Family Firms Research Articles

Tax aggressiveness under concentrated ownership: The importance of long-term institutional investors

Using a sample of 1,707 firm-year observations for the period 2010–2019 based on the Warsaw Stock Exchange, we reveal the positive relation between corporate tax aggressiveness and long-term institutional ownership. Controlling for a “normal level” of tax avoidance within the industry and firm size we provide evidence that tax aggressiveness increases with the increase of shareholdings of independent long-term institutional investors, domestic long-term institutional investors, and long-term institutional investors holding relatively large stakes. This relation holds for firms prone to severe agency problems, such as family firms. Our results thus suggest that ownership structure affects corporate tax avoidance, in line with the agency perspective of corporate tax aggressiveness.

Introducing professional managers, salary incentive and family business innovation

This paper provides an in-depth discussion of the impact of introducing professional managers on the innovation of family firms for a sample of A-share listed companies in China from 2017 to 2022. The findings show that introducing professional managers in family firms significantly positively contributes to corporate innovation. In addition, the study finds that both equity and cash incentives given to professional managers are conducive to further promoting corporate innovation. The results of this study are of great practical significance for how family firms can rationally utilize professional managers to enhance corporate innovation.

Intergenerational Transmission and Rental Occupancy Behavior in Family Firms

As more and more family firms enter the stage of intergenerational inheritance, the impact of second-generation family successors on business operations at the early stage of succession has attracted widespread attention and heated debate. Based on this, this paper analyzes and examines the changes in corporate rental occupancy behavior from the perspective of intergenerational succession events of family firms by taking Chinese family-held listed companies as the research object from 2010 to 2022. The results find that the rent-taking behavior of family firms is significantly suppressed after the second-generation successors take office. Through the analysis of the influence mechanism, it is found that the influence of intergenerational succession of family firms on the level of rent occupancy has an incentive effect in the way of exacerbating financing constraints and a disincentive effect in the way of lowering the level of risk-taking, with the disincentive effect being dominant. Further, the inhibitory effect of intergenerational inheritance on firms' rent-taking behavior is weakened when there is intense competition in the industry, a high percentage of the chairman's shareholding, and a low level of educational attainment of the successor. The research work in this paper not only enriches the relevant literature, but also the relevant findings have important implications for the monitoring and control of irregularities in family firms.

Family business sustainability: the impact of governance and women’s empowerment in Saudi Arabia

Due to their strong emotional interest and ownership control, family firm owners significantly influence their firm’s strategies and governance, which has consequences for their business sustainability practices. The failure to establish or maintain formal organizational structures, and adopt good governance principles, may hinder family firms in their pursuit of long-term sustainability. This study empirically investigated the impact of corporate governance on family firms’ sustainability, with women’s empowerment and culture as moderating and mediating factors, respectively. Data for the study were obtained from a sample of 126 family firms from Saudi Arabia. The study adopted the partial least squares structural equation modelling (PLS-SEM) method. The study results empirically confirmed that corporate governance is positively associated with women’s empowerment, which also assists in achieving business sustainability in family-controlled firms. The adoption of good corporate governance policies, and empowerment of women through their appointment on corporate boards operating in a supportive culture, can reinforce an organization’s mission, purpose and strategies, which can create an enabling environment for family business sustainability.

Mapping research on knowledge management in family firms: a bibliometric analysis

