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Look who I know! How family firms seek to overcome their “outsider” status as they expand internationally

Published 19 February 2024 in Family business • 8 min read

Signaling affiliation with well-known members of the global elite could be a useful way to smooth the international expansion of family firms, a new paper suggests.

“Who the hell are YTL?”

This was the headline in Britain’s Daily Telegraph newspaper after Malaysian infrastructure conglomerate YTL successfully won a bidding war to take control of Wessex Water for £1.2bn ($1.47bn) in 2002.

The headline – and the unfounded allegations of bribery in the bidding process – underscore how firms perceived as outsiders face significant stigma when trying to gain a foothold internationally. Lacking status in the eyes of a new audience, they may be viewed with suspicion, particularly if they are involved in something as economically and socially sensitive as an infrastructure project, where the cost of things going wrong is high.

Many scholars regard organizational status as an intangible asset. Yet what has become clear from previous studies is that firms often struggle to transfer their high domestic status across borders, and this is especially true for family firms from emerging markets trying to gain a foothold in a developed market where they are perceived as a “nobody from a faraway land”. This is because status often depends on how visible and familiar an organization is to the target audience.

So how can family businesses entering a new market accumulate status? And are there any ways they can overcome the liability of being labeled a low-class outsider? A prime example is Malaysian firm YTL, which has grown into a highly trusted multinational property and utility conglomerate.

With my colleague Michael Carney from Concordia University, we explored how, when audiences have no information about a newcomer, they assign status based on with whom the newcomer affiliates. Could this also apply to family businesses from emerging markets, and, if so, could this insight be used by family businesses to facilitate their internationalization?We analyzed the firm’s annual reports from 1986 to 2019 to examine how the family conglomerate was representing itself. Specifically, we looked at the photos in these reports to analyze which people YTL leaders affiliated with over time. We suspected these choices might serve a purpose: signaling who your friends are to provide status clues to new audiences. After all, if people don’t know who you are, they look at who you know.

Founded in 1955 by Yeoh Tiong Lay, whose initials gave the firm its name, YTL started as a construction company before diversifying into real estate development, hotel operations, and utilities, becoming a well-known domestic player. From 1990, it started to expand internationally, first in emerging markets and later in developed countries.

During the 34 years of annual reports available for analysis, we found a total of 452 images depicting 520 unique non-YTL individuals and 56 YTL representatives. We analyzed the individuals’ names and positions depicted in the photos and distinguished them into three broad categories: business, government, and civil society. Second, we coded their nationality into three categories: home country, host country, and other countries. Third, we studied the photo’s intended narrative by considering details such as context, venue, dress code, and spatial clues.

Common wisdom is that the only way to become an insider in an overseas market is to create your business networks there, which takes a lot of time and effort. From our findings, however, we discovered that this is not the only approach. We outline three status-signaling mechanisms that are far less resource intensive.

1. Bypass mechanism (non-business connections in the host country)

This is where newcomers in a host country circumvent business ties by projecting their social affiliations with high-status actors in that new market, such as political and bureaucratic actors.

In the case of YTL, it included photographs of YTL representatives meeting with heads of state or senior political figures in Africa and other Commonwealth countries during its first phase of internationalism. As it sought inroads into more developed markets, such as the UK, Singapore, and Australia, photographs portrayed YTL representatives with the heads of state from these countries such as Queen Elizabeth as well as former British prime minister John Major and Ong Teng Cheong, the former President of Singapore. Notably, each of these photos was taken in Malaysia.

Given that it takes a lot of resources to build up strong business networks overseas, we believe this approach could represent an affordable quick fix for firms to leapfrog some of the efforts needed to establish business ties in the host country. Bypassing business connections and projecting a tie with the head of state may be a convenient way to signal trust to host country audiences.

2. Allusion mechanism (non-business connections with global elites)

This is where the newcomer projects non-business affiliations with high-status actors situated in what some sociologists call “world society” (i.e., global elites). Here, too, the high-status actors in the photos were not business connections, but rather celebrities and royalty.

We call this allusion because the behavior provides a reference or insinuation that one has a social tie to someone well-known, even if these actors have little direct relevance to the business setting or host country. YTL displayed affiliations to high-status individuals like Michael Schuhmacher. This pattern may have helped YTL to fashion itself as “world-class”, thereby reducing perceptions of YTL as a low-status newcomer from a developing country.

