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Family Business Growth Around the World
Abstract
Growth is important for the long-term success of a business. Regrettably, the impact of family influence on firm growth is largely neglected. We examine whether family firms have a higher growth rate than their non-family counterparts. Based on a large sample of firms across 43 countries over a 10-year period, we show that family firms on average have higher growth rates than non-family firms, and this positive effect is greater for family firms operating in strong national institutional environments which are less corrupt, more democratic, more subject to rule of law, and have effective government policies. We also find that the positive effect of family influence on firm growth varies significantly across different types of family firms and different business cycles. These findings show that family control has an economically significant impact on growth rates and important implications for both family firm theory and practice.
Supplementary resource (1)
... Prior studies recognize that the process of establishing the performance conditions geared toward the development of the family firm is very much influenced by how these types of firms are governed and managed (Basco, 2013;Miroshnychenko et al., 2021). Moreover, a growing body of family firm scholarship suggests that the direction of travel of family firms rests on the family members who are charged with overseeing day-to-day operations (Hansen & Block, 2020;Martínez-Alonso et al., 2022). ...
... Moreover, a growing body of family firm scholarship suggests that the direction of travel of family firms rests on the family members who are charged with overseeing day-to-day operations (Hansen & Block, 2020;Martínez-Alonso et al., 2022). Their obligation to the family cause, which is often passed from generation to generation, is known to induce a strong sense of commitment to the family business (Basly & Saunier, 2020;Chrisman et al., 2012;Handler, 1994;Miroshnychenko et al., 2021;Zellweger et al., 2012). ...
... Within this research stream, there is recognition that family members who control their family firms draw on each others' strengths to create favorable performance conditions necessary and sufficient for the firm to develop (Carney et al., 2015;Fang et al., 2022;Patel & Cooper, 2014). In such a scenario, their family ties are considered their source of strength (Milton, 2008;Miroshnychenko et al., 2021). Arregle et al. (2007) suggest that the relationships family members establish enable an ideal environment for generating critical resources necessary to develop their firm. ...
The diversity of business philosophies and practices across family firms suggests their performance is influenced by factors that can be hard to isolate or understand. Based on 215 observations of Vietnamese firms operating in Asia, Australia, Europe, and North America, we use fuzzy-set qualitative comparative analysis techniques to discern the configurational relationships underlying their performance pathways. Of the 64 possible configurations, three pathways with a high consistency (95 percent) for high performance are distinguishable. These three pathways are characterized by varying degrees of family labor involvement, social network-based labor sourcing, and capital contributions from partners. They reveal how cultural factors, spiritual beliefs and practices, as well as the strength of firm networks influence the way these firms perform. Taken together, these insights offer valuable contributions to the theoretical understanding of family firm performance with practical and policy relevance.
... Additionally, we establish that the effect of family ownership on a firm's financial strength does not occur in isolation, as it is also affected by several other factors, such as an organization's scope of operations and the characteristics of its key players. In other words, we anticipate that the financial strength of all family businesses will not be the same, as it is also impacted by factors like whether they operate only in one country or in several countries, whether they focus their attention on a single industry or on several and whether they have only highly educated managers or they have managers of varied educational levels Miroshnychenko et al., 2021). ...
... Although we did not formally hypothesize such effects, this is not surprising given the maximization of the long-term orientation shown by these firms (Amato et al., 2023;Cathcart et al., 2020;Stein, 1988). In other words, Model 3 indicates that despite the (individual effect of the) context in which a firm operates or the characteristics of its TMT, family firms' inherent particularities overcome any other circumstances when explaining variations in firms' financial performance (Minichilli et al., 2010;Miroshnychenko et al., 2021). ...
... In this case, the lack of differences depicted among family firms with a high versus low TMT average age (see the right part of Figure 4) supports this assumption. Therefore, it seems that (again) family firms' inherent particularities and SEW overcomes and blurs any other characteristic present in the firm or Journal of Family Business Management its managers when explaining variations in firms' financial performance (Minichilli et al., 2010;Miroshnychenko et al., 2021). ...
Purpose
In this paper we propose to study the differences among family and non-family-firms in relation to its financial strength, and therefore its potential position to resist in front of financial crisis and receive financial support or conditions by public or private institutions.
Design/methodology/approach
We used multiple hierarchical regressions on a sample of 137 Spanish medium-sized firms (SMEs).
Findings
We observe that the perspectives and idiosyncratic characteristics of family-firms (strongly influenced by their socioemotional wealth) will affect the way these companies invest and operate in the market, which would be more related to efficiency because of their higher willingness to continue the legacy of the business and their weak risk-bearing attributes.
Research limitations/implications
Our study adopts a measure of familiness with a dummy variable, and not as a continuous variable as proposed by recent research. Therefore, our results although relevant and significant for the family firm literature, must be viewed carefully. Additional research could also retest some prior studies to depict differences caused by “real” family firm involvement.
Practical implications
Under a non-munificent environment, the financial strength maintained by firms will be highly relevant since this context could likely stress and influence their immediate future and viability, overcoming and blurring any other characteristic present in the firm or its managers.
Originality/value
This paper contributes to the family firm literature by offering insights into the nuanced dynamics between family and non-family firms during economic downturns, specifically examining their financial strength when different strategic options are pursued and when firms are managed by different type of managers.
... (V) Family representation on the nominating committee is a continuous variable measuring the share of nominating committee members who are family members in a given year (Anderson and Reeb, 2004). We standardise and winsorise at the 1% level at both tails to reduce the influence of extreme observations, as done in prior research (Miroshnychenko et al., 2021). (VI) Family name equals firm name is a dichotomous variable taking a value of 1 if the family name is part of the firm name (Deephouse and Jaskiewicz, 2013). ...
... Next, we identified an appropriate sample, the S&P 500 index, offering high-quality data that allows comparability with previous studies across companies and time (e.g., Randolph et al., 2018). To draw inferences regarding FFN variation over multiple business cycles (Miroshnychenko et al., 2021) and to avoid survivorship bias among the selected firms (Anderson and Reeb, 2003), we collected data for every firm that was at least temporarily listed on the S&P 500 during the years 2005-2018 (i.e., 9,365 firm-year D. Bendig et al. observations). We hand-collect ownership data and information on family members via the SEC's proxy statements (DEF 14A) as well as publicly available sources such as corporate histories on firm websites or news coverage. ...
... Five of the six variables were significant at the 1% level, while one indicator (dual-class share structure) was significant at the 5% level. Furthermore, we conducted Wald Chi 2 tests to validate the significance of the three variables per factor and ensure that none should be removed (Chatterjee and Hambrick, 2007;Miroshnychenko et al., 2021). Both Wald Chi 2 tests were significant at the 1% level, justifying the inclusion of all six proposed variables in our FFN scale. ...
Family firm behaviour can be a potential root of innovation in family firms. Building on the theoretical perspectives of socioemotional wealth and narcissistic organisational identification, we introduce a novel concept and new measure for family firm narcissism (FFN). We suggest that FFN influences family firms’ innovation orientation (i.e., strategic innovativeness) and realised innovation outcome (i.e., digital inventiveness). Additionally, we assume that industry IT intensity, as an indicator of environmental pressure regarding digital transformation, moderates these relationships. To test the hypotheses, we investigated a longitudinal cross-industry sample, comprising 1,302 firm-year observations of S&P 500 family firms and analysed it with regression models. The results indicate that FFN is positively related to strategic innovativeness and negatively related to digital inventiveness. We further find that industry IT spending intensity amplifies both linkages. Our study contributes to the discussion on the family innovation agenda by (1) introducing the new concept and measure for FFN and (2) underlining its controversial impact and effectiveness on two central manifestations of innovation under the boundary conditions of digital transformation.
... The family firms in the NRG Metrics Family Firms Dataset are identified as such using definitions based on family ownership and board involvement found in most cited papers (e.g., Miller et al., 2007;Villalonga & Amit, 2006). NRG Metrics's data has been used in recent studies on family firms (Davila et al., 2023;Gómez-Mejía et al., 2023;Miroshnychenko et al., 2021Miroshnychenko et al., , 2023Pinelli et al., 2023) and family CVC in particular (Duran & Mingo, 2022). Through this approach, we were able to identify 91 different family corporate venture capitalists. ...
... The key dependent variable in our analysis is whether a family corporate venture capitalist participated in a syndicated investment. Family CVC is a binary variable that equals 1 for CVC investors included in the NRG Metrics Family Firms Dataset and 0 otherwise (Duran & Mingo, 2022;Gómez-Mejía et al., 2023;Miroshnychenko et al., 2021). We conducted matching based on the International Securities Identification Numbers (ISINs) of the investors retrieved from the London Stock Exchange Group database and the family firms in the NRG Metrics Family Firms Dataset. ...
... We also consider the total disclosed sum of equity and debt in the deal, given that family corporate venture capitalists seem to prefer deals of larger size (Duran & Mingo, 2022). To account for deals that took place in a year affected by an economic downturn-such as the financial crisis years 2007 and 2008 or the COVID-19 pandemic years 2020 and 2021-we included a dummy variable for these exceptional years, as the associated differing market conditions might have influenced those deals (Miroshnychenko et al., 2021). We also added a dummy for cross-border deals in which the venture and the corporate venture capitalist do not have the same home country, as these investments come with additional risks (Bertoni & Groh, 2014;Cumming et al., 2016). ...
