Family Firm Performance Research Articles

The Influence of the Business Name on the Economic Performance of Family Firms: An Analysis According to the Generational Stage

A family identity of a firm, exhibited by the presence of the family name in the business name, can influence the value of economic profitability. The present analysis also explores if this relationship varies depending on the size and the generation running the business. The sample used to conduct this study comprises a panel data set of 21,149 Spanish family firms containing information from 2003 to 2015, which translates into a balanced database including 274,937 observations. For analysis purposes, the firms are classified into small, medium-sized and large ones. Contrary to the competitive advantages brought about by the family identity of the businesses highlighted by previous research, the current study suggests its negative effects on the profitability of small and medium-sized family firms. This effect is more acute when the company is managed by its founding generation. The findings in the case of large family firms indicate that the company name does not have an impact upon economic profitability.

When does time enhance family firm performance? Examining family generation in control and family control dispersion through a mixed-gamble logic

We investigate the differential effect of time in terms of generation in control of the firm's management on family firm performance to address the call in the literature for a more nuanced treatment of family firms and their performance differences. By drawing on the mixed-gamble logic of the behavioral agency model, our work suggests that the family's socio-emotional wealth (SEW) varies across generations, resulting in complex performance relationships. We theorize and empirically find that earlier-generation family firms protect current SEW and perform increasingly worse while later-generation firms maximize prospective financial wealth and perform increasingly better. Additionally, we argue that high family control dispersion mitigates the negative effect on performance of earlier generations in control and increases the positive effect of later generations in control. Important theoretical and practical contributions emerge from this study.

Business process innovations in family firms: evidence from Serbia

PurposeThis paper aims to explore the innovation performance of Serbian family firms, the differences in the innovation performance between family and non-family firms as well as different family firms, and the relationship between business process innovation and customer satisfaction among family firms.Design/methodology/approachThe sample consists of 207 valid responses from young Serbian companies from various industries founded in 2015 that published their financial statements in 2017. The statistical analysis involved descriptive statistics, reliability analysis, independent samples t-test, one-way ANOVA, and correlation analysis.FindingsThe study results indicate that family businesses in Serbia are innovation-oriented and that they introduced a number of innovations in business processes related to the production and distribution of goods or services and the development of products and business processes. The results also suggest that family and non-family firms are equally committed to introducing innovations in business processes. In addition, the study did not confirm significant differences in the performance of business process innovations among family firms in the manufacturing, trade, and service sectors. Finally, the results demonstrate that introducing business process innovations is positively associated with customer satisfaction and customer retention rate in Serbian family firms.Originality/valueThis paper presents the first comprehensive analysis of the innovation performance of Serbian family firms and can help policymakers assess the contribution of innovation to economic goals.

Going greener, performing better? The case of private family firms

In line with recent developments stressing the contextual sensitivity of the performance implications of sustainable development goals, this article explores the relationship between green innovation adoption and performance in private family firms. Drawing on the upper echelons theory, this research suggests that the influence of green innovation adoption on performance is contingent upon two important family-firm specific sources of top management team (TMT) diversity: family involvement and generational involvement. Using a sample of 191 private family firms, our results show that the positive impact of green innovation adoption on performance is attenuated as the ratio of family members involved in the TMT increases. In contrast, a higher number of generations involved in the TMT strengthens the positive relationship between green innovation adoption and performance. Our findings contribute to the scarce literature on sustainable development goals and green innovation in the family business context, stressing that the type of family involvement in the TMT conditions the ability of private family firms to turn green behaviors into performance gains.

Pengaruh struktur kepemilikan pada perusahaan keluarga yang terdaftar di Bursa Efek Indonesia: dimoderasi oleh Karakteristik Dewan

This study was to examine family ownership, institutional ownership, managerial ownership, and foreign ownership on the performance of family firms. In addition, this study will also examine family ownership which is moderated by the independent board of commissioners and the board of directors. This study uses quantitative methods and is tested using the SPSS application and E-views. The sample in this study is a family company listed on the Indonesia Stock Exchange (IDX) for the period 2017 to 2021. The company's performance variable in this study is measured by Tobin's Q. This study will conduct three tests. The first test is all variables without moderation. The second test is family ownership which is moderated by an independent board of commissioners. The third test is family ownership which is moderated by the board of directors. The results of this study are family ownership and foreign ownership have a significant positive effect on company performance. Meanwhile, institutional ownership, managerial ownership, family ownership moderated by an independent board of commissioners, and family ownership moderated by a board of directors have an insignificant effect on company performance. The results of this study can conclude that not all share ownership can affect the performance of a company.

