitment from a firm to exporting. General management literature supports the idea that specifying and evaluating employees on specific objectives will increase performance (Rodgers and Hunter, 1991). Research has supported this notion with export management, with positive effects on performance with the establishment of an export manager (Cavusgil and Zou, 1994). Kirpalani and Macintosh (1980) studied the marketing effectiveness of small technology-based firms and found that a separate marketing organisation is a valuable aspect of international marketing success. Beamish et al. (1999) found that firms with management commitment to international markets (as evidenced by the creation of a separate export management unit) increase their economic performance.

2.3 Ownership structure Ownership type can influence corporate strategy because different types of ownership are subject to varying levels of resources and risk aversion (Thomsen and Pedersen, 2000). In this study, two types of ownership structure are examined, family ownership and corporate block holder. Family ownership can make it more difficult to obtain resources (Allen and Philips, 2000). This is particular evident because family firms may be limited in access to the resources and capabilities that is needed in internationalisation and may show weaker growth (Thomsen and Pedersen, 2000). There are also advantages of family ownership, including a long-term orientation, flexibility, quick decision-making and development of family culture as competitive advantage (Poza et al., 2004). Family-owned companies are more reluctant to give up control, centralising control in the firm and may be relatively risk adverse compared to other ownership types (Thomsen and Pedersen, 2000). A corporate block holder, on the other hand, while still not being able to enjoy the capital raising benefits of public ownership, can access financial resources more readily than family ownership (Allen and Phillips, 2000). Corporate block holders are also less likely to have diversified products, given the corporate ownership being less risk adverse than family ownership (Hill and Snell, 1989).

2.4 Ownership concentration Previous research has explored variables that may determine ownership structure (Demsetz and Lehn, 1985): 1

Value maximising size: in general, the larger the firm’s competitively viable size, the larger the firm’s capital resources and, therefore, greater market value per ownership share. The increasing costs of capital encourage firms to diffuse ownership. Therefore, there is an expectation that an inverse relationship between firm size and concentration of ownership exists.

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Control potential: more effective monitoring of managerial performance may achieve a wealth gain for owners.

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Firm’s environment: elements may exist that are pervasive on control potential. Firms that transact in markets characterised by stable elements are firms in which managerial performance can be monitored at little cost. In less predictable environments, managerial performance simultaneously is more important for

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K. Brydon and L-P. Dana direction of the firm and becomes more difficult to monitor. Therefore, it is expected the noisier a firm’s environment, the greater the reward to owners in maintaining tighter control.

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Regulation: systematic regulation restricts the options available to owners, thus reducing control potential. It is expected that regulation calls for greater diffuseness of ownership.

2.5 Diversification In studies of diversification strategy, top managers are assumed to have a personal interest in product or geographical diversification at the corporate level because of employment risk aversion, expense preference and empire building (Thomsen and Pedersen, 2000). Managers use diversification strategies to protect the earnings streams of their companies (Bergh, 1995). The owners’ interests in maximising profit are best served by selling unrelated businesses; owners are predicted to favour selling unrelated units, whereas managers are predicted to prefer selling related units (Bergh, 1995). Bergh (1995) found that ownership concentration is positively associated with the sale of unrelated business units. The types of units sold might depend on whether managers or owners have the most influence over an organisation, as each prefers a different type of economic benefit. If managers have the most power, they might seek to enhance core competencies by using sell-offs to achieve unrelated diversification and competitive internal source allocation; if owners have the most power, they may seek to enhance core competencies by using sell-offs to achieve related diversification and cooperative internal resource allocation.

2.6 Networking Axelsson and Easton (1992) defined a network as sets of two or more connected exchange relationships. The networking literature proposes that the key use of networks is to gain information, and this is achieved through interaction with other people, whom are linked with others, creating a network of individuals, and the characteristics of that network affect the availability, timing and quality of information access (Arenius and Clercq, 2005). Strategic networks potentially offer a firm advantages from learning, scale and scope economies, permit firms to achieve strategic objectives, such as sharing risks and outsourcing stages and organisational functions, and the structural pattern of a firm’s relationship can be unique and potentially act of a source of competitive advantage (Gulati et al., 2000). Social networks promote trust and reduce transaction costs by greatly reducing the informational asymmetries that increase contracting costs and can further mitigate transaction costs by making opportunism (the motivation to exploit the other party) more costly because of negative consequences from a negative reputation (Gulati et al., 2000). The primary outcome of networking is that the firm develops relationships that secure access to significant resources and the sales of its goods; a firm has relationships with customers, distributors, suppliers and their customers, and the relationships are both stable and changing (Johanson and Mattsson, 1987). Coordination between individuals is


