Family-owned Firms Research Articles

Transformational leadership and non-family employee intrapreneurial behaviour in family-owned firms: the mediating role of adaptive culture and psychological empowerment

PurposeThe purpose of the present study is to examine the direct impact of transformational leadership on non-family employee intrapreneurial behaviour and through a mediating role of corporate adaptive culture and psychological empowerment in family-owned firms.Design/methodology/approachThe study’s sample consisted of 368 key role non-family employees at 109 family export and import firms in the Ho Chi Minh City of Vietnam. The data is analysed using a partial least square–structural equation model (PLS-SEM).FindingsThis paper shows that transformational leadership had a positive and significant influence on non-family employee intrapreneurial behaviour directly and via adaptive corporate culture and psychological empowerment as a mediating influence mechanism.Practical implicationsFamily-owned firms might balance the need to maintain traditional core values and requires innovation through the development of human capital with non-family employee intrapreneurship.Originality/valueThis paper grants a unique approach to studying intrapreneurial behaviour in the context of the family-owned business.

The role of tradition for food and wine producing firms in times of an unprecedented crisis

PurposeThe purpose of the present study is twofold. First, the study will investigate the importance of tradition for businesses operating during the COVID-19 crisis, notably, as a valuable proposition and strategy. Second, the study seeks to advance theoretical understanding, proposing two frameworks based upon emerging dimensions, the resource-based view and dynamic capabilities.Design/methodology/approachAn online survey gathered the views of 107 predominantly micro and small-scale owner-manager and family-owned firms involved in the food and wine sector. These participants are based in Italy, one of the hardest-hit countries in the crisis.FindingsThree fundamental dimensions emerge from the findings. The first, “embedded advantage”, concerns firms' more direct involvement and tradition-related actions. The second, “active advantage”, highlights the already established value of tradition, for example, through firm identity gained, well-established roots and firm culture. The third dimension, “strategic fusion”, underscores the importance of upgrading the business model, where innovation complements tradition strategically.Originality/valueThe study's revealed dimensions provide new conceptual perspectives to understand tradition in the context of firms confronting an unprecedented event. The first proposed theoretical framework illustrates that firms appear to mainly rely on tradition as the fundamental pillar of their overall strategy. Additionally, other firms engage in actions to consolidate tradition's strategic significance, while others embrace innovation to further strengthen their competitiveness. The second framework emphasises relations between these dimensions and key attributes associated with the two adopted theoretical foundations, where the need to “reconfigure tradition” clearly emerges.

Sit out or All in? Family Ownership and Turnaround Strategies in Severe Crisis

To investigate how firms attempt to overcome a survival-threatening crisis and why they do so, we apply a classification scheme of turnaround strategies and take a SEW perspective. We theorize how the level of family ownership relates to the employment of different turnaround measures and, ultimately, to insolvency. Analyzing a unique sample with responses of 209 risk managers reveals that the higher family ownership, the more the endangered firms tend to “sit out” instead of going “all in”, and that higher family ownership indeed makes insolvency less likely. This contributes to the literature on turnaround, particularly in family-owned firms, SEW, and to practice.

How Owners’ Emotions Shape Small Family Firms’ Selling Price Perceptions

Planning for business succession is a challenging process. For non-family successors, small family firm owners typically demand a sale price, which they specify based on personal experiences with and feelings toward their firms. However, their price perceptions typically do not represent the firm’s market value, which leads to failed transactions. Research studies selected emotions and lacks a measurement framework to quantify their impact on selling-price perceptions. Our study contributes to the literature by developing, validating, and preliminarily testing a new scale, which we denote the individual price indicator. To this end, we develop the proposed scale by analyzing 115 peer-reviewed papers in terms of emotional aspects and systematizing the corresponding results. We further validate the scale in two qualitative and two quantitative studies. Lastly, we provide a first test of the scale on owners’ willingness to accept lower sales prices. Our results evidence the scale’s usefulness to facilitate an owner’s business valuation practices.