... The coexistence of extended and restricted SEW shapes the distinct ethical orientation of family firms, leading to simultaneously socially responsible and irresponsible behaviors (Cruz et al., 2014;Davila et al., 2022). More specifically, whereas the pursuit of extended SEW priorities may align with the ESG objectives (Berrone et al., 2010;Cennamo et al., 2012;Miroshnychenko et al., 2021), the pursuit of restricted SEW priorities may clash with these goals and pose challenges for co-CEOs to implement them. For example, ESG initiatives aimed at equal treatment of employees and implementing more independent corporate governance structures may run counter to the nepotistic orientation of family firms and threaten the family's control over the business (Campopiano & De Massis, 2015;Chua et al., 2009;Federo et al., 2020;Lubatkin et al., 2005;Ponomareva & Ahlberg, 2016). ...
... Our empirical analysis corroborates Hasija et al.'s (2017) findings, indicating that the presence of co-CEOs is associated with higher ESG performance for nonfamily firms, and subsequently nuances it further, suggesting that this relationship is negative for family firms. In line with research on heterogeneity among family firms (Daspit et al., 2021;Marques et al., 2014;Miroshnychenko et al., 2021), we further show that this negative relationship is not universal across co-CEO constellations but emerges with the presence of family-induced cognitive diversity. Such diversity can be manifested through: (1) the presence of family and nonfamily co-CEOs in the leadership structure, and (2) the involvement of different generations of family co-CEOs in co-CEO structures containing only family co-CEOs. ...
While the prevailing perspective on executive leadership has emphasized the effectiveness of a unified command structure, family firms frequently adopt shared leadership structures, such as dyads, triads, or larger co-CEO constellations. Given the widespread use of such structures in family firms, it becomes imperative to understand how family involvement in the firm shapes the dynamics of co-CEO constellations and their implications for firm outcomes. Drawing upon the socioemotional wealth (SEW) perspective, we propose that the salience of extended SEW concerns increases the costs associated with a shared leadership structure. These elevated costs, in turn, result in adverse environmental, social, and governance (ESG) outcomes. Our empirical analysis, based on panel data from 76 Italian firms listed on the Milan Stock Exchange during 2003–2020, suggests that family firms employing a co-CEO structure tend to exhibit lower ESG performance, while a positive relationship emerges in nonfamily firms. We theorize and find empirical support that the negative effect for family firms stems from family-induced cognitive diversity, manifested via the inclusion of both family and nonfamily members or family members from different generations in the co-CEO constellation. Importantly, we identify a key mitigating factor: when one of the co-CEOs also holds the position of the board chair, the negative impact of the co-CEO structure on ESG performance is mitigated and even turns positive. These findings advance our understanding of how family involvement in the shared leadership structure shapes a firm’s ethical orientation, having important implications for the governance of family firms.
... In the U.S., where dispersed ownership is common, founding families were found to hold control in over 35% of S&P 500 and approximately 46% of all S&P 1500 firms (Chen et al., 2008). Looking more broadly, a more recent study reported that family firms represented around 33% of their sample of companies worldwide (Miroshnychenko et al., 2021). This prevalence has led scholars to study family firms extensively in recent years, leading to a prolonged debate on whether involvement by families either has positive or negative influences on firm value Dyer, 2018; van Essen et al., 2015). ...
... One direction for future studies is to extend our theory by incorporating different institutional and temporal contexts and outcomes. While our study of U.S. firms covers a meaningful portion of the global economy, research shows that cross-country institutional differences matter (Lohwasser et al., 2022;Miroshnychenko et al., 2021). Exploring whether the advantages of multi-founding family firms hold in different countries and how these dynamics change across various national and cultural contexts is a promising direction for future research. ...
Traditionally, family firm studies have assumed there is a single family behind the firm. We challenge this assumption and argue that the distinction between multi-founding family firms and single-founding family firms matters. We theorize that multi-founding family firms, based on mutual monitoring among families, have corporate governance advantages (less principal–agent and principal–principal problems) in terms of reduced founder CEO entrenchment and a lower probability of descendent leadership. Furthermore, we argue that multi-founding family firms exhibit higher levels of innovation and performance. Based on U.S. firms during 2001 to 2010, we find robust support for our arguments.
... The succession planning to device management strategies leads to the development of knowledge, talent and leadership skills and strengthens the overall capabilities of the organization, enabling adaption to the evolving market demands and technological advancements (Al Suwaidi et al., 2020;Upadhyaya & Kuknor, 2023). It can help in building trust, competence and credibility among the successors (Conway et al., 2019;Miroshnychenko et al., 2021). ...
The present study was done to evaluate the causal relationship amid the enablers of successful transition of management succession in family-owned business in South Asian Nations. This was an empirical study where owners of family-run business across various South Asian countries were interviewed. In this study we used the Decision-Making Trial and Evaluation Laboratory (DEMA-TEL) approach to examine the causal relationship among the twelve variables which were identified by examining the existing literature. The findings of the research demonstrated that formal education, well defined succession plan, early affiliation in business etc. formed the cause group and .shared vision for future, active involvement of the successor/s in the succession process, tacit knowledge transfer,building trust and credibility in successors and competence over gender etc.formed the effect group.
... We found the ROA to be less than 2% for the year 2020, which had been characterised by the COVID-19 pandemic. These results are in line with those obtained by Miroshnychenko et al. (2021), who evidenced that family firms have higher growth rates than other firms with different ownership structure. Our second assumption pertained to the moderating role played by independent directors on CSR investments in family firms and the value generation associated with such investments. ...
This paper presents a study on how corporate social responsibility (CSR) strategies create value amongst family and non-family firms. Additionally, in our study, we considered the moderating effect of independent directors on the relationship between CSR and firm value. Based on data drawn from companies operating in 61 countries over an 11-year period (i.e. from 2010 to 2020), our findings demonstrate that non-family firms derive market benefits from the governance improvements made by independent directors concerning CSR strategies. In contrast, the CSR strategies promoted within family firms are associated with lower firm value. However, this negative association is neutralised by the role played by independent directors, especially when the company is controlled by succeeding generations and not just by the founding one. These directors play a dissuasive role that leads family members to reassess their external socio-emotional preferences (reputation, image, etc.) in order to uphold the internal priorities of day-to-day decision-making. Our study has important implications for research and practice.
... FB, as an aspect of entrepreneurship, is still of great interest to researchers and industries worldwide. FBs have become the world's largest businesses, contributing significantly to their host country's economy (Miroshnychenko et al., 2020). ...
Purpose
This study investigates the influences of socioeconomic, familial and personal, cultural, organizational and technological factors on succession planning within family businesses (FBs). It aims to untangle the complex web these factors weave together, shedding light on their collective impact on the seamless leadership transition from generation to generation.
Design/methodology/approach
The theory of planned behavior (TPB) and systems theory (ST) were utilized in this study. The proposed framework is supported by a purposive quantitative design from 388 FBs in Jordan. The collected data were rigorously assessed using partial least squares-structural equation modeling and importance-performance map analysis.
Findings
Our results have shown that successor characteristics, such as age, gender, education and attitude toward the takeover, strongly affect effective succession planning. Other major factors include strong family relationships, the size of the business and modern digital integration. However, the religious belief variable did not seem to influence succession planning. The results conclude that technological savvy and online community mediating factors support smooth transitions.
Practical implications
Offering a treasure trove of insights, this study equips FB stakeholders with strategic keys to unlock the potential of digital and communal resources in succession planning. It champions a dual approach that venerates age-old family values while embracing the digital age, paving the way for transitions that are not just smooth but also forward-thinking and resilient.
Originality/value
This study harmonizes the TPB with ST to forge an innovative lens through which succession planning in FBs can be viewed. It underscores the burgeoning role of digital integration, communal networks and the potential of AI and GPTs in enriching traditional succession planning paradigms. Given that FBs are significant to the Jordanian economy, this area is under-researched as for many emerging nations.
... There is also a connection between entrepreneurship and family businesses, the most common form of business ownership (Fernandez, 2023). Family businesses are of interest because they have been shown to be crucial for employment and growth (Andersson et al., 2018;Miroshnychenko et al., 2021) and because they tend to be governed by philosophies that differ from those usually assumed in economic theory (Goel et al., 2014). Instead of profit maximization, priority is often given to control, long-term survival, and the possibility of transferring ownership to the next generation of family members. ...
... It encompasses any business arrangement where a set of relatives holds a dominant stake in the management of the organization (von Schlippe et al., 2021). Family businesses are considered a significant source of economic growth and development in today's world (Miroshnychenko et al., 2021;Chirapanda, 2020) and are often major employers, providing job opportunities for a significant portion of the population (Chahal and Sharma, 2020). In addition, family businesses collectively contribute a significant portion to the gross domestic product (GDP) of a nation (Memili et al., 2015). ...
Purpose
This study examines the influence of succession planning and the incumbents’ willingness to step aside on the sustainability of family businesses, a critical but often overlooked aspect that can determine the long-term viability of these enterprises. The study further explores the moderating effect of the incumbents’ willingness to step aside in the relationship between succession planning and sustainability.
Design/methodology/approach
The study employs a cross-sectional survey design. Data were collected through structured questionnaires from 190 successors of family businesses in Tanzania. Confirmatory factor analysis was used to validate the measurement model, and hypotheses were tested using the PROCESS macro.
Findings
The findings indicate that both succession planning and the incumbents’ willingness to step aside significantly enhance the sustainability of family businesses by ensuring a smooth and structured leadership transition, which minimizes disruptions and safeguards business continuity. Additionally, the incumbents’ willingness to step aside was found to be a significant moderator of the relationship between succession planning and sustainability, meaning that the influence of succession planning on sustainability is much stronger when the incumbents are fully supportive and cooperative during the transition. This implies that without the incumbents’ active participation, even well-designed succession plans may not achieve their full potential.