PurposeGiven the growing interest in the topic of knowledge management (KM) in family firms (FFs) and the subsequent increasing number of papers published, this study aims to review the field to identify and analyze the main themes and trends.Design/methodology/approachThis study applies bibliometric techniques to a sample of 146 papers published from 2007 to 2023 and their 8,126 unique cited references. Bibliometric coupling is performed on the sample papers to explore the current intellectual structure of the field of KM in FFs, whereas cocitations analysis is performed to investigate the different literature streams that served as roots for the development of such a field.FindingsBibliographic coupling reveals that sample papers can be grouped into four clusters, and, through papers content analysis, the author identifies their core themes as knowledge sharing, innovation, knowledge-based dynamic capabilities and intellectual capital. Cocitation analysis of the cited references revealed four main clusters that can be considered the literature streams that served as roots for the development of the field, i.e. knowledge-based view, socioemotional wealth, strategic management and social capital (as a theory and as a resource).Originality/valueThis study contributes to the literature on KM in FFs by extending prior systematic review efforts with bibliometric analyses and combining these results to highlight connections between the main research themes around which scholars have debated (i.e. the clusters identified through bibliometric coupling) and their theoretical foundations (i.e. the clusters identified through cocitation analysis). This study also has practical implications by synthesizing and informing managers about FFs’ advantages and weaknesses in the KM process.

Facilitating corporate sustainability integration: innovation in family firms

PurposeThe purpose of the study is to understand the relationship between family-driven innovation and the incorporation of corporate sustainability in German family firms.Design/methodology/approachThe study conducted 26 interviews with 22 German family firms. Thematic analysis was undertaken on the collected data resulting in five major themes.FindingsThe study identified five main themes of corporate sustainability-oriented innovation in family firms, which include measuring corporate sustainability performances, building corporate sustainability-oriented infrastructure, stabilizing/optimizing operations, enhancing operational flexibility/independence and knowledge management and development. The study also provides an activity-based guide for family firms to use innovation to achieve corporate sustainability goals and present the findings’ implications for policymakers.Originality/valueThe present study is the first study to empirically investigate the relationship between family-driven innovation and the incorporation of corporate sustainability at each of the corporate sustainability maturity levels.

SON PREFERENCE, FAMILY CONTROL AND FAMILY MEMBER SELECTION BIAS: EVIDENCE FROM CHINESE LISTED FAMILY FIRMS

This study investigates the influence of regional culture on local family firms from the perspective of son preference. By analyzing a sample of all 604 family firms listed on the China Shenzhen Stock Exchange, this study finds that in areas where son preference is pervasive, local family firms will give priority to introducing sons rather than daughters into the firm, and are more likely to hire a family CEO and hold more control of the firm in order to strengthen family control. Meanwhile, family firms in areas where there is a high preference for sons over daughters are also more inclined to choose close rather than distant relatives, and blood rather than affinity relatives into firms. This study contributes to this research by exploring the influence of local culture on family firms and verifying that family members are not a group with consistent interests; some family members are always given higher priority within the family. In addition, most research assumes that family firms in China are homogeneous; we demonstrate heterogeneity across China within different regions.

Balancing work and family when family is work: a reconceptualization of work–family integration, burnout and detachment in family business

PurposeBuilding from calls for greater interdisciplinary research in interpreting family business phenomena, we integrate research on work–family conflict, detachment and burnout from both organizational and family studies. Using the characteristic work–family integration of family business settings as a backdrop we develop theoretical arguments that emphasize the reconciliatory role of interdisciplinary perspectives to explain the ostensibly contradictory findings in extant research. The diminishing barriers separating work and life spheres occurring in most global industries illustrate the importance of conceiving the study of work–life phenomena through recursive, rather than linear, logics and emphasizing the relevance of family business research in providing a contextual foundation for interdisciplinary discussions.Design/methodology/approachThis theoretical paper integrates perspectives from the literatures on organizational behavior and family systems theory to form six propositions on the relationship between work–life integration and the antecedents and consequences of burnout and psychological detachment.FindingsThis paper explores the nuances that overlapping work and family roles might be a source of both harmony and discord in family firms. In doing so, our research contributes to the growing relationship between family systems theory and family business research, and creates the foundation for future empirical studies on the psychological dynamics that underlie work–family integration.Originality/valueThis research advances a novel perspective on the interactions between work–family integration and burnout and detachment, and does so by noting that the way the family business literature treats work–family integration may apply to any employee that experiences tension between these different spheres of their identity.