Do Family Firms Pollute Less? – Was an Incomplete Question

While prior research suggests that family firms pollute less, the key explanation we have is the socioemotional wealth perspective, which suggests that family firms are more careful with their toxic emissions due to subjectively higher reputational costs that may follow a harm discovery. At the same time, it is relevant to note that not all types of environmental performance are regulated or even monitored to turn on the loss aversion rationale. An example is the energy efficiency context where a common socioemotional wisdom would not give any preference to family-owned firms. Nevertheless, studying the electricity consumption of 1,683 Canadian firms over a 5-year period between 2012 and 2016, we find that family-managed firms still consume less energy to attain the same level of sales (holding industry and other resource consumption factors constant). This questions whether the reputational concerns of the owners is a key reason to a lower pollution in family firms and also rejects a common assumption that doing so has an efficiency cost. We provide an alternative rationale.

Coopetition and family-owned wine producers

The purpose of this investigation, underpinned by resource-based theory, involves unpacking the complexity of coopetition activities (interplay between cooperation and competition) among family-owned firms. The methods involve 20 field interviews and statistical analysis of 302 family-owned wine producers in the United States. Principal findings establish the non-linear (inverted U-shaped) nature of the coopetition-performance relationship within family-owned firms. Furthermore, competitive intensity negatively moderated the non-linear relationship between coopetition and company performance and a positive moderation effect existed from a competitor orientation. Additionally, unique insights illustrate the importance of utilising social capital in building relationships with trustworthy and complementary partners within and across clusters to enhance the performance consequences of firms’ product-market strategies; that is, both in their domestic market and internationally. The non-linear coopetition-performance relationship suggests decision-makers should not engage in too little or too much coopetition and have an exit strategy if things do not work out as planned.

Finance Impact of corporate governance on the valuation of IPOs in Pakistan stock exchange listed Firms. A moderating role of the family Ownership.

The objective of our study is to investigate the impact of the corporate governance on the IPO performance with moderating impact of the family ownership. To investigate that relationship, we used the data of IPOs registered from 2008 to 2017 in Pakistan Stock exchange. We used the OLS methods to analysis of the data. Our findings shows that Board independence (BIND) has positive significant relationship with IPO return, it means that independent directors have the more technical knowledge and experience in maintaining the IPO return and making the strong policy for the organizations. CEO duality has the significant negative relationship with IPO return with (P=0.0833), it means that when CEO has the combine rule then decisions are not distributed, and monopoly existed in decisions that leads to the negative impact on the IPO performance. Board diligence, Board size, ownership concentration and gender diversity have no impact are being seen in our analysis. In the moderating effect of the family ownership in reference to board diligence (BD) the results changed to significant positive relationship, it means that with the family-owned firms when board meetings increased then increased in the IPO return due to some factors. With the moderation of the family ownership the results of the Board independence also improved that shows the role of the family-owned firm in between them. Women in the board that means the gender diversity has no impact but with the moderating effect of the family ownership women in the board has significant positive impact. This study is helpful for the financial managers, investors, and the finance students and also for the government, in maintaining the code of the corporate governance.

Born to rebel? The owner birth order and R&D investments in Chinese family firms

AbstractFamily background has a significant impact on family firms’ strategies such as innovation investments. Going beyond prior studies that exclusively focus on how family governance and management factors determine research and development (R&D) investment decisions, this study investigates a family science factor: family firm owner's birth order, defined as the relative rank of the owner in terms of the age hierarchy among siblings in the family. Joining the family niche model of birth order and socioemotional wealth perspective, we propose that later‐born family firm owners tend to be risk‐takers and invest more in R&D projects compared with their earlier‐born counterparts. We further examine how the two other powerful decision‐makers within family firms (i.e., chairperson of the board and CEO) enable or constrain the owner's birth order–R&D investment relationship. We contend that the positive birth order impact on R&D investment is weaker when a family member is the chairperson of the board, while such a relationship is stronger in the presence of owner–CEO duality. We confirm our hypotheses using a sample of 605 firm‐year observations from Chinese‐listed family firms between 2006 and 2014. This study demonstrates the important impact of family science factors on innovation heterogeneities, which is understudied in the family firm innovation literature.