Originality/value
This study contributes to the limited empirical evidence on the influence of succession planning on the sustainability of family businesses. Additionally, it advances current understanding by identifying the moderating effect of the incumbents’ willingness to step aside on the relationship between succession planning and sustainability, an area not previously explored in the literature. The findings have significant implications for both practitioners and researchers, offering new perspectives on managing generational transitions in family businesses.
... As a result, it is also necessary to monitor the changes in the life cycles of family members during the life phase of the business (Tinh et al., 2023). Miroshnychenko et al. (2021) believes that the strategic operation of family businesses is influenced by the family itself as a factor. It is hardly known whether this effect is positive or negative, thereby suppressing or supporting the development of family businesses. ...
Nowadays, sustainability has become not only an environmental issue, but also a social, economic and cultural one. Examining the sustainability of family businesses is still an unexploited area. The aim of the study was to examine how factors specific to some family businesses influence their sustainability efforts. The research sheds light on whether there are statistically significant differences between family businesses operating in different markets in Poland in terms of sustainability. The study is based on secondary research, and it examines the problem on the basis of freely use data from Wiecek-Janka's (2023) primary research. The results reflect that, on average, family businesses operating in the international market define themselves as more sustainable businesses than businesses operating in the regional market. Furthermore, the perception of the sustainability of enterprises is greatly influenced by the operating sector. Family businesses that engage in some kind of production consider themselves to be more sustainable on average than those that do not engage in any production.
... There is also a connection between entrepreneurship and family businesses, the most common form of business ownership (Fernandez, 2023). Family businesses are of interest because they have been shown to be crucial for employment and growth (Andersson et al., 2018;Miroshnychenko et al., 2021) and because they tend to be governed by philosophies that differ from those usually assumed in economic theory (Goel et al., 2014). Instead of profit maximization, priority is often given to control, long-term survival, and the possibility of transferring ownership to the next generation of family members. ...
Plain English Summary
The neo-Schumpeterian growth models, introduced in the early 1990s, aimed to integrate creative destruction into mainstream economic theories of growth. However, the models fall short because they do not account for genuine uncertainty, instead assuming that profits can be predicted based on known probabilities. This oversight effectively sidelines the entrepreneur's unique role and does not satisfactorily explain economic phenomena critical to economic growth such as innovation, ownership, profits, and the role of financial markets. These limitations could lead to flawed or narrow policy recommendations, especially those that overemphasize the importance of research and development (R&D) investments. To address these issues, economic policies should focus more on enhancing the commercialization and dissemination of innovations. This includes providing incentives not just for entrepreneurs, but also for intrapreneurs and financiers who actively engage in and support the entrepreneurial ventures, bearing uncertainty and contributing to their governance and growth. In this context, tax policy is of major importance as it greatly influences incentives to uncertainty-bearing, not only for entrepreneurs, but also for intrapreneurs and financiers taking an active part in the governance and development of firms based on innovations characterized by genuine uncertainty. Furthermore, an inappropriately designed tax code will distort the evolutionary selection of innovations and firms, for example, by taxing owners and firms differently.
... NRG draws on data from annual reports, governance filings, presentations by top executives of the firm, filings with the stock market governance agencies (e.g., the SEC), and press releases. NRG Metrics data has been used in a variety of studies (e.g., Attig et al., 2021;Lozzano-Reina et al., 2022;Miroshnychenko et al., 2021). ...
Are green patents granted to family firms perceived more favorably by the market than those granted to non-family firms? Using a sample of 8918 green patents granted to family and non-family firms between 2014 and 2018, our study shows that it depends on the attributes of the green patent. Integrating the green innovation and family firm literatures with signaling theory, we develop a theoretical framework that highlights the need for family firms to balance their pursuit of green innovation with signals of innovation stability and due diligence so as to gain the greatest market value from their green patents. In contrast, we theorize that green patents offer nonfamily firms the greatest gain in market value when they signal innovation radicalness and newness. While our results show that the stock market reaction does not vary significantly between family and non-family firms, when we consider the attributes of green patents, we find that compared to nonfamily firms, family firms with longer green patent grant lags realize a more positive market reaction whereas those with higher patent radicalness experience a more negative market reaction. As such, our study suggests that the types of green patents that garner the greatest market value differ for family and nonfamily firms. The findings are robust to alternate family firm definitions, and additional robustness checks.
... Family firms are pivotal to economies globally, intertwining the complexity of family dynamics with the rigors of business management (Burkart, Panunzi, and Shleifer 2003;Miroshnychenko et al. 2021). These enterprises often exhibit a long-term orientation with a longer time horizon compared to non-family firms (Diaz-Moriana et al. 2020;Lumpkin and Brigham 2011). ...
Investment time horizons (i.e. long-term and short term) remain under researched within the context of family versus non-family firms. This phenomenon also requires taking a closer look at the governance heterogeneity among family firms as it can lead to differences among family firms in terms of the temporal nature of the investments. Drawing upon a goal-based theoretical framework, we hypothesize that family firms are more likely to engage in long-term investments; and simultaneously , less likely to engage in short-term investments compared to non-family firms. We also hypothesize that the idiosyncratic investment time horizon in family business is primarily captured by de novo or “born as” family businesses, rather than family firms privatized and transformed from state-owned firms. A longitudinal analysis of 34,079 firm-year observations from 4,101 listed firms between 2007 and 2020 yields interesting findings with significant theoretical and practical implications.
... As with many organizations, these firms have growth ambitions (as expressed by those leading the firms in our sample). Indeed, growth is important for the long-term success of small and large firms (Miroshnychenko et al., 2021). ...
We explore business exits in four family business portfolio firms located in Pakistan. Our research objective is to understand why when facing an unexpected situation that violates their expectations (a decline in firm performance), the owners of family business portfolio firms are more likely to retain some businesses in the firm’s portfolio while choosing to exit from one or more other businesses. Results from our qualitative analyses reveal that family business portfolio firm owners prioritize protecting the firm’s legacy business, even if it is underperforming, over pursuing potential future opportunities in satellite businesses, including successful ones. This paradoxical approach can ultimately place the overall business at risk. Our results provide insights regarding the roles of sensemaking and emotions when family business portfolio firm owners identify, evaluate, and then select a course of action to pursue to deal with an unexpected event. We observe that the owners of the family business portfolio firms in our sample engage in a sensemaking process that shapes their understanding of how their emotions of guilt, sadness, and fear—and their related emotional attachment to the firm’s legacy business—affect their business exit decisions.
... There is also a connection between entrepreneurship and family businesses, the most common form of business ownership (Fernandez, 2023). Family businesses are of interest because they have been shown to be crucial for employment and growth (Andersson et al., 2018;Miroshnychenko et al., 2021) and because they tend to be governed by philosophies that differ from those usually assumed in economic theory (Goel et al., 2014). Instead of profit maximization, priority is often given to control, long-term survival, and the possibility of transferring ownership to the next generation of family members. ...
... Another stream of SEW studies examine how variations in formal institutions or corporate governance systems affect the application of SEW in firm behaviors and outcomes (Luo, Jeong, and Chung 2019;Miroshnychenko et al. 2021). Corporate governance systems are defined as country-specific frameworks of legal, institutional, and cultural factors that shape the influence that stakeholders-such as managers, employees, shareholders, creditors, customers, suppliers, and the governmentexert on managerial decision-making (Weimer and Pape 1999;Yoshikawa, Zhu, and Wang 2014). ...
Research Questions/Issues
Scholarly interest in family firm governance and its strategic decision‐making has increased since the invention of socioemotional wealth (SEW). However, the widespread use of the SEW concept raises concerns on its reification and tautology. To address these concerns, we propose analyzing the social embeddedness of family firms to shed light on SEW‐driven governance practices and decision‐making.
Research Findings
Our two‐step method reviewed 85 papers utilizing social network perspectives, institutional theory, and SEW concepts. Our analysis demonstrates that integrating social embeddedness into SEW can help clarify the origins of SEW and its impact on decision‐making and governance and practices within family firms. Nonetheless, our analysis also highlights research gaps that future studies should address.
Theoretical Implications
By integrating the social embeddedness perspective with SEW, we offer a novel framework that systematically illustrates the social rationales underpinning diverse SEW‐driven behaviors and the evolution of governance practices in family firms. This framework, drawing from social network and institutional theory, elucidates the formation of SEW as driven by multidimensional social motivations, thus reconciling mixed findings from previous SEW research. Furthermore, our review provides a comprehensive research agenda for future studies in family business and corporate governance, encouraging exploration of multiple institutional logics, social networks, and their confounding effects on the SEW of family businesses.
Practical Implications
Our findings guide financial investors and nonfinancial stakeholders to better comprehend family firms' economic and noneconomic concerns, their distinct strategic behaviors from other firms, and their hybrid governance practices. Our discussion suggests practitioners incorporating social context of controlling families into decision.
... At this point, there is still a lack of discussion about the succession strategies employed by family business owners to evaluate successors' competencies and develop incentives for them (LeCounte, 2022). Finally, our research was conducted in Brazil and family businesses in developing countries remain poorly understood (Miroshnychenko et al., 2021). Notwithstanding, this is a relevant setting because family businesses must do business in attractive, fast-growing markets that have considerable institutional deficiencies or restrictions if they are to obtain sustainable competitive advantages in Latin America (Aguinis et al., 2020). ...