ESG performance on the value of family firms: international evidence during Covid-19

The link between the financial success of family companies during COVID-19 and their environmental, social, and governance (ESG) performance is examined for the first time in this research. We have a natural setting in the COVID-19 era to see if the market rewards family-run firms that integrate social and environmental concerns into their goals during uncertain times. Since they can enhance their image and reputation, which the market values, these companies are likely to pursue broader social objectives, such as environmental improvement (socioemotional wealth perspective); alternatively, managers can act as stewards of the family’s interests by using these initiatives to increase the company’s value (stewardship perspective). However, it is also possible that in this type of companies economic interests prevail over social wellness (“amoral familism”). Therefore, family-owned firms could be reluctant to implement ESG practices unless they yield certain socioemotional benefits, including enhancing or maintaining their reputation in the public eye. In light of the above, we use an international display of the 500 biggest family firms in the world from 2015 to 2021. Taking into account an endogenous relationship between ESG performance and family business value, the study uses generalized moments to construct a dynamic panel (GMM). The primary conclusion is that there is a positive correlation between corporate valuation and ESG performance. Nonetheless, it has been noted that the performance of the companies is negatively impacted during the COVID-19 period. However, for firms with superior ESG performance, this negative impact did not exist over this period, supporting the idea that investors view better ESG performance as a prediction of future good stock performance. The results have a variety of implications. To begin with, this study adds to the body of knowledge on the environmentally friendly and sustainable expansion of family companies by providing recommendations for investors and businesses to better understand the influence of ESG on the profitability of family businesses. Furthermore, managers have to concentrate on enhancing the ESG performance of their organizations as it has the potential to increase value, draw in investments, encourage sustainability, control risks, affect earnings, and interact with the ownership structure. Additionally, managers need to consider how important it is to have a strong ESG performance in order to mitigate the negative effects of external crises like the COVID-19 epidemic. It’s crucial to remember that the precise impact might change based on the sector and other aspects unique to each company.

ETHICAL LEADERSHIP IN FAMILY BUSINESS IN THE AGE OF DIGITAL TRANSFORMATION

Family firms have long been a mainstay of the world economy because of their distinctive combination of custom, long-term vision, and close-knit ownership structures. But these well-established businesses face a difficult battle from the digital revolution. In order to be competitive, family companies need to embrace digital transformation as technology redefines customer behaviour and changes entire industries. The ethical leadership required for this transformation journey must strike a balance between the demands of a fast evolving digital landscape and the family's core values. Families-run enterprises, the foundation of many economies, are at a crossroads. The digital era, characterized by swift technical progress and changing customer needs, demands a change to guarantee their sustained prosperity. Family-owned businesses have particular difficulties as a result of this shift since they have to balance their enduring traditions and values with the needs of the digital age. It becomes clear that ethical leadership is essential for negotiating this challenging environment. It investigates the complex interrelationships among family companies, digital revolution, and ethical leadership. Family businesses, with its unique fusion of agility and tradition, find themselves at a turning point in the digital age. This shift calls for a fresh emphasis on ethical leadership and offers both opportunities and challenges. We look at how ethical decision-making in the digital sphere might be guided by fundamental family business principles. This entails dealing with concerns including cybersecurity, algorithmic bias, and data privacy. The study goes on to discuss tactics for guaranteeing accountability among all parties involved, encouraging openness, and cultivating an ethical culture within the family business. Family businesses may secure long-term sustainability, bolster their competitive advantage, and cultivate trust with clients and staff by employing ethical leadership in the digital era. Keywords: Family Business Management, Ethical Leadership, Family Business, Ethics, Digital Transformation, etc

The role of financial investors in successful family‐firm takeovers: A configurational approach

AbstractFamily firms increasingly opt for an external succession route and sell shares to financial investors. Yet, not all family‐firm takeovers by financial investors are financially successful. To date, however, we lack a nuanced understanding of the conditions under which financial investors' family‐firm takeovers will succeed financially. Our fsQCA study builds on 52 interviews to reveal the interplay of three typical levers that financial investors use (i.e., operational, strategic, and governance measures), the market situation, and investor type. We identify three distinct roles (i.e., incentivizers, optimizers, and adjacent investors) that financial investors take in successful family‐firm takeover cases. We situate our findings in the literature on resources and their orchestration to explain how investors create value in each of the identified paths, and we contribute to the literature on family‐firm succession and the interplay of family firms and financial investors.

