Heterogeneity Of Family Firms Research Articles

The Role of Inward FDI and Family Firm Heterogeneity on Foreign Location Choice: Evidence from India

The Role of Inward FDI and Family Firm Heterogeneity on Foreign Location Choice: Evidence from India

Lack of resilience after COVID-19: the role of family firm heterogeneity and behavior. fsQCA versus regression

PurposeThis study analyzes antecedents explaining the lack of resilience in family-owned firms. Our model suggests that family-owned firms’ strategic behaviors and heterogeneity explain a particular crisis outcome: a lack of recovery.Design/methodology/approachOur evidence is based on a sample of 842 European family-owned firms. We complement regression analysis results with fuzzy-set qualitative comparative analysis (fsQCA).FindingsOur results show that lack of resilience is relevant. In fact, in our sample, 60% of family firms (FFs) failed to recover their sales. This evidence supports the role played by exploitation and exploration behavior as well as family heterogeneity in explaining the lack of recovery.Research limitations/implicationsOur results may offer guidance to practitioners and policymakers on the pathways that explain the lack of resilience.Practical implicationsAlthough it is unlikely that an external crisis such as COVID-19 will occur again to the same extent, other threatening events may occur and impact FFs. Understanding how FFs can avoid non-recovery is crucial: it can inform managers on how to deal with stressful events and provide guidance to economic authorities on how to help FFs around the world avoid non-recovery, which affects the economy.Originality/valueFirst, the study contributes to FF research by offering a theoretical explanation for the different effects of FF attributes on non-recovery in the context of a global crisis. Second, it contributes to the literature on organizational resilience by examining explorative and exploitative behaviors as antecedents of FF non-recovery. Third, we show the usefulness of combining fsQCA and regression analysis to understand complex phenomena.

What makes Latin American family firms different? Moving beyond cross-cultural comparisons

This editorial introduces the special issue on “Family Business in Latin America”. We argue that the cultural context plays an important role as a source of heterogeneity of family firms. Thus, in this introductory piece, we describe the Latin American cultural context and explain how and why it creates a unique environment that requires family firms to behave differently. We build on past research as well as on the four articles published in this special issue. The goal is to stimulate further research on Latin American family firms, what makes them unique, and what we can learn from this context that may be useful in other cultural environments.

How does family firm heterogeneity affect CEO compensation

How does family firm heterogeneity affect CEO compensation

Disentangling family firm heterogeneity: Evidence from a cross-country analysis

The existing typologies, classifications that identify types of family firms based on specific characteristics, aim to enhance our understanding of the heterogeneity of family businesses. However, these typologies fall short in thoroughly exploring and predicting behavioural and performance consequences associated with being categorized within specific classifications. Furthermore, the majority of the existing analyses have been empirically tested in one single country. To address these two research gaps, we use a sample of 814 small- and medium-sized family firms operating in 21 countries, collected by the STEP Project Global Consortium. This sample is employed to classify family firms based on their corporate governance similarities and explore their behavioural and performance patterns. Building on the principles of the configurative approach, we find that each of the four family firm configuration—group of family firms with related corporate governance mechanisms—has a unique yet similar combination of patterns in terms of transgenerational entrepreneurship practices, non-economic goals, and firm performance. Additionally, expanding on the isomorphic effect, we find evidence indicating that certain world macroregions exhibit a greater propensity for specific corporate governance configurations compared to others.

Unveiling new opportunities: A mixed gamble approach to external search breadth within family firms

This study introduces the idea that external search breadth constitutes a ‘mixed gamble’ where family firms face a unique trade-off between financial and socioemotional wealth (SEW) gains and losses. Considering the peculiarities of family firms, we examine the distinctive influence that two sources of family firm heterogeneity, namely family management and family generational stage, have on the mixed gamble of external search breadth. In addition, we also investigate export propensity as a contingent factor with the potential to alter the manners in which family management and family generational stage affect the external search breadth mixed gamble. Using a longitudinal sample of 1240 Spanish family firms, we empirically find that family firms with greater family management and in first-generation attach more importance to current SEW losses than to potential financial and SEW gains, resulting in lower external search breadth. Furthermore, we find that export propensity alters family managers' mixed gamble of external search breadth, so that current SEW losses become less pronounced in the financial and SEW trade-off, which leads to a higher external search breadth.