Purpose
The present study aims to identify the practices employed to bring heirs into family businesses as successors.
Design/methodology/approach
We conducted an exploratory, qualitative investigation using a case study approach. Semi-structured face-to-face interviews were conducted with external consultants and with incumbent leaders, next-generation heirs working in the firm (and likely to become successors) and employees from three family firms from different industries and under ownership and control of different generations of their respective families (first, second and third and fourth generations). In addition to surveying their general perceptions of the succession processes in their firms, each informant was asked to rate the degree of importance of 12 succession practices identified in the literature and the extent to which they exist in their respective firms.
Findings
Our results showed that heirs typically enter the family business after a development process outside of the family business, which we have termed as coming back to the nest. This process was enacted through practices that we allocated to the following categories: continued development of heirs, developing relationships in the succession process, separation of roles and attitude of the successor heirs. Overall, 8 of the 12 practices derived from the theoretical framework were endorsed as important by representatives of the family businesses and 9 were endorsed by the consultants, 7 of which coincided in both groups. However, only 5 of the practices were identified as present in the firms’ succession processes by the representatives of the family businesses, while the consultants did not identify any of the 12 practices as present.
Originality/value
We present additional important practices, the adoption of which would be beneficial for family business succession, such as adapting external learning to the family business, acquiring leadership skills and experience and developing emotional intelligence. Our study advances the prior literature since we do not merely discuss succession planning but analyze in an applied manner how succession actually takes place in family businesses.
... As empresas familiares têm sido consideradas como empreendimentos de relevante repercussão econômica e social (Miroshnychenko et al., 2021). Trata-se de um tipo de organização particular, marcado pela interação dinâmica entre família e empresa, e que passa a ser objeto de problematização científica na medida em que sua natureza e lógica de funcionamento reflete desafios no campo da compreensão e explicação científica de suas especificidades estratégicas, organizacionais, e sobretudo, familiares. ...
O objetivo deste artigo consiste em mapear a produção científica sobre sucessão em empresas familiares no Brasil. Para tanto, considerando o marco de trinta anos de publicações sobre processos sucessórios, buscou-se resgatar a evolução dessa produção ao longo do período analisado, identificando o estado atual, os padrões da pesquisa, e possíveis tendências das investigações sobre o tema. Nesta revisão de escopo da literatura, foram identificados um total de 161 artigos publicados em periódicos e nos eventos da ANPAD. Os trabalhos foram agrupados em três eixos principais: a construção do processo de sucessão; aplicação de modelos teóricos de análise; e a associação teórica entre sucessão e outros temas de pesquisa. Com isso, buscou-se reunir evidências para a identificação dos principais padrões e particularidades da investigação sobre sucessão, e para a proposição de tendências em potencial que podem contribuir para a formação de uma agenda para a realização de novos estudos sobre o tema no Brasil, contribuindo para o avanço e desenvolvimento futuro do campo nacional de estudos sobre empresas familiares.
... The starting point for our data collection was the NRG Metrics database, which has been validated in both the management and finance literature (e.g. Delis et al., 2020;Miroshnychenko et al., 2021), and provides data on ownership structure, corporate governance, directors, and officers (including family involvement) for over 8,000 publicly traded firms around the world. 2 It also includes information on the generation controlling the firm in case of FFs, the presence of a family CEO, and TMT size. We extracted firms in the automotive (auto parts, automobiles, and tires subsectors), industrial engineering (industrial machinery and commercial vehicles & trucks subsectors), and pharmaceutical (biotechnology and pharmaceuticals subsectors) sectors located in North America (i.e. ...
Digital product innovation (DPI) is critical for the survival of firms, especially those operating in traditional industrial-age industries. While research has started to investigate digital innovation in family firms (FFs) considering them as a monolithic group, we still lack a more nuanced perspective that considers heterogeneity among FFs with respect to DPI and what drives such variance. Drawing on construal level theory to explain the risk behavior and goal time horizon of FF owner-managers, we propose and find that the presence of later family generations in control positively influences DPI in FFs, while the presence of a family CEO is detrimental to DPI. Furthermore, we propose that these relationships are moderated by the size of the top management team (TMT), finding that a larger TMT weakens the positive relationship between later generations in control and DPI. We base our analysis on a longitudinal sample of 103 FFs in the automotive, industrial engineering, and pharmaceutical sectors observed from 2013 to 2020. This first empirical study applying construal level theory to the family business literature has important implications for the FF digital innovation literature and for FF owner-managers interested in achieving DPI.
... Firm performance is measured with a widely used economic indicator of firm success, namely return on assets (ROA). ROA is estimated as the ratio of earnings before interest, taxes, depreciation, and amortization divided by total assets (Miroshnychenko et al., 2020;Sánchez-Ballesta and García-Meca, 2007). To control for the degree of a firm's internationalization, we have adopted the ratio of foreign sales to total sales (Arregle et al., 2012). ...
... The family's goal is to build a business that ensures the financial stability of the family in the future. Therefore, the family behaves in a way intended to achieve this goal, for example by decreasing current profit, as the family's inheritance and well-being are linked to the stability of the business De Visscher et al., 2011;Miroshnychenko et al., 2021). An important characteristic of family businessesand one that is often part of their definitionis long-term sustainability. ...
... Family-owned businesses (F-OBs) play a pivotal role in the well-being of the world's economic system (Miroshnychenko et al., 2021). Few F-OBs are resilient, and others are vulnerable due to complex succession matters and imbalances between the business's interests and those of family members (Sallay et al., 2024). ...
Purpose
The succession phenomenon in family-owned businesses (F-OB) determines their future viability and success. This study aims to provide insight into key research areas related to F-OB’s succession and identify gaps in current literature that can be explored in future research.
Design/methodology/approach
The research article analysis was conducted using bibliometric techniques with VOS viewer and R-Studio Software. This study analyzed 799 articles from the Web of Science (1993–2023) to assess succession in F-OBs and future research directions.
Findings
This bibliometric study provides evolutionary publication trends on the succession of F-OBs. It also identified journals, universities, future trends, thematic maps, cluster networks, authorship countries, theoretical lenses and research gaps linked with F-OB’s succession.
Originality/value
This study focuses on the trends and research themes that have influenced and progressed the comprehension of succession phenomena and dynamics associated with the survival of F-OBs. By conducting a bibliometric analysis of these influential studies, the research provides an overview of significant advancements. It highlights gaps that can be addressed as future research opportunities to enhance the succession processes of F-OBs.
... Customized software programs verify all levels of data entry in search of inconsistencies and errors using a combination of quality control measures (NRG documents). This dataset includes publicly traded (active and non-active) firms from Africa, America, Asia, and Europe, and has been used in previous studies of family firms (Miroshnychenko et al., 2021). Next, we collected firm-level financial and accounting data from Osiris, which is a comprehensive dataset of publicly listed companies worldwide provided by Bureau van Dijk Electronic Publishing. ...
... Their primary organizational goal is often business sustainability to create value for future generations of the controlling family (Sharma & Sharma, 2019); therefore, they may sacrifice short-term economic objectives for the long-term survival of the firm (Gómez-Mejía et al., 2011). As suggested by Miroshnychenko et al. (2021), the transgenerational orientation of family firms may play a crucial role in promoting their sustainability and growth. This means that the transgenerational business vision could result in family firms with different cultures and strategies (Manzano-García et al., 2023). ...
Investment and financing decisions are especially important in a family firm context, as family and business dynamics interact to produce unique behaviors that may affect these decisions. However, research on how the family nature of these firms shapes their investment and financing preferences is still lacking. To help fill this
gap, this study aims to provide a robust picture of the literature to identify key questions that can help guide future research. Using a systematic approach based on bibliometrics and network analysis of 891 papers published in the Web of Science database between 1992 and 2023, we show the evolution of research in terms of
publications and identify the most active and influential articles, authors, and journals. Using bibliographic coupling analysis, the paper reveals the thematic structure and trends of the research. This study provides valuable insights into the future by identifying knowledge gaps and offering guidance to both researchers and
practitioners seeking to understand the specific needs and challenges faced by family firms in their investment and financing endeavors.
This study aims to examine the bibliometric analysis in family business research in Asia, as documented in the Scopus database from 1998 to 2023. A total of 649 documents were identified, providing insights into publication trends, country contributions, co-authorship networks, leading sources, and key research themes. The findings highlight major focus areas, including organizational identity, family-centric culture, succession planning, trust, government policy impacts, and the relationship between family ownership, performance, entrepreneurship, and corporate social responsibility. These insights are valuable for academics, policymakers, and practitioners looking to understand the evolving research landscape and explore future directions in family business studies in Asia.
Purpose
This research aims to understand how qualitative, non-market family business characteristics influence business performance in the context of a disruptive environmental change created by Covid-19 global economy lockdowns in the period of Spring/Fall 2020. Drawing on the Resource-Based-View (RBV), the authors postulate the influence of unique family firm characteristics on performance outcomes.
Design/methodology/approach
The authors analyze a sample of 2,344 family businesses from around the globe using cluster analysis, and identify three different types of family businesses whose characteristics are linked to differences in financial performance (change in revenues during Covid lockdowns) and social performance (change in employment in the same time). The survey data was collected between June 2020 and October 2020 and it captured family businesses of all sizes and from a vast range of industry sectors around the globe. The comparison between clusters of the baseline parameters was performed using one-way analysis of variance (ANOVA) for parametric variables. By conducting between-profile analysis of covariance (ANCOVA), the authors tested for differences in the dependent variables (i.e. change in revenues and change in employment) between the clusters, using cluster membership as the independent variable.