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not achieved through an organised hierarchy or through a price mechanism, but through the various interactions between the individuals in the network. Networks also have a potential negative side, as they may lock firms relationships that are unproductive, or relationships that place constraints on other potential relationships with other viable firms, therefore, it is important to recognise that although networks can create competitive advantages, they can also be restrictive (Gulati et al., 2000). In terms of the resource-based view of the firm, networks can act as an important source for the creation of unique resources, as much value can reside in a firm’s network of relationships (Gulati et al., 2000). There are different elements that determine the shape a given network will take according to Gulati et al. (2000). Firstly, industry structure will influence the shape networks will take, the degree of competition and the barriers to entry. Secondly, the positioning within an industry, including the presence of strategic groups and barriers to mobility has an influence. Thirdly, a firm’s inimitable resources and capabilities may make others dependant on it. Other factors include the costs of contracting between individuals and with coordinating the network, and finally the dynamic and path dependant constraints and benefits (Gulati et al., 2000). Firms with a shortage of resources may be able to use other actors within their network to access the resources such as offshore production facilities or access to different distribution channels (Sadler and Chetty, 2000).

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The New Zealand seafood industry

The New Zealand seafood industry exports over a billion dollars worth of product annually, making it the fourth largest export industry in the country. The industry operates in and beyond the world’s fourth largest exclusive economic zone and contributes 1% of the world’s production of seafood. Nelson is the largest fishing port in Australasia with 5,440 full time jobs and makes a contribution to the Nelson economy of $382 million directly and indirectly, according to the webpage of the Nelson City Council. Major commercial players within the industry located in Nelson include Sealord Group Ltd., Talley’s – Amaltal and NZ King Salmon. There are also numerous smaller companies and support industries. The seafood industry is heavily reliant on the international market with up to 90% of product exported. The industry is particularly vulnerable to fluctuations in the New Zealand dollar, hovering around 70 cents US in 2010, after a recent drop to 50 cents. Increasing fuel costs also affect the success of the industry, as this is a large input cost. Free trade discussions with other countries are also closely followed, as many other governments worldwide subsidise their fishing industries, making it more difficult for the New Zealand industry to compete overseas. The seafood industry in New Zealand can be broadly segmented into two groups; wild fisheries and aquaculture, as some seafood is extracted from the wild, and other is bred in marine farms. Currently most of the revenue comes from wild fisheries, but the proportion from aquaculture is rapidly increasing. In terms of the wild fisheries, the industry can be further segmented according to where the fishing takes place, namely inshore, mid and deep water fisheries. The largest wild fishery by species is hoki. Aquaculture in New Zealand has increased rapidly since 1980 but has slowed recently

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due to legislative changes and increased amount of consents needed for a marine farm permit. In New Zealand, aquaculture is focused mainly on mussels and salmon. The seafood industry is highly regulated in New Zealand in comparison to other primary produce industries. The industry makes significant levy contributions to assist with the management of the fisheries, which is rarely seen in other fisheries or primary product industries. The government plays an important role of managing the fisheries through policies and legislation, and therefore influencing the government becomes a key role of all groups who have an interest in the industry. Such influence depends somewhat on the overall perception of the industry. The government controls the fisheries through the Quota Management System (QMS). This system was internationally the first of its kind and replaced the input control system that previously governed the industry. The QMS is based on a property right system to create an incentive for the industry to manage the fish stocks in a sustainable manner. Many of the main species of fish are managed by independent management companies, who manage the species and carry out research on behalf of the quota holders. Most of the major fishing companies have a portfolio of fish species quota. The species management companies ensure that specific attention is paid to each species. This system was the first of its kind and has meant that New Zealand has been able to secure a high quality and environmentally friendly perception overseas, given the amount of over fishing that has been widespread over the entire of the northern hemisphere. New Zealand’s clean green image also helps to create demand, as this is reflected in pristine, pollution-free, waters, key to produce high quality seafood. The New Zealand seafood industry faces a negative public perception within New Zealand, yet a positive perception overseas.

