Copyright 2004 Singapore Press Holdings Limited The Business Times Singapore
October 13, 2004 Wednesday
LENGTH: 387 words
HEADLINE: Family-linked enterprises under the spotlight
BYLINE: Nande Khin
BODY: FAMILY-LINKED enterprises (FLEs) should balance equity share, form, and structure of ownership in foreign affiliates when they internationalise, the Global Entrepolis@Singapore (GES) heard yesterday.
'Depending on the industry, it may not be ideal for these FLEs to maintain 100 per cent ownership in their overseas operations. For example, if you are manufacturing for the local market, a joint venture with a local partner may be better because the local partner may open up more channels of distribution and so on,' said Henry Yeung, associate professor of economic geography with the National University of Singapore. He was speaking at the Family-linked Enterprises Summit.
It is, therefore, also important for FLEs to identify different ways of establishing foreign operations and to get non-family members to deal with day-to-day management, 'since there are only a certain number of family members you can rely on'.
Diversifying the sources of finance beyond the family pool is also becoming increasingly important. Mr Yeung said that the largest FLEs in the region - Singapore, Malaysia, Hong Kong, Taiwan, and South Korea - have international operations that go 'beyond the wealth of the family (which heads the enterprise)'.
So, to expand successfully internationally, FLEs need to search for outside capital. 'And such a development will have ramifications for family control and ownership, as well as corporate governance. There will need to be more transparency.'
These insights shared by Mr Yeung are based on the results of his recent survey of about 200 FLEs from the region - 54 of which are from Singapore.
The survey also showed that capitalising on network connections is an important element in the internationalisation efforts of FLEs. While there is a heavy reliance on business connections, family networks have been declining in significance, said Mr Yeung. The problems faced by FLEs when they expand beyond the home country also tend to differ according to the host regions of their expansion operations.
While host government regulations in the form of opaque and restrictive rules are the bugbears of FLEs when expanding in Asia, lack of personal experience and insufficient financial assets are the biggest challenges faced by FLEs seeking to expand to Europe and the US.