Findings
Considering the characteristics of family firms in terms of the level of involvement of family members (Herrero and Hughes 2019), and directive leadership capturing the top-down recovery effort adapted from Krause et al . (2022) and Faraj and Xiao (2006), the authors identify four different types of family firms that appeared during the initial phase of the pandemic. The findings suggest that different contexts lead to disparate outcomes in terms of financial performance, as measured by revenue changes, as well as social performance and measured by employment change. Results show that a directive leader may contribute to decreased revenue and employment losses, while family involvement in the absence of a directive leader may exacerbate these negative outcomes.
Practical implications
Specifying qualitative, non-market characteristics of family firms that likely contribute to more favorable business outcomes in an event of a significant environmental disruption is likely to be instructive to family firm practitioners, as well as owners and managers of family enterprises.
Originality/value
While research on organizational resilience in the context of family enterprises has gained momentum, the influence of organizational factors on family firm performance outcomes during a crisis is still an area requiring detailed investigation. Global economy disruptions created by Covid-19 pandemic provided for a unique context to investigate these effects. In addition to studying financial performance outcomes, this research also investigates changes in employment, an important measure of social performance of a firm. This research provides evidence that a directive leader can have a positive effect on the financial performance and employment retention of a firm, while family involvement, especially in the absence of a directive leader, might have a negative effect.
This essential reference work explores the role of finance in delivering sustainability within and outside the European Union. With sustainability affecting core elements of company, banking and capital markets law, this handbook investigates the latest regulatory strategies for protecting the environment, delivering a fairer society and improving governance. Each chapter is written by a leading scholar who provides a solid theoretical approach to the topic while focussing on recent developments. Looking beyond the European Union, the book also covers relevant developments in the United States, the United Kingdom and other major jurisdictions. Thorough and comprehensive, this volume is a crucial resource for scholars, policymakers and practitioners who aim for a greener world, a more equitable society and better-managed corporations.
This study explores groupthink on the boards of family firms. We conjecture that institutional investors, in the face of principal–principal agency issues, are discouraged by groupthink and consequently invest less in family firms. Appropriate corporate governance in the form of greater board diversity, lower director tenure, busier boards, more financial disclosure, and bigger shareholder voice should help in alleviating these institutional investor concerns. We examine a sample of firms from the S&P 500 and find evidence consistent with these propositions. Also, we provide evidence that board generational heterogeneity in family firms exacerbates groupthink.
Küreselleşme ve onun getirdiği bilgi ve iletişim teknolojilerindeki gelişmeler, iş dünyasında yeni trendlerin ortaya çıkmasına yol açmıştır. Yoğun rekabet ortamı, işletmeleri değişen pazar ve piyasa koşullarına uyum sağlamaya yöneltmiştir. Bu yoğun rekabet ortamında aile şirketlerinin varlıklarını sürdürmeleri için daha esnek ve yeniliklere hızlı ayak uyduran bir yapıya sahip olmaları gerekmektedir. Ülke ekonomisine ve milli gelire çok önemli katkı sağlayan aile şirketleri, dünya ekonomisinde de çok önemli bir yere sahiptir. McKinsey (2024) raporuna göre aile işletmeleri uzun zamandır küresel ekonomide büyük bir rol oynamaktadır ve aile işletmelerinin küresel GSYİH'nın %70'inden fazlasını ve küresel istihdamın yaklaşık %60'ını oluşturduğu belirtilmiştir. Bu işletmelerin, karlılığın ötesinde bir amaca odaklanmalarının aile işletmesi olmayan rakiplerinden daha güçlü performans göstermelerine yardımcı olduğu belirtilmektedir. Dolayısıyla aile işletmeleri, ekonomik ve sosyal hayata katkıları ile tüm dünyada ilgi odağı olmaya devam etmektedirler. Bu araştırma, Türkiye’de aile şirketlerinin kurumsallaşma sürecinde insan kaynakları süreçlerini nasıl yapılandırdıklarını incelemeyi amaçlamaktadır. Çalışmanın örneklemi, Bursa’da faaliyet gösteren plastik, içecek, otomotiv ve tekstil olmak üzere dört ayrı sektörden altı şirketin aile üyelerinden oluşmaktadır. Öncelikle literatür taraması yapılarak on üç soruluk bir anket oluşturulmuş ve yüz yüze görüşme yöntemiyle katılımcıların yanıtları detaylı olarak alınmıştır. Araştırmada aile şirketlerinde kurumsallaşma çabalarının ve insan kaynakları yapılanmalarının bu süreçlerdeki rolünün ne düzeyde etkili olduğunun ortaya koyulması bu alanlara odaklanmak isteyen aile şirketleri yöneticilerine ve araştırmacılara yol gösterici olacağı düşünülmektedir.
Purpose
This study aims to investigate the effects of the historical prevalence of infectious diseases on contemporary entrepreneurship. Previous studies reveal numerous proximate causes of entrepreneurship, but little is known about the fundamental determinants of this widespread economic concern.
Design/methodology/approach
The central hypothesis is that historical pathogens exert persistent impacts on present-day entrepreneurship. The authors provide support for the underlying hypothesis using ordinary least squares and two-stage least squares with cross-sectional data from 125 countries consisting of the averages between 2006 and 2018.
Findings
Past diseases reduce entrepreneurship both directly and indirectly. The strongest indirect effects occur through GDP per capita, property rights, innovation, entrepreneurial attitudes, entrepreneurial abilities, entrepreneurial aspirations and skills. This result is robust to many sensitivity tests. Policymakers may take these findings into account and incorporate disease pathogens into the design of entrepreneurship.
Originality/value
The novelty of this paper lies in the adoption of a historical approach that sheds light on the deep historical roots of cross-country differences in entrepreneurship.
Modern digital technology has enabled many businesses, includes family-run enterprises, to develop novel business strategies. We investigate how dynamic capacity functions as a mediator in the connection between creativity and social impact of the business model of the digital age (BMI), as well as the role of environmental dynamics moderator. We demonstrate the beneficial correlation between family damage and digital BMI through utilizing unique survey data from 1,444 Indonesian businesses with and without family damage, this study examines knowledge exploitation, risk management, and marketing capabilities. As a result of this, and in opposition to our assumptions, we recognize that positive relationships between the group's interests and its dynamic capabilities are strengthened by the environment. All of us bear significant ramifications for digital BMI research and family business innovation, both of which shed light on the dynamics of dynamic ecosystems in the digital economy.
Research background: Many studies point to the fact that the use of controlling in family businesses differs from that in non-family businesses and depends on factors that cannot be observed in non-family businesses. The research into the application of controlling tools in family and non-family businesses operating in the woodworking and furniture industry in Slovakia as a unique interconnection of the issues of family businesses, controlling and the Slovak woodworking and furniture industry has not been so far carried out. Purpose of the article: The aim of the paper is to identify significant differences in the application of tools of individual controlling subsystems between family and non-family businesses operating in the woodworking and furniture industry in Slovakia on the basis of a comprehensive mapping of the utilization of controlling tools in the businesses in question. Methods: The mapping of the issue was carried out by questionnaire-based method. In total, seven hypotheses were formulated. The validity of the assumed hypotheses was verified by two sample z-test. To generalize the obtained results to the entire basic set, verification of the minimum sample size was carried out. The representativeness of the sample was verified by the Pearson's Chi-square test of goodness-of-fit. Findings & value added: Based on the findings, it can be concluded that there are indeed significant differences in the use of controlling tools between family and non-family businesses operating in the industries in question. The results have showed the existence of significant differences in the use of tools of all examined controlling subsystems. It can be concluded that the application of controlling tools in the family businesses is significantly different from that in the non-family businesses. It can also be observed that family businesses of the industries in question tend to use controlling in an insufficient way and in general to a lesser extent compared to non-family businesses. The main benefit of the paper is the identification of the use of controlling tools in Slovak family businesses operating in the woodworking and furniture industry compared to non-family businesses. This knowledge can be valuable for practitioners and researchers in the field. The contribution also refers to the future direction of the development of the Slovak woodworking and furniture family businesses.
Even though the contemporary theories date back to the 1980s and 1990s, immigrant entrepreneurship is still considered a nascent field. In the last decade, influx of immigrants moving from the Middle East towards various destinations renewed the attention of researchers in the field and encouraged them to investigate different aspects of immigrant entrepreneurship. Family business phenomenon among migrant enterprises is the foremost of these research strands. A plethora of research pointed out the significance of embeddedness of immigrant entrepreneurs in their family. This chapter focuses on the family business framework among the immigrant-owned entrepreneurial ventures, the role of family on resources, succession plans, challenges, social relations and future pathways. To illustrate these points, in-depth interviews were conducted with eight migrant restaurateurs located in İzmir. Findings revealed that family businesses and migrant enterprises are deeply intertwined in many aspects. Succession plans appear to be vague and ambiguous for migrant restaurateurs in İzmir. Moreover, family plays an important role in acquiring various resources. Lastly, challenges faced by the migrant entrepreneurs can be overcome with the help of family members.
Purpose
This paper explores the drivers and inhibitors of the transition of entrepreneurial family firms from small to large firms. We adopt two contrasting theoretical perspectives, i.e. agency and stewardship, to explore the effects of family power on size transition.