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Methodology

The method used for this study was a case study analysis of two major firms in the New Zealand seafood industry. The industry is dominated by a few key players and high capital intensity, therefore creating large barriers to entry. Our study focuses on two firms, which together employ over 50% of the employees in the industry. Each firm is also unique in their ownership and organisational structure, therefore, creating an opportunity to compare the two firms in terms of their internationalisation. x

Firm A Talley’s frozen foods – privately-owned family business: 1,000 full time employees, 85% offshore sales and 3% offshore production. Talley’s has a relatively flat hierarchy, with few levels between the four family directors and the processing employees. Talley’s owns some ships, however, is also supplied by many independent fishermen. Firm exports to Australia, the USA, Europe, Pacific Islands, Japan, Korea, Thailand, Taiwan and China.

x

Firm B Sealord Group – privately owned (two corporate block holders): 1,600 full time employees, 96% offshore sales and 15% offshore production. Sealord has a taller hierarchy than Talley’s, with more levels between the director and processing plant staff. The firm currently exports to over 50 countries worldwide, with their main business being in Europe, the USA, Australia, Japan and China. They have established international offices in the main distribution points, as well as established joint ventures in catching and production.


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x

Qualitative survey method: the survey involved asking the firm about organisational structure, ownership structure, degree of diversification and firms’ use of networking on the degree of internationalisation. The survey was initially given to an established contact within the firm, and then this was given to whom they thought was the most qualified employee to respond to this. A company director and the general manager of marketing filled out the surveys (see Appendix for a copy of the survey). Follow up questions were also asked via email.

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Hypotheses

Taken from the literature the following hypotheses will be examined in this research. It is predicted that Firm A, a family-owned business, will have a lesser degree of internationalisation and face larger resource constraints than Firm B, which is owned by corporate block holders. The nature of the industry suggests that firms have to internationalise to create profit and growth; therefore, the family business will be established internationally but to a lesser degree than Firm B. H1: Ownership type will influence the degree of internationalisation. Firm B will have a greater degree of Internationalisation than Firm A. It is predicted that the level of internationalisation will impact the structure of the firm, particularly in regard to how they manage their exports. Given that these firms rely on international sales for survival, it is predicted that they have changed organisational structure to accompany this. H2: The degree of internationalisation will affect the structure of the firms. Both firms in this study operate in an industry that requires heavy capital investment – this would suggest a greater diffusion of ownership. However, the industry is very noisy and, therefore, tighter control may be required. Seafood industries are one of the most regulated industries in New Zealand; therefore, this literature suggests this leads to more diffused ownership. From this we would expect that the greater capital investment and nature of the regulated industry would override the noisiness and, therefore, predicted from this literature that there would be a greater diffuseness of ownership for both firms. H3: Both firms will have diffused ownership – given the capital intensity of the industry, and the regulated nature of the industry overriding the noisiness of the environment. It is predicted that Firm A, a family-owned business, where the managers are the owners, and being a privately-owned company, they would more likely be risk adverse and have more diversification than Firm B given they are owned by corporate block holders, who will be more interested in maximising profit than protecting the earnings of the company. H4: Firm A will have more diversified investment than Firm B. Given the nature of the industry and the heavy reliance on exports for income and growth, both firms will actively use networks in establishing new relationships overseas. Given the different resource constraints, however, Firm A may rely on networks more heavily than Firm B, given fewer resources to aggressively pursue new markets. H5: The two firms will utilise networks in different ways.

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Findings

H1: Supported x

Firm B has a greater degree of internationalisation than Firm A.

x

Firm A manages exports from the domestic market in the same department.

x

Greatest threat to growth – financial restrictions.

Firm B manages exports from offices/JV all over the world.

Greatest threat to growth – lack of supply to meet demand.

H2: Supported x

Firm A has a less degree of internationalisation and, therefore, less complicated firm structure.

H3: Not supported x

Both firms have a high level of concentration despite high capital requirements and high regulation in the industry.

x

Perhaps noise in the environment has a larger impact on ownership concentration than capital and regulation.

H4: Supported x

Firm A has a large portfolio of unrelated businesses.

x

Firm B has diversified interests; however, these are all related to the seafood industry.