Growth implications of creation and discovery behavior among family firms: the moderating role of venture age

PurposeThe aim of the study is to examine the effects of opportunity creation and discovery on the performance of family firms. Specifically, from the tenets of dynamic capabilities and organizational contingency perspectives, this study proposes and tests a framework of how family firms' creation and discovery behavior impact venture growth and the conditions under which such impact can vary.Design/methodology/approachThe study uses moderated-hierarchical regression to analyze survey data from 156 family-owned small and medium-sized enterprises (SMEs) operating within a sub-Saharan African economy.FindingsThe findings indicate that creation behavior has a curvilinear U-shaped relationship with venture growth, while discovery behavior has a direct positive relationship with venture growth. Further analysis reveals that the curvilinearity of the U-shaped relationship between creation and venture growth will be stronger for older family firms than for younger ones.Research limitations/implicationsThe study findings may be limited by the cross-sectional nature of the data and the specific focus on family firms only.Practical implicationsThe results highlight the significance of pursuing both opportunities among family firms. In fact, both creation and discovery opportunities are significant drivers of family firm growth, albeit in different capacities. Relatedly, managers of older family firms (compared to younger firms) can invest more in exploiting creative opportunities.Social implicationsFrom these findings, governments and other stakeholders should create enabling environment and institutional frameworks conducive to exploiting opportunities by entrepreneurial firms.Originality/valueThe study is novel – as it provides unique findings on the performance implications of creation and discovery behavior of entrepreneurial family firms within developing economies.

EMPIRICAL STUDY ABOUT THE RELATION BETWEEN FAMILY OWNERSHIP AND FIRM PERFORMANCE: EVIDENCE FOR ROMANIAN FAMILY FIRMS

The objective of the article is to produce and validate a statistical model for quantifying the performance of family firms. Such aim will be achieved through the analysis of a sample of 27 entities from the “family firms from Romania” group. The statistical hypothesis underlying the specification of the model is one according to which selected variables will distinguish the performing family firms from the non-performing ones, regardless of ownership. The article addresses an alternative possibility for assessing the financial performance of family businesses, namely a model created by Carton, R. The complex indicator created by Carton, R, is composed of performance factors such as asset growth, debt change and degree change survival rate (Z-score change), calculated using the Statev coefficient, Z-score. The indicators that were used are extracted from both the Entities’ Balance Sheet and their Profit and Loss Account (on-line), while the modelling is carried out through the Excel statistical modelling.

Family monitoring and the adverse consequences of political connections: does it vary over family generations?

Purpose This study aims to investigate the impact of family ownership on firm performance. The authors examine whether family ownership in a firm reduces the adverse consequences of political connections on firm performance. Further, the authors analyze whether monitoring benefits of family ownership vary over family generations. Design/methodology/approach This study examines the financial data from 229 active nonfinancial firms listed on the Pakistan Stock Exchange between 2011 and 2019. First, the authors estimated several panel data regression models after incorporating control variables in the full sample. Second, the authors estimated models in the subsample of family firms for investigating whether the results vary among different generations of family firms. Further, for checking the robustness of the authors’ statistical results, the authors have used two proxies of family ownership and revalidated the findings in several subsamples of the data. Findings This study finds that family firms financially outperform nonfamily firms. Further, the results suggest that boards with family members tend to enhance monitoring and governance mechanisms which reduce the harmful effects of political connections. Finally, this study finds that the monitoring benefits of family ownership which reduce the adverse effects of political connections on family firm performance diminishes over generations. Originality/value First, this study provides evidence of whether the monitoring benefits of family ownership reduce the adverse effects of political connections on firm performance. Second, to the best of the authors’ knowledge, no prior study provides evidence whether first-generation family firms are superior in monitoring and ultimately reducing the negative effects of political connections.

Bifurcation Bias in Executive Compensation System and Family Firm Performance

Family firms tend provide preferential treatment toward family members vis-à-vis nonfamily members. Prior studies defined such practices as bifurcation bias, and suggested that bifurcation bias can trigger nonfamily members’ perceptions of unfairness, and thus is detrimental to family firm performance. Drawing upon a social categorization approach to distributive justice, we extend this line of research by suggesting not all bifurcation bias practices have the same impact on firm performance, given that nonfamily member may perceive some bifurcation bias practices as unfair, whereas view other bifurcation bias practices as just. With data on family firms publicly traded in China, we found that bifurcation bias in salary compensation and bifurcation bias in equity compensation have divergent impacts on family firm performance.