Design/methodology/approach
We adopted an original research design that leverages a unique longitudinal database built starting from the list of the 500 best Italian manufacturing family firms published by the AUB Monitor in 2018. Specifically, we tested our hypotheses using a comprehensive set of financial and governance data from 89 Italian manufacturing family firms covering a 10-year period. To test our hypotheses, we conducted a survival analysis using a Cox regression.
Findings
We find an inverted U-shaped relationship between family involvement in ownership and size transition: size transition is more likely to happen at intermediate levels of family involvement in ownership. Additionally, our analysis shows that family involvement in the board of directors negatively impacts size transition, while the presence of a family CEO has a positive influence.
Originality/value
To the best of our knowledge, this study represents the first exploration of the phenomenon of size transition within entrepreneurial family firms. We believe it was worthwhile for two reasons. First, small size is frequently regarded as a weakness when competing in international markets, investing in R&D, or rewarding shareholders. Second, since small family firms are the major contributors to the world economy, understanding the factors that facilitate their transition to large firms can have a significant impact on overall economic development and prosperity.
Based on empirical material from India, this case discusses the more active role of women in family businesses. It introduces background information on legal regulations, family structure, and marriage patterns in India. These cultural factors influence the roles of women in the business family and the family business. Despite the patriarchal background, women are finding success and this case invites students to think about opportunities for empowering women in their own environment and how to apply this to family businesses.
The development of family companies can become a driver of the national economy and form mechanisms that overcome foreign economic barriers and political challenges. The purpose of the presented work was to study the dynamics of career preferences of students from Russia and Bulgaria (the comparison was made in 2021 and 2023). This empirical study was conducted within the framework of the InterGen project. The results of the statistical analysis showed that the most desirable thing for students in the two countries is to build their own business. The second most popular is working in a large company. The least attractive is the prospect of creating or continuing a family business. Comparison by year showed that for the University of Ruse the statistical differences are not significant. For University of Tyumen the career orientation "opening a family business" shows a significant decrease. This empirical result may indicate the ineffectiveness of government programs to popularize family businesses in Russia.
Firms are more prone to allocate their resources to research and development (R&D) when they are confident about their ability to appropriate the value created through these activities. In this regard, policymakers create formal intellectual property rights (IPR) institutions to create an innovation-friendly environment. Less formalized shared values and norms are however likely to affect the extent to which organizations depend on the strength of formal institutions in determining their R&D strategy. Embracing an institution-based perspective on firm-level strategic decision-making, we examine whether the degree to which a firm relies on strong formal IPR institutions in R&D decisions depends on the configuration of informal institutions in its environment, including family and societal culture. We test our hypotheses on a representative sample of privately-held European manufacturing firms and find that the family institution can play an "institutional void filling" role through involvement in ownership and management. This is particularly the case when the firm is embedded in a collectivist culture coherent with the family's values and norms imbued in the business. Our study offers contributions to the institution-based view, innovation, and family business literatures.
The present study analyzes the nexus among business growth, ownership structure, and local embeddedness—that is, the involvement of economic actors in a geographically bound social structure—in rural and urban contexts. This work combines regional economics with studies on family business and firm growth and uses a coarsened matched sample of privately held Swedish firms. The findings indicate that family firms benefit more than nonfamily firms from local embeddedness and as such they achieve higher levels of growth and that this effect is more pronounced in rural areas. Research implications are shared in the Conclusion section.
This study investigates the effect of both family-centered goals and family board representation (family member representation on the board of directors) on family firm capital structure. Based on a sample of 327 Belgian family SMEs, our findings show that family-centered goals indirectly affect the total debt rate through family board representation. More specifically, results indicate that this mediating effect holds primarily for the short-term (vs. long-term) debt rate and for the financial (vs. nonfinancial) debt rate. Taken together, our findings suggest that the socioemotional wealth (SEW) perspective is relevant and fruitful to explain debt decisions in family firms. Our findings contribute to family business literature and enable scholars and practitioners to gain a better understanding of family firm capital structure decisions.
Heterogeneity among family firms has become an important research topic. This special issue of Journal of Business Research contributes to the literature on family firm heterogeneity by specifically focusing on variations in governance. In this introductory article, we suggest that governance—particularly family involvement in firm ownership and management, and decisions concerning human resource practices—is a primary source of family firm heterogeneity. Dimensions of family firm governance are discussed, and four empirical studies are featured that focus on how governance influences the international entry, knowledge sharing, financial performance, and human capital of the family firm. We extend the contributions of these studies by exploring research opportunities related to heterogeneity in family firm goals, governance, and resources.
https://www.sciencedirect.com/science/article/pii/S0148296317305350
Research on the internationalization of family firms has flourished in recent years, yet the mechanisms through which family involvement shapes the determinants, processes, and outcomes of internationalization remain little understood and largely undertheorized. We contribute to research at the intersection of international business and family business by examining the roles of different sources of family firm heterogeneity and the context in shaping the determinants, processes, and outcomes of business internationalization. Drawing on this analysis, we summarize the articles published in this special issue and set out an agenda for further research aimed at advancing a more fine-grained and contextualized understanding of internationalization in family firms.
By integrating literature on family functionality, family firms, and socioemotional wealth (SEW), we develop a theoretical model explaining how family functionality and SEW dimensions influence firm innovativeness. Our multigroup structural equation model on two samples of family small and medium-sized enterprises (SMEs) shows that family functionality is positively linked to SEW, whereas divergences emerge on the effect of different SEW dimensions on innovativeness. Binding social ties, the emotional attachment of family members to the firm, and the renewal of family bonds through intrafamily succession positively affect family SME innovativeness, while identification of family members with the firm has a negative effect. By deepening current understanding of the role and functionality of controlling families as determinants of their propensity to preserve SEW and achieve innovativeness, our findings offer important implications for theory and practice, paving the way for future research on SEW and family firm innovation.
There are competing theoretical explanations and conflicting empirical evidence for the IPO underpricing phenomenon in family firms. The behavioral agency model predicts that loss-averse family firms discount their shares more than non-family firms in order to minimize losses of socioemotional wealth (SEW). By contrast, the endowment effect in prospect theory suggests that family owners maximize their financial wealth (FW) by including SEW in their perceptions of firm value and demanding a higher IPO price to relinquish it. We reconcile these seemingly incompatible predictions by adding insights on the dynamic properties of the reference point in decision framing. Conceiving IPO pricing as a two-stage gamble, we theorize that initial SEW losses entailed by the listing decision increase the disposition of family owners to underprice IPO shares to possibly offset these losses, or to “break even”. In doing so, we advance the behavioral agency model with the aversion to loss realization logic to explain how the decision frames and preferences of family owners change during the IPO process, depending on initial losses of current SEW and new expectations of future SEW. Our analysis of 1,807 IPOs in Europe supports our theoretical expectations, clarifying the trade-off between FW and SEW and explicating the dynamic properties of mixed gambles in family firms.
Using proxy data on all Fortune-500 firms during 1994–2000, we find that family ownership creates value only when the founder serves as CEO of the family firm or as Chairman with a hired CEO. Dual share classes, pyramids, and voting agreements reduce the founder's premium. When descendants serve as CEOs, firm value is destroyed. Our findings suggest that the classic owner-manager conflict in nonfamily firms is more costly than the conflict between family and nonfamily shareholders in founder-CEO firms. However, the conflict between family and nonfamily shareholders in descendant-CEO firms is more costly than the owner-manager conflict in nonfamily firms.
This paper investigates the relationship between investor protection and CEO pay in family-controlled corporations. Using a panel of 986 firm-year observations from 11 EU countries, we show that the lower the investor protection, the higher the compensation of the CEO. The sensitivity of pay to the institutional context is higher for a family CEO than a professional CEO, a result that corroborates the hypothesis that CEO compensation contracts in family firms are influenced by familiar connections. Overall, these results are more consistent with the hypothesis of rent extraction than with the perspective of optimal remuneration contracts.
Research on corporate social responsibility (CSR) has traditionally focused on managerial discretion and stakeholders’ influence. This study extends current research by addressing the effect of family firms and institutional owners on CSR performance, namely, CSR strengths and concerns. Based on stewardship theory and the socioemotional wealth perspective, we propose that family firms are more likely to value CSR performance. Next, drawing from multiple agency theory, we predict that institutional owners, unlike family owners, will influence a firm’s CSR performance differently. We tested our hypotheses using a sample of 153 firms from 1994 to 2006 and found general support for our hypotheses. A higher percentage of family owned equity and the presence of a family CEO are found to increase CSR strengths, whereas transient institutional owners have an opposite effect. The presence of a family CEO and founding family are found to reduce CSR concerns. Contrary to our predictions, dedicated institutional owners are positively associated with CSR concerns.
'This comprehensive academic study will have most relevance for researchers, teachers and students interested in business management in general and entrepreneurship in particular. The book contains a wealth of empirical detail and many suggestions for further research.' © Per Davidsson, Frédéric Delmar and Johan Wiklund 2006. All rights reserved.
We provide evidence that both human capital and R&D increase the likelihood that a firm will be a high-growth firm in the industry. However, different from human capital, being an R&D active firm also increases the probability of substantial decline or failure, underscoring the risky nature of innovation. Quantile regression results show that, different from R&D, human capital is growth-enhancing for all firms, hence also those located in the lower quantiles of the distribution of growth rates across firms.
