Abstract
This paper explores the impact of family management on performance in relation to the firm’s diversification strategy. Using a dataset of 292 German firms from 2000 to 2009 we find that family members are better placed to manage focused rather than diversified firms, as they may not have the expertise, skills and capabilities to manage the complexity of the latter. This relationship is moderated by the level of international diversification. Managers face similar challenges in product and international diversification. Hence higher levels of international diversification allow family managers of diversified firms to develop and leverage capabilities which reduce their negative impact on performance. In focused firms, in contrast, internationalization introduces new challenges without generating the same benefits and reduces the positive impact of family managers on performance.