In the case of YTL, when it entered the UK, it organized concerts with famous opera stars including Luciano Pavarotti, Jose Carreras, and Placido Domingo. We believe the allusion-signaling mechanism may be valuable in a context where the newcomer is entirely unknown and lacks the time and experience to build up host country insider status in a conventional manner. By associating with globally known actors, a family business can reach beyond the host country and project trust by showing family leaders’ global high-status friends.

3. Aspiration mechanism (connections to global business elites)

This is where newcomers seek to associate with globally prominent high-status business actors who are not from the host country but are likely to be known by host country audiences.

For instance, YTL sought to benefit from positive status spillovers by visualizing its partnership with Germany’s Siemens, a technology expert in power and utilities, at a time when YTL sought to invest in utilities in Asian markets.

Status hierarchies in a host country can be difficult to penetrate, as industry peers may be reluctant to be seen with a low-status newcomer. This problem may be minimized if you can show affiliations with actors from adjacent business categories. For example, Francis Yeoh, who took over YTL’s Chairmanship from his father, was shown dining with high-status financiers, such as the Chairmen/CEOs of Goldman Sachs and Standard Chartered. One striking example was a photo of Yeoh and his son dining with the Chairman of UBS Marcel Ospel and his wife at their private residence in the Swiss town of Klosters, with the photo signaling an intimate familial setting with informal dress codes. Photos like this one have little apparent connection to YTL’s business operations, so we interpret the inclusion of such visuals in annual reports as purposeful status signals.

“Family firm owners often aspire to be prominent players in world society, and the overlap between family business and owner identity enhances the credibility of status signaling.”

It also helped that YTL had acquired a collection of luxurious properties like the Mûse Hotel Deluxe in St. Tropez, France, which provided a suitable “luxury” backdrop to some of the photos, underlining its sophistication and sending signals about YTL’s embedding in a progressive global elite.

We reason that lacking strong business ties in a host market is less of a liability if a firm can visually demonstrate embeddedness in the “superior” fabric of global elite business. The worldwide recognition of these business figures can be borrowed to project the successful accumulation of status toward new audiences.

Over time, YTL’s annual reports increasingly highlight its global business affiliations, reflecting a desire to be seen as part of the upper echelon of the global business world. This mirrors the goal of aligning with influential individuals and organizations celebrated for their vision, innovation, and entrepreneurship in world society.

An alternative route for family-owned businesses?

It’s important to note that our research is archival and did not measure how effective the signaling strategy was in influencing the audience’s perceptions of YTL’s status. We merely interpret the signal sending as seen in annual reports (which is only one channel of communication, albeit one that is fully under the control of the company). We do not suggest our analysis fully captures the scope of YTL’s social networks. Yet it reveals an alternative route for family firms that are hoping to polish their global credentials as they expand internationally. Contrary to the conventional wisdom that firms need to invest in host country networking to become insiders the YTL annual reports make clear that you can emphasize different overseas and global affiliations to influence new audiences of your desired status positioning. Thus, the cumbersome and often costly route of building close ties with business actors in all overseas markets may not always be necessary.

Family owners, especially in eponymous firms, seem well-positioned to make use of the status-signaling mechanisms we found in this study. They are typically motivated to enhance their reputation, even more so when they identify closely with their family business. Elevating the family’s status identity is a goal that may even take precedence over economic gains. Family firm owners often aspire to be prominent players in world society, and the overlap between family business and owner identity enhances the credibility of status signaling. Owner-CEOs’ extended tenures also ensure that accumulated status through elite networks persists over time. Thus, we believe that family firms may be better at unlocking the powerful benefits of signaling their high status by being seen as affiliated with world elites.

Audiences are typically suspicious of newcomers from faraway places, but family firms can mitigate this by visualizing their powerful elite connections to win over the skeptical audience.

This article is based on the paper “See who I know! Addressing the liabilities of outsidership through status signaling” by Michael Carney and Marleen Dieleman, which was first published in the Journal of International Business Studies


Marleen Dieleman

Peter Lorange Family Business Professor

Marleen Dieleman holds the Peter Lorange Chair in Family Business. She is an expert on the challenges faced by emerging market enterprises in their strategic trajectories. Her research focuses on the governance, strategy, internationalization, innovation, and transformation of business families in emerging markets, and also on emerging market state-owned enterprises and the interaction between these companies and their governments. At IMD, she directs the Future-Proofing your Business Family program.


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