In spite of various calls for a wider application of qualitative research in the family business field, it is our contention that the full potential of qualitative inquiry is not being fully realized. Part of the reason for this relates to the tendency to promote methods choice and diversity rather than addressing the foundational questions and processes which underlie qualitative research choices. These tendencies obscure attention to the reasons why researchers choose qualitative methods and the kinds of foundational issues about family businesses that are brought to light through qualitative research. To address this, we undertake an analysis of the most-cited articles using qualitative methods from an annotated bibliography of family business studies. From this, we identify the strengths and weaknesses of extant qualitative studies in family business research and argue for the need to re-orientate calls in family business research towards the foundational questions (rather than methods) that underline qualitative inquiry.
Competent research methods and data analysis are essential components for the progression of family business research. To identify and evaluate empirical trends, and make suggestions for future research, we examine 319 empirical articles published in Family Business Review since 1988. These studies are compared with 146 family business research articles published in top-tier journals not dedicated to family business research over the same timeframe. While we substantiate growth in rigor and sophistication, we address specific family business research challenges regarding construct validity, generalizability, causality, temporality, and multilevel issues. Suggestions are provided for future empirical research across six major topical areas.
This paper challenges the prevalent notion that family-owned firms are more risk averse than publicly owned firms. Using behavioral theory, we argue that for family firms, the primary reference point is the loss of their socioemotional wealth, and to avoid those losses, family firms are willing to accept a significant risk to their performance; yet at the same time, they avoid risky business decisions that might aggravate that risk. Thus, we propose that the predictions of behavioral theory differ depending on family ownership. We confirm our hypotheses using a population of 1,237 family-owned olive oil mills in Southern Spain who faced the choice during a 54-year period of becoming a member of a cooperative, a decision associated with loss of family control but lower business risk, or remaining independent, which preserves the family's socioemotional wealth but greatly increases its performance hazard. As shown in this study, family firms may be risk willing and risk averse at the same time.
CEO compensation in family firms is affected by certain corporate governance characteristics, such as the generational stage of the firm (founder or descendant-controlled firms), the level of family involvement on the board of directors (lone or multiple family members sitting on the board) and the family status of the CEO (family or professional CEO).
In this paper, we argue that moderating effects arise among these dimensions of heterogeneity. The results show that in firms owned by descendants, the presence of multiple family members is beneficial in lowering family CEO compensation, while the opposite is true in the presence of the founder. Moreover, within founder and descendant firms, the number of family representatives on the board exerts a strong influence on the compensation of family CEOs, whereas it does not affect the compensation of professional CEOs. The results also show that in certain family clusters, CEO compensation is higher than in nonfamily firms, thereby emphasizing that when comparing CEO compensation in family and nonfamily firms, it is important to consider the intersections among the heterogeneity dimensions of the governance of family firms.
The findings of the paper contribute to the literature on the governance of family firms by showing that certain family firm types are more effective than others in keeping CEO compensation under control.
Does democratization reduce the cost of credit? Using global syndicated loan data from 1984 to 2014, we find that democratization has a sizable negative effect on loan spreads: a 1-point increase in the zero-to-ten Polity IV index of democracy shaves at least 19 basis points off spreads, but likely more. Reversals to autocracy hike spreads more strongly. Our findings are robust to the comprehensive inclusion of relevant controls, to the instrumentation with regional waves of democratization, and to a battery of other sensitivity tests. We thus highlight the lower cost of loans as one relevant mechanism through which democratization can affect economic development.
The firm’s investment opportunity set (IOS) reflects the prospective growth opportunities related to physical and human capital investments. IOSs are largely firm specific, embedded in assets-in-place, or generated by experience curves, learning-by-doing, and other similar phenomena. However, the value of an IOS can be destroyed if a firm does not exercise the option to invest. In this study, we theorize that a firm’s ability to invest in R&D is conditional on the availability of a favorable IOS. We test our theoretical propositions in the European business environment using a sample of large publicly traded firms with concentrated ownership. Our findings support the notion that the IOS is a significant determinant of corporate R&D investments, but the magnitude of this effect depends on the identity of the ultimate owner. Specifically, the sensitivity of R&D investments of family- and state-owned corporations is higher to favorable IOS than that of widely held corporations, suggesting these firms are more responsive to favorable IOS than others. By introducing the IOS dimension, our results have interesting implications for both theory and practice.
Growth brings lifeblood to sustain longevity across generation, but also critical challenges for family business. Relying on the behavioral agency model and its assumptions on risk‐bearing in family firms, we discuss and test the effect of family involvement in the top management team (TMT) on family business growth. We use an input‐behavior‐outcome framework based on the mediating role of entrepreneurial orientation. We also consider the moderating role of different ownership structures on the relationship between family involvement in the TMT on entrepreneurial orientation (EO). Results based on survey data collected by the STEP research consortium support the hypothesized negative effect of family involvement in the TMT on growth, fully mediated by EO. We also find that the presence of passive family members as majority shareholders and multigenerational involvement in ownership are important contingencies of the direct effect. Our evidence points to the fact that risk‐bearing in family firms is not just dependent on the degree of family involvement in management, but also on the interests of different types of shareholders. We show that the at‐times stylized negative traits of family firms are not universally valid, and that a comprehensive view of family influence over the business is needed to ascertain whether and to what extent these firms actually achieve growth.
This study seeks to investigate whether family firms are more likely to downsize their workforce than their non‐family counterparts. Drawing on socioemotional wealth approach, we first explore the effect of family presence on workforce downsizing. Furthermore, we examine the moderating role of R&D activity on the family presence–downsizing relationship. Our sample covers a panel of manufacturing SMEs in Spain over the 1993–2014 period. We find that family firms are less likely to downsize than non‐family firms. Our results also reveal a negative association between R&D activity and workforce downsizing. Finally, the relationship between family presence and downsizing is contingent upon R&D activity, that is, family firms engaged in R&D activities are less likely to downsize than non‐innovative family firms.
We examine whether family firms invest more in employee relations than nonfamily firms. Using the variation in state-level changes in inheritance, gift, and estate taxes as an exogenous shock to family control, we find that family firms, particularly those in which a founder serves as chief executive officer or those in which a family member serves as a director on the board, treat their employees better than nonfamily firms. More importantly, family firms focus on investing in employee relations that help alleviate labor-related conflicts and controversies, possibly to avoid a negative family reputation among stakeholders. Family firms’ better treatment of their employees is also evident when we use a difference-in-difference test to exploit changes in family firm status due to (sudden) deaths of family members and firms’ inclusion in Fortune’s “100 Best Companies to Work For” list to identify employee-friendly treatment. We further find that family firms in the early stage of their life cycle invest more in employee relations when they operate in labor-intensive industries in which the benefits from family owners’ monitoring of employees are expected to be large. Moreover, we find that although nonfamily firms’ investment in employee relations is impeded by several constraints, such as short-term investor pressure, managerial myopia, and managerial agency problems, family firms do not suffer from such constraints. These findings help explain why underinvestment in employee relations is prevalent in public firms despite potential long-term benefits from such intangible investment.
This paper was accepted by Neng Wang, finance.
Research Question/Issue
In this study, we explore the relationship between the use of nonfinancial performance measures in Chief Executive Officer (CEO) bonus plans and CEO power, moderated by compensation committee monitoring. Furthermore, we investigate whether the inclusion of nonfinancial performance measures is associated with higher CEO bonus pay sensitivity to shareholder returns.
Research Findings/Insights
Using a sample of FTSE 350 firms during the period 2007‐2013, we find that CEO power is significantly negatively related to the propensity of using nonfinancial performance measures. This negative relationship, however, is moderated by higher levels of compensation committee monitoring. We also find that firms combining nonfinancial and financial performance measures in CEO bonus plans tend to have stronger CEO bonus pay sensitivity to shareholder returns than firms using financial measures alone. Thus, our results suggest that boards of directors adopting nonfinancial performance measures are able to better align CEO incentives with shareholder interests. We find similar results when using the weight of nonfinancial performance measures in the bonus plan in our analyses.
Theoretical/Academic Implications
This study empirically supports the managerial power theory whereby powerful CEOs influence the choice of performance measures in their bonus plans. However, effective compensation committees are found to attenuate the influence of powerful CEOs and to better align their interests with those of shareholders. Our result of stronger bonus pay sensitivity to shareholder returns for firms combining nonfinancial with financial performance measures implies that the informativeness of these measures enhances the firm's ability to tie CEO bonus compensation to shareholder wealth.
Practitioner/Policy Implications
This study offers insights to members of boards of directors, especially compensation committee members, who are interested in improving the design of executive incentive contracts to better align managerial incentives to shareholder interests. Furthermore, the findings inform regulators about the importance of alternative performance measures in pay‐performance sensitivity and may warrant increased firm disclosure of the details of the pay structure.
This edited volume focuses on the interplay between organizational identities and firm growth, an area which remains largely unexplored. Firm growth in its various forms is omnipresent in the contemporary business environment, but does not always lead to positive results. At the same time, some organizations are growing faster than their peers, leading to questions of organizational growth antecedents. In addition to the dominant economic reasons in strategic literature, the volume seeks to integrate psychological aspects to the discourse, thereby considering the micro, meso and macro level. By providing both insights into international academic thinking and into practical examples of small and medium-sized companies in Berlin, the authors identify new findings concerning successful growth strategies.
We provide evidence that democracy has a positive effect on GDP per capita. Our dynamic panel strategy controls for country fixed effects and the rich dynamics of GDP, which otherwise confound the effect of democracy. To reduce measurement error, we introduce a new indicator of democracy that consolidates previous measures. Our baseline results show that democratizations increase GDP per capita by about 20 percent in the long run. We find similar effects using a propensity score reweighting strategy as well as an instrumental-variables strategy using regional waves of democratization. The effects are similar across different levels of development and appear to be driven by greater investments in capital, schooling, and health.
