Does a Family‐controlled Firm Perform Better in Corporate Venturing?

Wong, Ying Jiuan; Chang, Shao Chi; Chen, Li Yu

doi:10.1111/j.1467-8683.2010.00792.x

Cited by 50 publications

(41 citation statements)

References 109 publications

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“…Interpreted through the lens of SEW, our findings are consistent with the idea that, relative to non‐family firms, family firms prioritize non‐economic goals, such as family dynasty and legacy, reputation, and social identity, which are represented by employment growth, to a greater extent than economic goals, such as firm financial performance and sales growth. These findings may shed light on those of Wong, Chang, and Chen (), who find that the stock market reaction to corporate venturing announcements is significantly lower for family‐controlled firms among a sample of publicly‐traded Taiwanese firms.…”

Section: Resultssupporting

confidence: 64%

Family Control, Regulatory Environment, and the Growth of Entrepreneurial Firms: International Evidence

Qiu

Hou

et al. 2014

Corporate Governance

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Manuscript Type Empirical Research Issue We investigate the joint effects of family control and the regulatory environment on entrepreneurial growth through the lens of socio‐emotional wealth (SEW) theory. Research Findings Taking into consideration both economic and non‐economic goals of entrepreneurial firms, measured by sales growth and employment growth respectively, we find that, compared to their non‐family‐controlled counterparts, family‐controlled firms tend to have lower sales growth rates, but higher employment growth rates. Furthermore, less favorable regulatory environments reduce both sales and workforce growth rates to a greater extent for family‐controlled firms than for non‐family‐controlled firms. Theoretical/Academic Implications We add to the corporate governance and family business management literature by documenting that the regulatory environment moderates the corporate governance effect of family control on the economic and non‐economic goals of family‐controlled firms. The findings also contribute to the family business management literature by enriching and providing strong evidence in favor of the SEW theory through our exploration of the moderating role that macro‐governance plays in the family control‐SEW relation. This research also makes contributions to the entrepreneurship literature, laying a foundation for future empirical studies on entrepreneurial growth by separating its economic from its non‐economic dimensions. Practitioner/Policy Implications Our findings provide practical implications for both policy makers and entrepreneurs. They not only help entrepreneurs better understand growth strategies in various macro‐governance settings, but also provide governments and policymakers with potential policy implications to encourage entrepreneurial and economic growth. Policies that improve the macro‐governance environment can help family firms to prosper by contributing to their economic and non‐economic growth, both of which are important for economic development.

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Section: Resultssupporting

confidence: 64%

Family Control, Regulatory Environment, and the Growth of Entrepreneurial Firms: International Evidence

Qiu

Hou

et al. 2014

Corporate Governance

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“…Yet there tend to be—especially at the crossroad between family business and corporate entrepreneurship literatures—some major conceptual gaps (McKelvie et al ; Sciascia and Bettinelli ). The scholarly debate on CV in family firms, for example, still mostly refers to family versus nonfamily attitude toward venturing or capability to manage CV, thereby treating family influence as a single construct (e.g., Wong, Chang, and Chen ). In this paper, we support the need to take into account the heterogeneity of family firms, beyond comparing family and nonfamily firms (Chua et al ; McKelvie et al ; Sciascia and Bettinelli ; Sharma, Chrisman, and Gersick ).…”

Section: Discussionmentioning

confidence: 99%

How Do Family Firms Launch New Businesses? A Developmental Perspective on Internal Corporate Venturing in Family Business

Brumana

Minola

Garrett

et al. 2017

Journal of Small Business Management

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This conceptual work depicts internal corporate venturing in family business as consisting of two separate and sequential strategic choices: first, the decision about the degree of relatedness between the parent firm and the venture; second, the definition of the level of venture autonomy. Drawing on stewardship theory, we argue that family business dynamics, and in particular the development of the ownership structure, influence how family firms pursue internal corporate venturing and make decisions related to such two steps. We also discuss the contingent effect of corporate governance characteristics and of the national legal system.

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“…Based on agency theory (Jensen & Meckling, ; Shleifer & Vishny, ), we predict that both family member and family representative involvement are associated with higher agency costs to minority shareholders. Prior studies in emerging market settings generally find that family involvement is negatively related to performance, due to higher agency costs between the controlling family and other shareholders (e.g., Bae, Kim, & Kim, ; Bertrand, Johnson, Samphantharak, & Schoar, ; Wong, Chang, & Chen, ; Yeh & Woidtke, ). In this study, we apply these same agency cost arguments to family representatives.…”

Section: Introductionmentioning

confidence: 99%

Family Representatives in Family Firms

Chen¹,

Gray²,

Nowland³

2012

Corporate Governance

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Manuscript Type Empirical Research Question/Issue Family control in family firms can extend beyond the direct involvement of family members, but identifying these mechanisms is difficult in most markets. We utilize unique disclosures made by Taiwanese firms to examine the role played by family representatives in listed family firms. Family representatives are non‐family members that represent the controlling family's indirect shareholdings in the firm. We examine whether family representatives are used in the same manner as family members and whether they provide net benefits or costs to shareholders. Research Findings/Insights In our sample of listed family firms, we find that omitting family representatives understates the influence of controlling families by 46 percent. We show that family representatives are associated with net costs to shareholders, but to a lesser extent than family members. We also find that controlling families use family members and family representatives differently. Family members are more involved in older family firms and in firms founded by the family. Family representatives are more involved in acquired and second generation family firms and in larger firms with more fixed assets. Theoretical/Academic Implications We apply agency theory to the use of family representatives and show that family representatives are being used by controlling families to extend their influence within their firms, increasing agency costs to minority shareholders. Practitioner/Policy Implications For policymakers, our analysis shows that disclosure of family member and representative relationships within firms is important and value‐relevant to investors. Furthermore, our results suggest that firm performance could be improved by limiting the involvement of family members and family representatives in family firms.

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Does a Family‐controlled Firm Perform Better in Corporate Venturing?

Cited by 50 publications

References 109 publications

Family Control, Regulatory Environment, and the Growth of Entrepreneurial Firms: International Evidence

Family Control, Regulatory Environment, and the Growth of Entrepreneurial Firms: International Evidence

How Do Family Firms Launch New Businesses? A Developmental Perspective on Internal Corporate Venturing in Family Business

Family Representatives in Family Firms

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