Do Family Firms Issue More Readable Annual Reports? Evidence From the United States

Using a sample of 22,442 firm-year observations for 3,721 U.S. listed firms, we show that family firms, on average, issue annual reports with higher readability than non-family firms. Higher readability could occur due to lower obfuscation or less information conveyance. By controlling complexity and choosing readability measures linked to obfuscation, we attribute the higher readability to lower obfuscation. Our investigation into the heterogeneity in family firms shows that the positive effect of family control on reporting readability exists for eponymous family firms but not for non-eponymous family firms. We also find that family firms managed by founders or heirs issue more readable 10-K reports than non-family firms, but family firms managed by outsiders do not exhibit such a difference. Cross-sectional analyses show that the difference in readability between family and non-family firms diminishes for firms with more earnings manipulation, weaker board governance, and dual-class shares. Further, we find that investors perceive family firms’ annual reports with higher readability to be more informative. Finally, we use state-level succession tax cuts as an exogenous shock to link the higher readability to family insiders’ incentives and preferences. Our findings are consistent with the view that family insiders’ incentive to maintain family reputation contributes to lower obfuscation in 10-K narrative disclosures.

Determinants of Green Innovation in Family Firms

Family firms represent a unique kind of company and extent research characterizes them to be rather risk-averse in their commitment to innovation but consider them to be more efficient in their innovation efforts in contrast to non-family firms. Although family firms have a widespread impact on the worldwide economy, there has been limited research on the heterogeneity in their innovation behavior in both family firm and innovation literature. The growing body of research on green innovation indicates that it is a distinct type of innovation due to its unique characteristics and common knowledge on general innovation in family firms cannot be transferred to their behavior with respect to green innovation. Therefore, we aim to investigate why family firms engage in green innovation and which factors determine their green innovation performance. To investigate this new phenomenon and contribute to theory, we conduct a multiple-case study based on a sample of German family firms from different industries by collecting and analyzing data from both publicly available sources and interviews conducted with the top management of these firms. Thereby, these firms cover the spectrum family firm heterogeneity in this field ranging from high to low green innovation performance and their approach to green innovation supports our argumentation. Our findings suggest that family firms develop and adopt green innovation due to their SEW aspirations, as these lead them to think and invest for the long term. If they engage in the development and implementation of green innovation, however, their success depends on their familiness, namely their social capital, human capital, and financial capital, as these resources are crucial to successfully manage the complexity of the green innovation development process. This study is equally important for researchers, practitioners, and policy makers as it highlights the key obstacles and requirements for family firms to successfully develop and implement green innovation.

Emotional heterogeneity and intergenerational knowledge transfer in family firms

With this study, we attempt to understand how emotions influence the intergenerational transfer of knowledge in family businesses from the perspective of emotional heterogeneity. We use a qualitative methodology of multiple case studies to comprehensively address theissue. The results indicate that emotions influence knowledge transmission and learning, sotransmission is more effective in Enmeshed and Balanced family businesses than in Disengaged ones.

Family firm heterogeneity and patenting. Revising the role of size and age

AbstractThis study offers a comprehensive framework for evaluating the moderating effects of size and age on the relationship between family ownership and innovation. The research hypotheses are tested on a large sample of Italian firms observed over the 2010–2017 period using a zero-inflated nonlinear count model. To refine the understanding of firm heterogeneity, we employ a three-way interaction approach. Results show that the patenting gap between FFs and non-FFs is sensitive to size and age. Compared to non-FFs, FFs underperform when they are small and young, or large and mature, with no substantial differences seen in other types of firms. By referring to the Socioemotional Wealth theory, we find that the founder effect, which differs over a firm’s life, is behind a good deal of these findings.

Socioemotional Competencies in higher education

A large number of the powerhouses of the world economy are family-owned. In Latin America, these generate jobs and contributions to the regional economy. The decision-making of these companies significantly determines their good performance and sustainability, so it is crucial to understand their causes, nature, and effects. The present investigation is of a mixed approach, not experimental; Through the systematic literature review, current production is studied in four principal databases. This paper offers a current look at the state of the literature on family business decision-making in the Latin American context. The main results show that the current literature has a very limited field of application and that, added to this, the heterogeneity in family firms should allow generalizations. It is necessary to broaden the methods and perspectives of study to address the subject.