A multi-layer organizational culture framework for enhancing the financial performance in tourism and hospitality family firms

Prior research on factors influencing the financial performance of tourism and hospitality family firms concentrated mainly on family-level traits, thus limiting our comprehension of the organizational culture mechanism by which family-level values are transformed into firm-level business processes. We bridge this void in prior literature by presenting a multi-layer organizational culture framework comprised of the organizational values and organizational climate layers. Data stemmed from eight in-depth interviews, followed by a survey with 187 tourism and hospitality family firms reveal that stewardship climate inside the firms mediates the relationship between long-term-oriented values and financial performance. Moreover, our findings show that entrepreneurial orientation moderates the organizational culture mechanism that enhance the financial performance of tourism and hospitality family firms.

Does Religious Affiliation of Owning Family Matter to Firm Performance? Study of Indian Family Firms

Whether the religious antecedence of owning family has any influence on the performance of a family firm in a religiously diverse institutional context is an interesting yet unexplored area of research. Invoking the resource-based view and social capital theory we theorize why family owners’ religious affiliation may impact firm performance and the moderating role of factors such as promoter shareholding, age, and size of the firm. Use a proprietary dataset of family firms in India, we find that firms with family owners affiliated to minority religions perform better and we also find support for the moderating hypotheses. India provides a natural setting for this study as several religions are practiced by its population and the business landscape is dominated by family firms. Our results run counter to the popular belief of dominance of majority religion in such institutional context. We conclude that micro level resources that accrue over a period due to religion based social network and religious practices are perhaps more dominant in comparison to macro level-institutional resources in impacting family firm performance. We find significant heterogeneity in performance amongst firms owned by different minority religions relative to the dominant religion adding further credence to our core thesis.

The relationship between family management and performance: A configurational approach in exploring the role of socioemotional wealth and generational stage

We examine how socioemotional wealth (SEW) influences the relationship between family management and firm performance, constructively replicating and extending Sciascia, Mazzola, and Kellermanns (2014). We apply fuzzy-set qualitative comparative analysis on a sample of 277 privately-owned US family firms and measure SEW both directly and via unidimensional proxies. In agreement with the authors’ findings, our results show that family management relates positively to performance in later-generation family firms. Our findings also show that SEW is sufficient for high family firm performance, challenging the view that family firms face a trade-off between pursuing affective goals and achieving profitability. Both findings, however, hold only when SEW is directly measured, underscoring the importance of adopting a multidimensional and universally accepted operationalization of SEW for an accurate and robust understanding of its true relationship to family firm outcomes.

A closer look at diversity and performance in family firms

PurposeOwnership structure plays a significant role in determining board demographic diversity. However, it is still unclear how different ownership configurations impact the structures of firm's boards and how board diversity influences firm performance. This study aims to investigate the relationship between family ownership and board diversity. Therefore, in this study, the authors argue that family firms have a lower level of board demographic diversity (in terms of age, gender and nationality) than non-family firms and that board diversity moderates the relationship between ownership and firm performance.Design/methodology/approachTo test the authors’ hypotheses, we draw data from a sample of 341 German family and non-family firms for a period of five years.FindingsThe results show that family firms are less diverse in terms of age, gender and nationality diversity than non-family firms.Originality/valueThis study contributes to the general understanding of family firms and in particular the role ownership plays in shaping board demographic diversity.

Board gender diversity and performance in family firms: exploring the faultline of family ties

Using a sample of 1134 firm-year observations of non-financial family firms listed on the Spanish stock market in the period 2003–2020, we explore how women directors affect company performance, distinguishing between family and non-family female members on the board. We believe there might be faultlines between family and non-family women on boards that may well impair performance due to differences in agency conflicts and socioemotional links with the family firm. As the number of female family directors grows, we reveal that conflicts with non-family sub-groups become more prevalent, impairing firm performance. Opening boards to non-family women does, however, seem to be an effective way of enhancing firm performance when there is a critical mass of female directors. The results are robust to alternative measures of board gender diversity and different econometric specifications.

The workplace social performance of family firms: a configurational approach

PurposeThe purpose of this study is to explore the drivers for proactive workplace social performance in family firms through a configurational approach. Comparative research on family versus non-family firms and workplace social performance has produced mixed results. Consequently, several calls have been made to account for family business heterogeneity to understand better how family involvement in the business affects the workplace social performance. The authors respond to these calls by exploring the governance antecedents that can catalyze family firms’ workplace social performance.Design/methodology/approachUsing qualitative comparative analysis, the authors analyze 131 family firms from the STEP survey data.FindingsThe authors find two governance configurations that lead to better family business workplace social performance. The first configuration is the combination of 100% family ownership, high family involvement in management and a mix of outside directors and family members on the board. The second configuration is the combination of less than 100% family ownership and low family involvement in management.Originality/valueThe study builds on and extends the nascent work suggesting the integration of agency and stewardship theories. The authors show that these two theoretical approaches are able to not only coexist, but that they can also be complementary in helping to understand the unique workplace social behaviors of family firms.