Classical approaches to strategy are built around two dominant pillars to explain firm performance: industry structure and firm strategy and capabilities. Firm performance is typically seen as a result of a “fit,” or complementarity, between industry structure and firm strategic choices. We supplement the classical model of strategy with a third pillar, that of the institutional envelope. We argue that the institutional envelope, as its name suggests, is a pervasive influence on the strategy-performance relationship. Both firm strategy and industry structure are simultaneously shaped by, and shape, the institutional envelope, which is both a primitive to and product of firm strategy and industry structure. It also moderates the relationship between firm strategy and industry structure.
Institutional considerations are therefore not simply a subfield of strategy research. The institutional envelope is a critical component of any consideration of strategy. Theories of industry structure and strategic choice are insufficient without a fully formed model of the institutional envelope at their very foundation. All strategies, market or non-market, are consciously or unconsciously related to their institutional envelope—being tailored to conform to the institutional envelope or tailoring the institutional envelope to suit them. We see this institutional project that we are advancing as nothing less than the third great wave of strategy research, building off the previous waves emphasizing industry structure and firm choice and resources. It is in the context of this institutions-based strategy model that we preview the papers in the special issue.
Looking back on a Family Business Review article we published in 2006, we discuss its origins, publication challenges, apparent influence, and how we might build on it today. Much of this reflection proposes how we may gain further insights into agency, stewardship, and resource perspectives by addressing promising underexplored areas relating to family enterprise. In the process we suggest topics that we hope may advance conceptualization about family firms by addressing relevant social and economic issues.
The growing attention to corporate green practices and the increased competition in global markets have pressed companies to disclose information about their environmental footprints. In doing so, some firms tend to either overstate or understate their environmental commitments by adopting so-called “greenwashing” or “brownwashing” strategies, respectively. In this paper, we analyze the impact of different types of environmental communication strategies on firm value and operating performance using a panel of 3490 publicly traded companies from 58 countries and 19 industries. Results show that it does not pay to be a greenwasher, whereas the decision to not properly communicate a firm’s environmental commitment is associated with lower financial performance. Therefore, this study highlights the importance of having not only effective green practices, but also coherent communication of environmental strategies. This is the first attempt to empirically model the impact of greenwashing and brownwashing strategies on corporate financial performance in a longitudinal setting.
Governance, along with goals and resources, is a key determinant of the distinctiveness and heterogeneity of family firms. Our introduction discusses formal and informal governance mechanisms that emanate from inside and outside the firm and then reviews, integrates, and extends the contributions to this topic of the six articles and four commentaries in this special issue. Building and reflecting on these contributions, we suggest that although formal governance mechanisms inside family firms have unique characteristics, informal governance mechanisms may be equally important, and external mechanisms, both formal and informal, can also profoundly influence the behavior and performance of family firms.
Examination of family firms’ interactions with institutional contexts has been a major research stream within family business scholarship. This study reviews three decades of research at the intersection of family firms and institutional contexts. Our review sample includes 124 articles published in 24 top-level journals across several disciplines. We adopt an institutional theory lens to synthesize this literature and explicate main understandings about how family firm behaviors/outcomes are influenced by or may influence formal and informal institutions in their institutional contexts. Moreover, we discuss major research gaps and unproductive biases in this research area and provide directions for future research.
The study of the roles, impact, and challenges associated with nonfamily members in family firms has generated considerable attention in the literature. To gain an appreciation of this body of knowledge, we systematically review 82 articles on nonfamily members in family firms that were published in 34 journals over the past three decades. We synthesize the literature according to three broad, yet overlapping themes: preemployment considerations, employment considerations, and outcomes of nonfamily employment. We then offer a future research agenda that integrates these themes to guide the advancement of knowledge on nonfamily members in family firms.
We test what explains family control of firms and industries and find that the explanation is largely
contingent on the identity of families and individual blockholders. Founders and their families
are more likely to retain control when doing so gives the firm a competitive advantage, thereby
benefiting all shareholders. In contrast, nonfounding families and individual blockholders are
more likely to retain control when they can appropriate private benefits of control. Families are
more likely to maintain control when the efficient scale is small, the need to monitor employees is
high, investment horizons are long, and the firm has dual-class stock.
Family and nonfamily firms both must align owner and employee interests. However, family firms may experience lower labor productivity because of adverse selection problems from labor market sorting and attenuation. Incentive compensation reduces alignment of interest problems in family and nonfamily firms. Importantly, incentive compensation signals to potential employees that performance will be rewarded, which should improve the relative labor productivity in family firms by reducing adverse selection. Analysis of matched data on 216,768 firms supports our hypotheses, implying that incentive compensation has a broader impact on firm performance than commonly recognized in the family firm or human resource literatures.
This introductory paper lays out the rationale for exploring the relationship between organizational identity (OI) and firm growth. It screens the current state of the literature streams and their up to date interplay reveals a broad research gap. The pivot papers are presented and some qualifications about further research are made.
Recently, firms have been criticized for focusing too strongly on the short term and for neglecting investments in assets and capabilities required for long-term success, such as investments in R&D or in employee training. Family firms are considered to be different. They are commonly assumed to be more long-term oriented than comparable non-family firms. Joern Block analyzes this phenomenon in more detail and investigates whether and under which conditions family firms pursue more long-term oriented strategies than other firms. To this end, he compares R&D activities, downsizing practices and executive compensation of family firms with those of non-family firms. He also develops a theoretical model of how to pay a non-family manager who works in a family firm. © Gabler | GWV Fachverlage GmbH, Wiesbaden 2009. All rights reserved.
A growing body of research is concerned with how family governance influences innovation. Yet the organizational issues that family governance engenders for innovation processes have been largely overlooked. In a study of six small- and medium-size family enterprises, we investigate the design decisions that fit family and business logics to create high-performing new product development programs. Our results reveal three design principles concerning teams, leadership, and incentives that diverge from customary approaches of organizing for new product development, adding important dimensions to the determinants of successful new product development in small- and medium-size family enterprises.
Emerging markets like India have poorly functioning institutions, leading to severe agency and information problems. Business groups in these markets have the potential both to offer benefits to member firms, and to destroy value. We analyze the performance of affiliates of diversified Indian business groups relative to unaffiliated firms. We find that accounting and stock market measures of firm performance initially decline with group diversification and subsequently increase once group diversification exceeds a certain level. Unlike U.S. conglomerates' lines of business, and similar to the affiliates of U.S. LBO associations, affiliates of the most diversified business groups outperform unaffiliated firms.
This paper tests the hypothesis that Founding Family Controlled Firms (FFCFs) are more averse to control risk than similar non-FFCFs and therefore avoid debt. Higher levels of debt increase the likelihood of bankruptcy and the level of control risk. We show that FFCFs use less debt; their choice of debt is more sensitive to conditions associated with control risk; and that leverage is not significantly related to managerial ownership in non-FFCFs, indicating that founding family control, not managerial ownership, matters in determining leverage.
It is generally accepted that a family's involvement in the business makes the family business unique; but the literature continues to have difficulty defining the family business. We argue for a distinction between theoretical and operational definitions. A theoretical definition must identify the esence that distinguishes the family business from other businesses. It is the standard against which operational definitions must be measured. We propose a theoretical definition based on behavior as the essence of a family business. Our conceptual analysis shows that most of the operational definitions based on the components of family involvement overlap with our theoretical definition. Our empirical results suggest, however, that the components of family involvement typically used in operational definitions are weak predictors of intentions and, therefore, are not always reliable for distinguishing family businesses from non-family ones.
Manuscript Type: Empirical
Research Question/Issue: Considering the recent financial and economic crisis as a unique exogenous shock, our study investigates the financial performance of family-controlled firms in “steady-state” conditions as opposed to situations of severe economic distress. In addition, we focus our attention within family firms, in order to tease out the leadership (family or non-family CEO) and family ownership (family ownership concentration or dispersion) conditions that allow some governance arrangements to perform better than others during an economic downturn.
Research Findings/Insights: Examining the entire population of Italian industrial family and non-family publicly listed companies over the period 2002–2012, we observe a significantly and consistently better performance of family-controlled firms during the financial and economic crisis, a finding that proves to be robust to several analytical specifications, as well as to different performance measures (ROA, ROE). Then, focusing on family firms only, we find that mixed configurations (family CEOs with relatively lower family ownership concentration) produce better performance in face of an external hazard.
Theoretical/Academic Implications: Our study confirms the pivotal assumption of the socioemotional wealth perspective that the advantages of family firms show up exactly when ownership is at stake. Our results also add to the growing literature on the resilience of family firms, showing that they are more apt than others to absorb exogenous shocks.
Practitioner/Policy Implications: Our findings suggest the importance of crafting governance structures well in advance of a crisis. Our research speaks to policy makers, indicating the importance of family firms for national economies, and the political opportunity to sustain their growth and managerial development.
Mutual fund attrition can create problems for a researcher because funds that disappear tend to do so due to poor performance. In this article we estimate the size of the bias by tracking all funds that existed at the end of 1976. When a fund merges we calculate the return, taking into account the merger terms. This allows a precise estimate of survivorship bias. In addition, we examine characteristics of both mutual funds that merge and their partner funds. Estimates of survivorship bias over different horizons and using different models to evaluate performance are provided. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.