The accounting for defined benefit pension plans in family firms

AbstractThis paper investigates the accounting for defined benefit pension plans in U.S. family firms. Relying on agency theory and the literature on defined benefit pension plans, we test whether the allocation of pension plan assets, the expected rate of return on pension plan assets and the contributions to defined benefit pension plans in family firms are significantly different from those in non‐family firms. Relying on a sample of U.S. firms over the period 2004–2018, we first document that family firms take more risk when allocating their pension plan assets relative to non‐family firms where they allocate a larger (smaller) percentage of pension plan assets in equity (debt) securities. We also show that family firms are more aggressive in setting the expected rate of return on pension plan assets than non‐family firms. However, family firms’ contributions to defined benefit pension plans are comparable to those of non‐family firms. Our findings hold after controlling for the endogeneity in family firms. These findings are important since they provide first hand empirical evidence on the accounting for defined benefit pension plans in family firms. They further shed light over pension plans that serve as a key tool to attract and retain executive talents and make up a significant portion of firms balance’ sheets.

Executive gender and firm leverage decisions: The role of firm ownership and governance

Female leadership in strategic decision-making has received considerable attention in the context of global gender inequality. To advance our understanding of the role of executive gender in corporate financing decisions, we examine whether family firms are less likely to use leverage than their non-family counterparts when they have a female leader (considering CEO and board chair as leadership positions). In addition, we examine whether board independence influences gender differences in the use of leverage in family firms. Drawing on the behavioral agency model (BAM) and socioemotional wealth (SEW) theory, we develop and empirically test our hypotheses using a large dataset of firms from 40 countries. Our results show that family ownership increases the reluctance of female-led firms to use leverage, but board independence mitigates this effect.

Institutional effects on family business internationalization: a systematic review

Abstract Family firms play a vital role in the global business landscape, significantly impacting their home countries GDP. These firms diverge from non-family counterparts in their internationalization strategies, yet they stand to gain substantial benefits from international expansion. Beyond economic considerations, family resources and values introduce non-economic factors that challenge traditional economic theories. This study leverages an institutional approach to illuminate the multifaceted influences shaping family firms’ internationalization, encompassing positive and adverse dynamics. The integration of institutional theory marks a recent shift in understanding family firm internationalization, encompassing institutional and economic geography perspectives. To foster discourse and guide future research, this paper systematically reviews peer-reviewed articles covering over a decade, from 2010 to 2023. It identifies formal and informal institutional elements, alongside economic geography factors, that either facilitate or impede family firms’ internationalization. This review underscores existing knowledge gaps at the nexus of institutional theory, economic geography, internationalization, and family business studies. Notably, the systematic literature review uncovered a limited corpus of only 41 articles, indicating the need for more research exploring the synergy between economic geography and institutional factors in the context of diverse internationalization strategies. Furthermore, the review highlights the underexplored terrain within social institutions and economic geography, revealing a notable gap in the extant research.

How Public Support for Innovation Affect Entrepreneurial Orientation of Mexican Companies: The Moderating Effect of Being a Family Business

AbstractWe study the relationships between the input and network additionalities prompted by public support for innovation and entrepreneurial orientation and whether being a family business moderates these relationships. The results, based on a dataset of 115 Mexican firms, show that the changes generated by public support for innovation programmes encourage entrepreneurial orientation. Additionally, family firms have a differential ability to transform input and network additionalities into entrepreneurial orientation. This study contributes theoretically and practically by highlighting the positive effects of research and development support programmes on a firm’s entrepreneurial orientation. It also points out the need to consider family status when designing public policies, since our results reveal that family and non-family firms are not equally efficient in transforming resources into entrepreneurial orientation and that family firms that drive networking through the rules of the subsidy do not trigger the expected potential benefits.