Decision-making in Latin American family firms: a systematic review of the literature

A large number of the powerhouses of the world economy are family-owned. In Latin America, these generate jobs and contributions to the regional economy. The decision-making of these companies significantly determines their good performance and sustainability, so it is crucial to understand their causes, nature, and effects. The present investigation is of a mixed approach, not experimental; Through the systematic literature review, current production is studied in four principal databases. This paper offers a current look at the state of the literature on family business decision-making in the Latin American context. The main results show that the current literature has a very limited field of application and that, added to this, the heterogeneity in family firms should allow generalizations. It is necessary to broaden the methods and perspectives of study to address the subject.

Family businesses and debt maturity structure: Focusing on family involvement in governance to explain heterogeneity

Understanding family firms’ debt maturity structure is important because it plays a key role in making strategic decisions and mitigating agency conflicts. This study investigates the relationship between family involvement in governance and debt maturity structure in family firms by drawing on governance literature and insights from the socioemotional wealth perspective. Based on a sample of non-financial Italian public family firms, comprising 383 firm-year observations, we find differences in the proportion of long-term debt depending on variations in components of family involvement in governance. In particular, later-generation involvement on the board is associated with a lower proportion of long-term debt. Furthermore, family ownership positively moderates this relationship such that the proportion of long-term debt is higher with high family ownership. This study contributes to literature by adding further nuance to our understanding of the heterogeneity of family firms, by considering the relationship between variations in family involvement in governance and debt structure. Our study has practical implications that may inform investors about factors related to family involvement in governance, which are likely to influence debt maturity structure, and thus long-term strategies of family firms.

The influence of board social activity on firm performance

This study investigates the relationship between board social activity (i.e., frequency of board meetings) and firm performance in publicly traded family and non-family firms, focusing on the moderating effects of family involvement (i.e., family ownership and at least one family member on the board of directors). Our investigation is based on a database of 172 family and non-family firms listed on the Italian Stock Exchange over a 10-year period (1098 observations). The results indicate a curvilinear (inverted U-shaped) relationship between board meeting frequency and firm accounting performance. Moreover, family involvement positively moderates this curvilinear relationship, leading to an optimal level of board meetings, which is higher in firms with increasing family involvement than in other firms. Applying behavioral governance theory, we contribute to explain how boards of directors influence firm performance through the board context (i.e., family involvement) and arrangements (i.e., frequency of board meetings/social interactions), providing evidence for family firm heterogeneity.

Promote or inhibit: State-owned equity participation and family firms’ innovation investment

Targeting A-share listed family firms on the Shanghai and Shenzhen Stock Exchange, this study focuses on the special situation of state-owned equity participation in non-state-owned enterprises. Specifically, we explore the relationship between state-owned equity participation, intergenerational succession in family firms, and innovation investments. The results reveal a prominent “double-edged sword” effect of state-owned equity participation on family firms; that is, there is a reversed U-shaped relationship between shareholding proportion and innovation investment. To some extent, the intergenerational succession of family firms moderates the reversed U-shaped relationship. Moreover, the double-edged sword effect of state-owned equity is more prominent in family businesses that are created by the entrepreneur from scratch. Compared to existing research arguing for the linear relationship between state-owned equity participation and innovation investment by enterprises, we reveal the impact of the excessive supervision effect arising from the increase in state-owned equity holdings on family firms’ innovation. This study confirms the double-edged sword effect of state-owned equity participation in family firms and further explores the influence of intergenerational succession and the heterogeneity of family firms on such an effect. By revealing the double-edged sword effect of state-owned equity holdings, this study enriches the research on the participation of private enterprises in mixed-ownership reform.

Regional culture: The role of the invisible hand in shaping local family firms' top management team.

Research on family businesses has focused on the differences between family and non-family firms regarding the top management team (TMT), while this study further explores the difference within family firms from different regional culture based on the perspective of socio-emotional wealth (SEW) and evolutionary psychology. Using a sample comprised of all 625 family firms listed on the Small & Medium Enterprise Board and Growth Enterprise Board in Shenzhen Stock Exchange, this study finds that in regions of strong clan culture, family members are more willing to be involved in a family business and accept lower economic rewards. Particularly, when financial risk is high, these relationships mentioned above become more significant. Based on the results, this study proves that regional culture can affect the characteristics of top management teams in family firms, explains the heterogeneity of family firms' decision-making from a culture-based perspective and extends existing research on family business from the level of "family firm vs. non-family firm" to that of "family firms affected by different regional cultures".

