Locus of Ownership and Family Involvement in Small Private Firms

Abstract

abstractThe relationship between ownership and family involvement in small businesses is not altogether clear because empirical studies have not distinguished among family ownership, family management, and owner‐management in composing their samples. In the present study, a large sample of small private firms is parsed into sub‐samples with distinctly different types of owners in order to isolate the effects of locus of ownership. The results show that firms with different locus of ownership behave differently with respect to the extent of involvement by the CEO's relatives as employees, key managers, advisors, and board members. Although owner‐managers and sole‐proprietors would seem to have more authority than other CEOs to involve family members in the operations of the business, the findings indicate that these self‐owned firms have significantly less family involvement than firms owned entirely by relatives of the CEO.