A multi-level model of family enterprise corruption

Corruption is an important social and economic problem globally, and family firms are an important source of such corruption that we know too little about. By leveraging insights from the literature on family priorities, governance, and institutional environments, we develop a multi-level model highlighting why some family firms are prone to exhibit corruption in specific contexts. We focus on businesses where close connections between firm and family cause the priorities of the one to affect the other. There, family loyalties, conflicts, ethics, and social aspirations can enhance the willingness to engage in corrupt behavior. Private ownership and secrecy facilitate that behavior, as do tempting contexts with few institutional constraints. We provide examples and propositions for further research.

Cash holdings decision‐making in Spanish family firms: Exploring the impact of heterogeneity

AbstractCash holding decision‐making is one of the main corporate challenges for family firms (FFs), with significant consequences for their growth and survival. It is closely connected to key financial decisions such as financing, investments, and dividends. The motivations behind adjusting cash holdings vary, encompassing precautionary, risk avoidance, opportunity cost considerations, and the spending hypothesis. In our study, we aim to integrate specific motivations for cash holding decisions that stem from the influence of family dynamics within these businesses since FFs have unique characteristics, which affect their financial choices. Therefore, we analyze the impact of family involvement in management and the generational stage of FFs on their level of cash holdings. The results of the partial least squares–structural equation modeling, which was estimated on a sample of 7269 unlisted Spanish FFs, show that the higher the level of family involvement in management, as well as the higher the generational stage, the higher the level of cash holdings, with this having a positive effect on the firm's performance. In addition, we find that the positive relationship between family involvement in management and the level of cash holdings is strengthened by family ownership and weakened by family governance. These findings are relevant for a better understanding of the complexity of cash holding decision‐making in FFs and have practical implications not only for the FFs themselves but also for the entities related to them due to the important links between a firm's liquidity and its risk of default and performance.

The role of culture in family firms

The role of culture in family firms

Large state-owned shareholders and cash holding: Evidence from family firms

This paper investigates the effect of large state-owned shareholders on cash holding in family firms. Using a large sample of Chinese listed family firms for 2012–2022, we find that large state-owned shareholders positively impact cash holding in family firms. The finding remains valid to a battery of sensitivity tests and is attenuated for family firms with higher control power of the controlling shareholder, family firms originating from the privatization of state-owned enterprises, and family firms located in regions with lower levels of institutional development. Economic mechanism tests show that large state-owned shareholders increase cash holding in family firms by reducing related-party transactions and perk consumption. These findings support the view that better corporate governance may increase corporate cash holding and suggest that state-owned ownership is an essential variable in the predictors of cash holding in family firms.

Sustainable Development of Chinese Family Businesses: Exploring the Role of Succession Planning in Maintaining Organizational Sustainability from the Perspective of Socioemotional Wealth

Identifying the factors affecting organizational sustainability is a crucial topic in the field of social science and business research. Especially in family businesses, the most crucial issue is how to maintain corporate sustainability across generations. In this regard, succession planning plays a key role in maintaining the sustainable development of family businesses. From the perspective of socioemotional wealth, this study discusses the motivations and consequences of intrafamily succession by measuring the impact of the internal determining factors of succession planning on family business performance. Based on a sample of 281 Chinese family firms, this study uncovers the relationship between succession planning and organizational performance. The core findings of this study include succession planning is positively related to organizational performance in the matter of the successor’s training; succession planning has a positive effect on organizational performance in terms of the successor’s self-preparation; and succession planning is positively correlated with organizational performance in the aspect of the relationship between the successor and business. By illustrating that the formulation of succession planning is an essential pursuit for family businesses to preserve sustainability and socioemotional wealth, the results reveal ways to facilitate succession planning through internal factors in the family business. This study contributes to organizational sustainable development literature, family business sustainability studies, and succession management research by validating the positive relationship between succession planning and organizational performance, indicating that succession planning is a vital driving force for achieving organizational sustainability.