Identifying and classifying family businesses

Abstract

One of the main challenges facing those researching family business is that of defining what exactly constitutes a family business when considering whether family businesses and non-family businesses are different or not. Most research on the definition of family firms has been conceptual-based, and the choice of definition has lacked empirical support. Previous research has not yet obtained conclusive results regarding the differences between family and non-family firms. Moreover, very few countries worldwide have explicit database information to enable them to recognize family firms. This research uses an abductive method to identify family-involved firms (FIFs) with homogeneous features compared to the rest of firms regarding performance, an essential indicator of the firm’s success. Second and later generation FIFs, despite their internal differences, make up a uniform group of firms when considering several dimensions of performance (leverage, efficiency and profitability), and differ significantly from the rest of firms. At the same time we test whether entrepreneurial firms (lone- founder firms) should be considered family firms or non-family firms, according to their behavior. Results agree with making a distinction between lone-founder firms, in which no relatives are involved as internal stakeholders, and FIFs.