No abstract

There is controversy in the literature about the effects of ownership on strategy and performance. Some scholars have taken agency explanations as definitive, arguing that closely held firms outperform. Empirical studies, however, show conflicting findings for firms with concentrated ownership: lone founder firms outperform, family firms do not. Such conflicts may be due to the failure of agency theory to distinguish between the social contexts of these different types of owners. We argue that explanations of performance must take into account not simply ownership, but who are the owners or executives and how their social contexts may influence their strategic priorities. Family owners and CEOs, influenced by family stakeholders in the business, are argued to assume the role identities and logics of family nurturers and thus strategies of conservation. By contrast, lone founders, influenced by a wider set of market-oriented stakeholders, are argued to embrace the identities and logics of entrepreneurs and strategies of growth. Family founders and founder-executives are held to blend both orientations. These notions are supported in a study of Fortune 1000 companies.

A considerable amount of research has investigated the linkage between top management team (TMT) characteristics and firm financial performance. Much of this research relies on demographic data. While these data are reliable and accessible, findings across studies are not consistent. Meta-analysis of several TMT indicators and firm financial performance provides modest support for direct relationships but indicates moderating influences. Further meta-analysis and a confirmatory factor analysis enrich these findings by examining potential moderating and intervening factors. Copyright Blackwell Publishing Ltd 2006.

Two contradictory perspectives of family business conduct and performance are prominent in the literature. The stewardship perspective argues that family business owners and managers will act as farsighted stewards of their companies, investing generously in the business to enhance value for all stakeholders. By contrast, the agency and behavioral agency perspectives maintain that major family owners, in catering to family self-interest, will underinvest in the firm, avoid risk, and extract resources. This paper argues that both these views have application but under different circumstances, determined in part by the degree to which the firm and its executive actors are embedded within the family and thus identify with its interests. Stewardship behavior will be less common, and agency behavior will be more common the greater the number of family directors, officers, generations, and votes, and the more executives are susceptible to family influence. These findings are supported among Fortune 1000 firms, as well as among the subsample of those firms that are family businesses.

Much of the literature on corporate acquisitions has focused on managerial incentives for making acquisitions but has underemphasized the role played by the social context of major shareholders. This study of Fortune 1000 firms argues that the priorities and risk preferences of family owners can have important implications not only for the volume but also for the diversifying nature of their acquisitions. Agency and family business perspectives are used to derive expectations concerning the acquisitions behavior of family owners. Consistent with both perspectives, and owners' desire to reduce business risk, we find that family ownership is inversely related to the number and dollar volume of acquisitions. However, whereas agency theorists differ about how ownership concentration influences whether acquisitions are diversified, the family firm literature is more definitive. The latter suggests that given family owners' desire to retain control of their firms for offspring, their wealth must remain concentrated. Hence they can most easily reduce the risk of their wealth portfolio by diversifying the business-that is, through diversifying acquisitions. Consistent with this logic, we found the propensity to make diversifying acquisitions to increase with the level of family ownership.