Foreign Relations

Bonding Issues

There may be stronger bonds among family business owners from different countries, but in most cases, those bonds don't form automatically. "That bond is not immediate," confirms Ross Nager, executive director of the Arthur Andersen Center for Family Business in Houston. "People of different cultural backgrounds don't trust each other just because they're members of family businesses."

One possible roadblock to finding common ground lies in the fact that the largest businesses in many countries are family businesses--the equivalent of our Fortune 500, says Ernesto Poza, an international family business consultant and professor at Case Western Reserve University in Cleveland. "Given their size, they might be more sophisticated than midsized family businesses here," Poza says. "They have a lot of political clout in their own countries, and they might not be willing to spend their political capital unless they see the collaboration as one that's low risk with the possibility of a high return."

For midsized U.S. family firms, the complexity of doing business abroad puts another brake on forming alliances. "American family businesses look across the seas and have high expectations because of the vast market potential and [other countries'] desire for U.S. products and services," says Poza. But, he adds, with that potential comes a host of challenges--including everything from import/export laws and tax implications to unfamiliar distribution channels and cultural differences. "It's not that the [international] rules and customs are necessarily tougher than ours; it's just that they're different and have to be learned," he says.

Perhaps that's why U.S. family businesses haven't plunged headlong into the international marketplace--even with the necessary technology available at reasonable prices. Consider these statistics, culled from the Arthur Andersen/Mass Mutual Family Business Survey conducted last year: Just a modest percentage of U.S. family businesses generate international sales. Only 7.5 percent of businesses collect 11 percent to 50 percent of their revenue from business overseas, while just 1.6 percent generate more than 50 percent of their revenue from sources abroad. A majority of family firms (67.7 percent) don't generate any international sales.

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This article was originally published in the August 1998 print edition of Entrepreneur with the headline: Foreign Relations.

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