H5: Supported x

Firm A relies on informal networking to a greater extent than Firm B.

x

Firm B is very aggressive in entering new markets – setting up offices and actively expanding customers.

x

Firm A has informal relationships with buyers. They seek to enter new markets through existing contacts.

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Discussion

Comparing both firms reveals that ownership structure did have a significant impact on the degree of internationalisation. This is in accordance with the literature on family ownership, and the decreased ability to source financial resources that may be required to enter foreign markets. Sealord has a much larger presence overseas, with established joint ventures and many international offices. Fifteen percent of its production is sourced offshore, in comparison to Talley’s 3%. The main obstacle facing Sealord (in terms of internationalisation) is getting a sufficient supply to bring to the market, which has been the main incentives in setting up international alliances, to source alternative seafood supply. Talley’s main obstacle is financial in nature and includes the ability to access


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markets at the price level given New Zealand’s currency and competition from other suppliers. Demand for seafood far exceeds supply, and this fact has dictated to where the supply goes. Along with the clean green image that New Zealand enjoys, there is much demand for New Zealand seafood, and this has meant that relationships have been established because demand for New Zealand’s product, more so than New Zealand creating the demand. Therefore, the pattern of countries to which New Zealand exports most of its supply is dictated more from demand than those psychically similar, and these are largely more affluent countries that demand high quality seafood. The nature of the seafood industry in New Zealand has meant that it was not a decision to enter foreign markets, but a necessity, due to the small domestic market, and the capital intensity of the industry, meaning that to reach any sort of economies of scale meant producing more than the domestic market demanded. Therefore, the ownership structure has not influenced the decision to internationalise, just the rate at which each company has gone through the process of entering foreign markets. Both firms have a different complexity of firm structure, and this was predicted given the differing degree of internationalisation between the two firms. Sealord has a larger degree of internationalisation and manages its exports through the multiple international offices spread throughout the world in its major markets. The main site in Nelson there is a separate marketing department in which they coordinate with the offices. Talley’s exports are handled within their domestic site, with a team dedicated to exports. This is a reflection of the firms differing degree of internationalisation, as supported in the literature, as firms increase their international presence, the firm structure becomes more complex to accommodate the increased complication involved in serving a foreign market. According to research by Demsetz and Lehn (1985), the degree to which a firm’s ownership is concentrated is dependant on three factors. There are two factors that work towards creating a more diffused ownership concentration. Firstly, the value maximising size, which shows that the larger the firms capital resources, the increasing costs of capital encourage firms to diffuse ownership. Secondly, the degree of regulation, which shows that the higher regulated the firm in an industry, the more likely to have diffuse ownership due to lack of control regardless, therefore, decreased incentive to remain highly concentrated. The third mechanism, which works to keep firms increase firms ownership concentration, is the uncertainty in the environment. Demsetz and Lehn (1985) argue that the more ‘noisy’ the environment, the more incentive firms have to keep tighter control over the firm to influence decisions more effectively when there is an unexpected situation. From this research, both the firms operate in an industry where there is a large value maximising size, the capital investment required to operate in the seafood industry is massive, which is why there is only a few large firms, as the capital required for investment acts as a large barrier to entry. Given that the firms both operate in the most regulated industry in New Zealand, and throughout most of the world, it was hypothesised that these two factors would outweigh the effect the uncertainty has on the environment, leading to more diffused ownership. However, these two firms retain very high concentration of ownership, Talley’s being a family business, and Sealord’s being owned by two corporate block holders. Therefore, the influence of uncertainty in the environment has an overwhelming influence over the factors to concentrate ownership. This is not surprising given the high uncertainty