Entrepreneurial Leadership in Austrian Family SMEs: A Configurational Approach

This article explores the role of stewardship practices related to entrepreneurial leadership in turning entrepreneurial orientation (EO) into family firm performance while considering its environmental context. Family business research has not fully investigated how the EO–financial performance relationship depends on configurations of internal and external factors which establish strategic fit. We argue that family firms can overcome the often-highlighted paternalism-entrepreneurship paradox by employing stewardship practices related to entrepreneurial leadership (internal factor), which in turn can help them leverage strategic fit between EO and dynamic environments (external factor). The results of a survey of 162 Austrian small and medium-sized family enterprises (family SMEs) show that family SMEs can only profit from EO under certain configurations of internal and external factors. Employing stewardship practices related to entrepreneurial leadership turns out to be an efficient and necessary condition for transforming EO into performance. Environmental dynamism is, furthermore, a double-edged sword facilitating and impeding the transformation of EO into performance. These findings contribute to existing research by shedding light on the role of stewardship practices in establishing strategic fit in entrepreneurial family firms.

Performance, investment, and financing patterns of family firms after going public

AbstractResearch Question/IssueThis study investigates the performance, investment, and financing patterns of family firms after they go public.Research Findings/InsightsDespite the common claim that most initial public offerings (IPOs) are motivated by growth considerations, we find that the operating performance of family firms declines after going public relative to non‐family issuers and comparable private firms. This effect is long‐lasting and not due to earnings management before the IPO. We also document that family firms do not differ from other firms in terms of investment activities, but they experience a smaller decrease in leverage.Theoretical/Academic ImplicationsThe contributions of this study are threefold. First, it delves into the incentives of controlling families when facing the IPO decision. Second, while financial investors' ability to effectively time IPO decisions has been previously documented, this study shows that families, despite peculiar incentives, take their firms public before a performance decline. Third, it examines the behavior of family firms concerning the usage of IPO proceeds.Practitioner/Policy ImplicationsFamilies accept diluting their stake in an IPO when they know that firm performance is about to deteriorate. This increases the relative attractiveness of the non‐pecuniary benefits of control, most of which remain with the family, over financial wealth, whose future value is expected to decrease.

Strategic Orientation and Sustainable Competitive Performance of Family Firms: Evidence of an Emerging Economy

This study tried to shed light on the relationship between strategic orientations and sustainable competitive performance with the mediating effect of strategic flexibility of family-owned SMEs in an emerging economy. This study is significant because family firms need a more flexible and quick organizational structure to respond effectively to external market demands. For achieving fruitful insights, data was collected from family-owned manufacturing firms operating in Islamabad and Rawalpindi verified from Small and Medium-sized Enterprises Development Authority (SMEDA). In addition, structured questionnaires were used to collect the data from top management through an online source; for testing the hypotheses, Smart PLS-SEM was deployed. The finding suggests that strategic flexibility firmly explains the mechanism to support the relationship between both strategic orientations (entrepreneurial and market) and sustainable competitive performance. Thus, our study suggests several recommendations to the policymaker and governmental bodies to support the family-owned firms in modifying existing resources according to the market demand.

Family Involvement in Ownership, Management and Firm Performance: Evidence from Indian Listed Companies

We studied the impact of family ownership and management on Indian family firm performance by using a sample of companies listed on the National Stock Exchange of India (NSE) 500 from 2011–2020. The findings using panel data analysis demonstrate that family ownership positively impacts the accounting (ROA) and market (Tobin’s q) measures of firm performance in our sample. Further, there is empirical evidence that family management is positively associated with firm performance using ROA but negatively related to TQ with the study showing that founder-managed firms outperform descendent or professionally managed family firms in the Indian context. The study is unique in understanding the ways in which family businesses perform, behave and add value to the shareholders by analysing a dataset of listed companies for ten years.

Family Firm Heterogeneity and its Effect on Strategy. The Case of the Spanish Wine Sector

This research aims to cover some of the existing gap in the strategy of family firms literature, taking into account the heterogeneity of this kind of firms. We use a logit regression methodology in order to analyse the relationship between the strategy selected by the family firm and its performance, and whether differences exist depending on the degree of the family involvement in the firm. In order to test for our hypothesis, we use a sample of Spanish firms from the wine sector. Our results show that Porter’s cost strategy is positively related to performance for all type of family firms, and that a Miles’ analyser strategy is positively related to performance in family firms, although the effect of this strategy loses its impact as the degree of involvement of the family in the firm increases. It has also been shown that Miles’ reactive strategy, in family firms with more than fifty per cent of family involvement, negatively influences performance. In short, the results show that the strategy chosen by the family firm depends on the degree of property owned by the family.