International Expansion of Family Firms in the Arab World

Stemming from the ongoing and growing debate about the individualities of family firms and their internationalization behavior, this article aims to explore how family-owned firms can also achieve a high performance in markets at a greater distance, like the Arab World, which is still one of the fastest-growing economies globally. Using data on 128 German family firms, we found that the best strategy to achieve higher levels of international sales (as a proportion of total sales) in these markets is to enter multiple countries and opt for a single market entry mode, especially among family firms with only a few years of experience in the region. However, some family firms may decide to initiate business in a single Arab country, which leads to higher performance when family firms have more experience of the Arab World.

Political Connections, Family Ownership, and Firm Performance: An Emerging Economy

Emerging economies are characterised by a high proportion of family-owned businesses, significant political corruption, and a weak legal system which creates a more favourable environment for politically-connected family firms. Hence, we investigate the effect of political connections on firm performance in family and non-family-owned firms through advanced panel estimation techniques. Our result is based on a sample of publicly listed 150 non-financial firms from Pakistan Stock Exchange (PSX) over the period 2013–2018. We demonstrate that politically connected family-owned firms perform better than non-family owned connected firms. These findings have important policy implications for countries such as Pakistan which have experienced recent increases in the number of family-owned firms.

Corporate Governance and Tax Avoidance: Evidence from Governance Reform

Prior literature struggles to find evidence in U.S. settings to support the Desai and Dharmapala (2006) theory on how corporate governance affects tax avoidance. Most studies rely on equity incentive compensation as their governance proxy. We use a Mexican setting to examine this association and find firms with stronger governance engage in less tax avoidance. We rely on both a hand-collected governance index and governance reform to show improved corporate governance pushes tax avoidance toward a new equilibrium. Supplementary analyses show associations between governance and tax avoidance are greatest for tax-cost-sensitive family-owned firms and non-cross-listed firms with naturally weaker governance. A one standard deviation increase in governance corresponds to an increase of between one and three percentage points in a firm’s effective tax rate. Our findings suggest these governance reforms effectively reduce rent extraction by majority shareholders and identify Board independence and audit committees as channels responsible for decreased tax avoidance.

Family-centered goals, geographic focus and family firms’ internationalization: a study on export performance

ABSTRACT The aim of this paper is to investigate whether family-centred goals impact on family firms’ export performance and to determine the extent to which the geographic focus (regional versus global) of the firm’s strategy changes this relationship. Our hypotheses are tested on a sample of 195 medium to large family firms. The main findings show that, while family-centred non-economic (FCNE) goals negatively impact on export performance, family-centred economic (FCE) goals have a positive influence. Moreover, empirical evidence suggests that both effects are stronger when firms adopt an international strategy with a global, rather than regional, focus. We therefore suggest that a global strategy is detrimental for those family firms strongly prioritizing FCNE goals yet beneficial for those strongly prioritizing FCE goals. Overall, our study theoretically and empirically shows that the actual emphasis that family firm owners place on family-centred goals may either facilitate or inhibit their international sales and that this influence is moderated by the geographic focus of their international activities. In so doing, our study improves our knowledge of why some family firms are more successful than others in their international endeavours.

The influence of symbolic and instrumental attributes of employer image on perceived industry attractiveness: differences between business owners and employees

