The agency-based theoretical premise that nonfamily CEOs are risk-averse has been extensively researched, but the relationship between nonfamily CEOs and family firms’ internationalization has yielded mixed results. We address this issue by examining the origin of nonfamily CEOs, that is, if they are internally promoted or externally recruited. We find that internally promoted nonfamily CEOs have stronger psychological ownership with family firms, resulting in a lower agency problem of risk-aversion. We also find that the strength of psychological ownership is influenced by governance mechanisms, such as managerial ownership incentives and family board monitoring.