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involved within the industry. There is never any confidence in production numbers, as catch rates fluctuate greatly between years; the seasonal nature of the industry also adds more uncertainty. Aquaculture has added some stability to the shellfish industry and farmed salmon, but there is still uncertainty because of the vulnerability of farms from exposure to the elements. In terms of diversification, the hypotheses were correct. Research suggested that family-owned companies, given the owners are the managers, would be more risk adverse. Talley’s has diversified into unrelated businesses, such as Ice cream and frozen vegetables, as well as businesses relating directly to their initial seafood interests, including the recent acquirement of Amatal Fisheries. Sealord, however, is owned by corporate block holders, and in line with the literature, has only related diversification, in the establishment of overseas joint ventures and purchasing of other seafood firms. Corporate block holders are more focused on profit generation and are less risk adverse, because the consequence to them if the core business goes bust is selling their share of the business at little risk to themselves, therefore, more interested in creating profit through efficiencies (Bergh, 1995). Thus, this case study adds evidence to the current literature. In terms of networking, as predicted, both firm utilise networking in a different degree. Sealord has a more aggressive approach to internationalisation. They establish joint ventures or marketing offices and task them with expanding customer bases and supply sources. They have established offices throughout the world and it is through these that new markets are developed and sourced. Talley’s, on the other hand, utilises more informal channels internationally. They have established buyers in their current markets and stock is bought outright by the buyer and there is no stock on consignment, however, the majority are repeat customers. They do not often look for new customers in an existing market as they claim this to be competing with existing customers and may be price destructive. In terms of looking to enter new markets, as opposed to Sealord’s more aggressive approach, they utilise their networking skills to develop new relationships through existing relationships. For example, their existing relationship, in supplying fish to McDonald’s, has led to several different markets through this association. Talley’s describes their technique for entering new markets as ‘very much relationship driven’. Both firms use networking in establishing relationships internationally, however, the importance for networking is markedly higher for Talley’s given the increased financial constraints compared to Sealord, and they rely on it to a much greater extent.

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Conclusion

Overall, the literature matches findings of this study, aside from the level of ownership concentration, as this was contradicted the theory posited by Demsetz and Lehn (1985). The results from this study could conclude that the uncertainty in the environment plays a larger role in the determination of ownership concentration, or further elements need to be investigated that determine the level of concentration within firms. There appears to be significant differences between the two firms in terms of their international business, and many of these differences could have arisen from the firms’ structure and difference in ownership. It seems that industry characteristics have had important implications for the internationalisation of both firms, suggesting that this was the critical element leading to internationalisation and may have shaped the level of


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ownership concentration. From here, the resource constraints created by the ownership structure has influenced the rate at which the firms have internationalised and also the level to which each relies on networking to different degrees. In the seafood industry, the large international demand for the product has shaped the route of the supply in the world as opposed to the firm’s individual decisions. Finally, the degree of internationalisation impacts on firms structure, in that as a firm increases in complexity due to increased foreign markets, the firms structure needs to adjust to manage the complexity. These relationships are shown in a conceptual diagram (see Exhibit 1). Exhibit 1 Conceptual diagram

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Future research could set to reinvestigate the variables that influence ownership concentration given these did not hold entirely true for this study, and investigation into the variables relative weighting could provide some clues. More research into the role of the industry would provide valuable insight, as in this case it is a large influencing factor in the decision to internationalise. Also the nature of the domestic market has shown to be important. Many New Zealand firms have no choice but to internationalise to gain economies of scale – and internationalise based solely on that reason. The role of international demand for a commodity has also shown to be relatively important, and has heavily shaped the path of the New Zealand seafood industry. This was not particularly examined in this research but just as a side note by the researchers; further investigation into this matter may be useful.

Acknowledgement The authors appreciate the feedback from three very helpful reviewers.

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Appendix Survey 1

What countries does (firm) currently do business in? And what is the nature of the business relationship?

2

How was each of these relationships established? Including who initiated the relationship and why it was established?

3

Why were each of these countries selected to establish relationships?

4

What was the predominant reason that (firm) looked into internationalising?

5

How would you describe the process you take in establishing overseas connections?

6

Is (firm) considering entering any new foreign markets?

7

If so, which ones? And how will (firm) go about establishing relationships in that country?

8

How do (firm) manage exports?

9

a

Are they managed as part of the domestic business (e.g. no special organisational arrangement)?

b

Managed within a domestic-based export unit?

c

Managed by an overseas agent?

d

Managed by company employees based in export markets?

e

Managed by an overseas subsidiary and/or joint venture?

f

Or please explain or elaborate … Managed through our own international offices or joint ventures?

What is the biggest obstacle when venturing into new markets?

10 What is the key objective in entering foreign markets? 11 What percentage of (firm) revenue is earned from overseas markets? 12 What percentage of (firm) production is offshore? 13 Do you offer stock options to your top management team?