PurposeThis study determines the influence of employer image on industry attractiveness in small and medium-sized hospitality firms by using the instrumental-symbolic framework adapted from marketing literature.Design/methodology/approachA total of 405 employees and 429 family firm owners in Bavaria were surveyed using a quantitative research design. The authors used linear and hierarchical multiple regression analyses for hypothesis testing using the variables included in the instrumental-symbolic employer image framework.FindingsThe study revealed differences in perception between employees and owners. Data showed that employees' ratings for instrumental attributes, such as job security and income options, and symbolic attributes, such as industry attractiveness, significantly differ from those of owners. Consistent with the instrumental-symbolic framework, owners' perceptions of symbolic attributes predicted their perceived industry attractiveness.Practical implicationsOwners may examine how their industry's image needs to be changed to gain positive perception by current and potential employees. Policymakers may benefit from the study’s results that may help them find the right focal points for strategies in promoting Bavaria's hospitality sector. As a result, an adequate and positive image is created that attracts workers for this sector.Originality/valueThe study addresses the rather under-researched stakeholder group of existing hospitality employees, particularly with respect to employer image. Furthermore, owners and employees are compared, regardless of their individually different relationships to the business. Employer image is connected with overall perceived industry attractiveness, stating that the industry comprises individual employing businesses and thus depends on employer image.

Family ownership and corporate social responsibility disclosure

ABSTRACT This study investigates the association between family ownership and the level of CSR disclosure, and to what extent country-level institutional differences and level of industry risk differences influence this association. Using a sample of firms domiciled across 14 European countries for the period from 2010 to 2017, the empirical results show that there is a negative association between family ownership and CSR disclosure. The study also indicates that both institutional environments and the industry risk have influence on the association between family ownership and CSR disclosure. In particular, family-owned firms domiciled in coordinated market economies demonstrate a higher degree of CSR disclosure in comparison to their counterparts operating in liberal market economies. Further, the results show various levels of associations between family ownership and CSR disclosure, as well as social and environmental disclosures, for family-owned firms domiciled in the sub-categories of CMEs. In terms of industry risk, family-owned firms operating in high-risk industries have higher scores of CSR compared to firms in low-risk industries. Moreover, family-owned firms that operate in high-risk industries have higher scores of environmental disclosure, compared to social disclosure, in order to increase their legitimacy on environmental issues.

Family Firms, Chaebol Affiliations, and Corporate Social Responsibility

This study analyzes the corporate social responsibility (CSR) activities of family-owned firms by investigating public companies in Korea. By nature of their governance structures, which are aligned with the interests of their shareholders and management, family firms are managed from a long-term perspective based on a sense of ownership. While CSR implementation entails investment costs, it ultimately increases firm value by enhancing the firm’s reputation and brand image. As such, family firms are expected to be more active than non-family firms regarding CSR investments. We conducted an empirical analysis based on the Korean Economic Justice Institute Index (KEJI Index) from the Citizens’ Coalition for Economic Justice and found that family firms’ CSR scores were higher than those of non-family firms. This indicates that family firms are relatively more active in their CSR activities, as they are managed from a long-term viewpoint. However, family firms classified as large-scale corporate groups (chaebols) had lower CSR activity levels. This is because when family firms are classified as corporate groups, they can enjoy monopolistic market positioning through their subsidiaries, and are thus more likely to utilize the resources originally required for CSR in other projects that conform to the pursuit of firm interests.

