Does Family Involvement in Management Reduce the Risk of Business Failure? The Moderating Role of Entrepreneurial Orientation

Abstract

This cover sheet may not be removed from the document.Please scroll down to view the document. Does Family Involvement in Management Reduce the Risk of Business Failure? The Moderating Role of Entrepreneurial Orientation AbstractThis study explores the question of whether-and under which circumstances-family involvement helps avoid business failure. We hypothesize that it is family involvement in management, rather than ownership, which reduces the risk of failure during economic downturns; however, this effect is negatively affected by the firm's entrepreneurial orientation (EO). We argue that EO hinders reaching consensuses on and commitment to family-centered goals, which are focused on long-term survival. We analyze 369 manufacturing firms in Spain from 2007 to 2013, and find that family involvement in management reduces the risk of business failure, but this effect decreases as EO increases.

Family influence on internationalization: an analysis of risk acceptance

“…The conservative attitude towards risk in FBs varies in all attitudes, a fact commonly demonstrated by the high difficulty in delegating activities and high retention of power, as Revilla (2016) concludes. In addition, the author mentions that it is possible to expect family businesses to show and mention such conservatism when faced with the risk of bankruptcy.…”

“…Risk appears to be one of the main blockers or barriers for a FB to develop new businesses, as Medina and Pichardo (2017) corroborate, especially when family ownership of shares is greater (Hamilton, 2016;Revilla, 2016).…”

“…Lack of resources has been seen to be the reason why FBs tend to internationalize later and more slowly than non-family firms, and studies point to the fact that FBs contain intrinsic emotional aspects, leading to the prioritization of business longevity, many times called the "family business" (Revilla, 2016). Revilla (2016) notes that FBs are slower and less likely to internationalize than non-family firms.…”

“…Revilla (2016) notes that FBs are slower and less likely to internationalize than non-family firms. His findings, based on data collected in companies, were confirmed by Medina and Pichardo (2017).…”

“…Most studies use a minimum percentage of ownership in combination with the requirement of at least one family member in a management position in the firm as the defining characteristics of a family business (Graves;2006, Claver;Quer, 2008;Abdellatif;Amann;Jaussaud, 2010;Revilla, 2016).…”