The effects of family dynamics on diversification strategy: Empirical evidence from French companies

Abstract

The question of the influence of ownership structure on corporate diversification strategy incites debate. Past research has led to controversial results whether it is based on agency theory, strategic approach or stewardship theory. We propose new empirical evidence by applying this question to the context of family businesses in France. We find that family businesses are more diversified than non-family businesses, which contradicts past results of studies based on US samples. This finding underlines the importance of considering the diversity of international contexts. Our analysis also shows that there is a negative relationship between the presence of a shareholder block and the level of diversification only for non-family businesses. This result emphasizes the particularity of family businesses in terms of the links between governance structure and business strategy. Furthermore, our results reveal that there is no difference between family and non-family businesses in terms of the choice of diversification type (related or unrelated).