Debt maturity in family firms: Heterogeneity across countries

This study examines whether the heterogeneity of family firms and their legal and institutional contexts shape their debt maturity. We analyze a dataset of 121,238 listed and private firms worldwide (105 countries) and find significant differences in the determinants of family firms’ debt maturity according to whether they are listed or private SMEs. Our findings show that listed family firms have shorter debt maturities when they have a family CEO, have more concentrated ownership, and are in weak contexts, while these same features facilitate private family SMEs’ access to long-term debt. Generational transition favors longer-term debt in both listed and private family firms.

The corporate governance-diversification link: exploring the heterogeneity of family firms

PurposeBuilding on behavioral agency theory, the authors explore the role played by corporate governance characteristics as drivers of the diversification strategies of family firms. Specifically, this study aims to investigate the effects of board size and board gender diversity on the likelihood that family firms will execute a diversifying acquisition vis-à-vis a related acquisition. Furthermore, the authors investigate the contingency effects played by foreign directorship and the firm’s listing status.Design/methodology/approachThe hypotheses are tested on an original sample of 213 cross-border acquisitions executed by Italian family firms between 2008 and 2021.FindingsThe findings suggest that both large board sizes and greater gender diversity positively affect the diversification of family firms. While the presence of foreign directors magnifies the positive effect of board size, gender diversity discourages diversification in the case of listed firms.Originality/valueThe originality of this study is twofold. First, while prior literature has mostly focused on the family vs nonfamily dichotomy, this paper contributes to an emergent line of research investigating the heterogeneity among family firms’ corporate strategy decisions. Second, by exploring the corporate governance-diversification link in the context of family business, the authors answer to recent calls that diversification by family firms deserves further investigation in light of its highly controversial nature in terms of socioemotional wealth implications and potential mismatch among multiple objectives.

Family involvement and proactive tax management behaviour in private family SMEs

PurposeThis paper investigates whether board composition, a family chief executive officer (CEO) and the firm's managerial capabilities affect proactive tax management in family small and medium-sized enterprises (SMEs). The main statement is that the professionalisation of corporate government and management practices explains the difference in tax avoidance behaviour in closely held family SMEs.Design/methodology/approachUsing the 2012 Spanish thin-capitalisation rule as a quasi-experiment, the authors estimate panel regressions with firm fixed effects and robust standard errors. This model represents a triple difference-in-differences combined with propensity score matching (PSM-DID).FindingsAnalysis shows that having a high proportion of non-family board members and a high endowment of managerial capabilities lead to tax liability optimisation in family SMEs. Conversely, familial boards and family SMEs with low managerial capabilities lack enough expertise to weigh the costs of tax avoidance over the benefits, resulting in a reluctance to engage in tax optimisation behaviours. Alike, results show no significant relation between CEO's family affiliation and tax management behaviour.Practical implicationsWhen implementing fiscal policies, the specific needs of family SMEs should be considered, and how these needs interact with corporate governance and managerial mechanisms. Moreover, policymakers need a deeper understanding of family SMEs in order to develop policies appropriate to their characteristics. A more comprehensive knowledge of how family firm heterogeneity affects corporate decisions, such as indebtedness and fiscal decisions, may improve public policies.Originality/valueThis study addresses the issue of tax behaviour in family SMEs in a particular event that implies a specific logic to weigh the pros and cons of each alternative: reducing debt or paying more taxes. This study’s conclusions are based on a model that deals with potential endogeneity problems, which avoids bias in the findings.

Unveiling the Direct Effects of Family Firm Heterogeneity on Environmental Performance

By combining agency theory and the resource- and capabilities-based view, this paper aims to unveil the influence of family firm heterogeneity on environmental performance. Previous results are inconsistent about how the specific features of this type of business contribute to better environmental protection performance. We analyse a number of variables related to the management, ownership and corporate governance characteristics of the family business and their individual influence on environmental performance. We test our hypotheses using a database of 748 family firms in the Spanish tourism sector. This economic sector, which is mostly composed of family businesses, puts great pressure on the environment. As such, family firms must take an active role in the resolution of the environmental problems that afflict society. We find that the effects of a family-controlled ownership and management structure on environmental performance are negative. Family-founder firms with a high degree of family control also are shown to have a negative relationship with environmental performance. However, the existence of a formal management mechanism, such as a management committee, emerges as the most powerful structural factor in facilitating the achievement of environmental objectives. The conclusions drawn from this study allow us to outline future lines of research as well as recommendations for practitioners. Our study responds to the call made in the literature to delve deeper into the heterogeneity of the family business, and specifically to determine which of its characteristic features allow this type of business to achieve better environmental performance.