Inefficiency patterns in family-owned banks in Bangladesh

PurposeMulti-directional efficiency analysis (MEA) is an alternative methodology to data envelopment analysis (DEA) that investigates the improvement potentials in each input and output dimension and identifies a benchmark proportional to these potential improvements. This results in a more nuanced picture of the sources of the inefficiency providing opportunities for additional conclusions about which variables the inefficiency is mainly located on. MEA provides insights into not only the level of the inefficiency but also the patterns within the inefficiency, i.e. its sources and location. This paper applies this methodology to Bangladeshi banks to understand the differences in the inefficiency patterns between different subgroups.Design/methodology/approachThis paper analyses the difference in the pattern of inefficiency between the older family-dominated banks and the newer non-family-owned banks in Bangladesh using the recently developed MEAs technology, which enables analysis of patterns within inefficiencies rather than only levels of (in)efficiency. The empirical results show that whilst there are few significant differences in the levels of variable-specific efficiency scores between the two subgroups, there are clearer differences on the inefficiency contributions from particular outputs in most of the study period and also on most variables in the time window of 2007–2009. This finding provides clues to differences in business models and management practice between the two types of banks in Bangladesh.FindingsThe empirical results show that whilst there are few significant differences in the levels of variable-specific efficiency scores between the two subgroups (older family-dominated banks and the newer non-family-owned banks), there are clearer differences on the inefficiency contributions from particular outputs in most of the study period and also on most variables in the time window of 2007–2009, during the Global Financial Crisis (GFCs). This finding provides clues to differences in business models and management practice between the two types of banks in Bangladesh.Practical implicationsDEA is a conventional tool for benchmarking in management science. However, conventional benchmarking exercises based on DEA do not reveal significant differences in the sources of inefficiency that show differences in business models. While DEA remains the most utilized technique in the efficiency literature, we think that a more flexible and deeper analysis requires something like MEA.Originality/valueThe contribution is twofold. First, examination of performances of family-owned firms is a well-established but analysis of performances of family-dominated banks is relative scarce. Secondly, isolating the sources of inefficiency which differs between types of banks even if there is no difference in inefficiency levels is absolutely new for a complete data set of conventional banks in Bangladesh. It turns out that there are few (significant) differences between the groups in terms of the inefficiency levels, whereas clear patterns emerge in terms of differences in inefficiency contributions between family-dominated and non-family-owned banks, during the Global Financial Crisis

The role of dyadic interactions between CEOs, chairs and owners in family firm governance

The objective of this case-based study is to understand how the dyadic interaction between the key governance actors can influence the decision-making aimed at directing and controlling a family firm. The study provides evidence that dyadic interaction at the back stage of the formal governance process can offer a privileged position for the family firm owners who serve on the board, and the non-family member Chair of the Board, to influence decision-making before, after and between board meetings. The cases studied suggest that dyadic interactions can serve as preparation for formal board processes and complement and clarify them, yet they also have the potential to conflict with them. Dyadic interaction is also shown to offer important relational and emotional benefits that may not necessarily be achieved through larger group interaction. The findings suggest that although the actors can self-regulate their behaviour through informal rules, the rules may imperfectly address one risk of dyadic interaction—the reduced cognitive conflict among the board.

Women's Leadership and Pragmatism Incidences on Performance of Listed Family-Owned Firms in the Cultural Context of Arab Countries

This research paper aims to study the level and determinants of the financial performance of family businesses, according to the gender of the board of directors’ chairman in the Arab world. Our research approach is based on a sample of 152 listed family-owned businesses and a control sample of 166 listed non-family businesses over the 2011-2018 periods. The research results indicate that the female gender issue has a positive influence on the financial performance of businesses with family ownership. This is explained by the fact that women leaders have a prudent and pragmatic leadership style that limits stereotypical images of women presidents’ leadership style in the Arab world. This result is original since it can be considered as the first one to ever clarify the relationship between female leadership in the board of directors, risk-taking, and financial performance in the context of family ownership in the Arab countries.

Dark Triad Personality Traits and Selective Hedging

We study the relationship between risk managers' dark triad personality traits (Machiavellianism, narcissism, and psychopathy) and their selective hedging activities. Using a primary survey of 412 professional risk managers, we find that managers with dark personality traits are more likely to engage in selective hedging than those without. This effect is particularly pronounced for older, male, and less experienced risk managers. The effect is also stronger in smaller firms, less centralized risk management departments, and family-owned firms.

Is there any association between real earnings management and crash risk of stock price during uncertainty? An evidence from family-owned firms in an emerging economy

This research work intends to analyze the association between real earnings manipulation and stock price crash. Further, we also analyze the spillover outcome of the crash as a result of applying real earnings management. It is hypothesized that there is a positive and statistically significant association between real activities manipulation and crash risk. It is also assumed that this spillover outcome is more noticeable during uncertainty. By applying data of family firms for the time period 2005–2018, empirical results provide the proof that real manipulation has a significant impact on stock crash for a developing economy like Pakistan among family-based companies. This research work also gives a statistical insight that spillover outcome is more notable for firms facing uncertainty. Our statistical estimations are in support of the assumed hypotheses of the study. This study has very significant and practical implications for academic researchers, standard setters, and investors.