Founders versus Descendants: The Profitability, Efficiency, Growth Characteristics and Financing in Large, Public, Founding-Family-Controlled Firms

Abstract

This study examines the differences between founder‐controlled firms and firms controlled by descendants or relatives of the founder. In general, we observe that founder‐controlled firms grow faster and invest more in capital assets and research and development. However, descendant‐controlled firms are more profitable. The results are consistent with a life‐cycle view of the family firm in which the early years are characterized by rapid growth. The experience of the early years provides a basis for later, when the firm is more professionally run and can exploit its established position in the market.

Performance and Behavior of Family Firms

“…Some scholars, however, argue the opposite by showing that descendant-controlled firms are more efficient and profitable than founder-controlled firms even though founder-controlled firms tend to grow faster and invest more in capital assets and research and development (McConaughy et al [15]; McConaughy et al [16]). Similarly, Morck et al [13] show that firm performance becomes lower when the firm is run by a member of the founding family than when it is run by an officer unrelated to the founder in older firms.…”

Family-owned and non family-owned SMEs: empirical evidence of survival determinants

“…Various criteria are used: 1) based on the people who effectively manage firms or who have effective decision-making authority (Filbeck & Lee, 2000); 2) based on the people who own the firm capital (Donckels & Lambrecht, 1999;Littunen & Hyrsky, 2000); and 3) based on the possibility of transferring business ownership to next generation (McConaughy & Phillips, 1999).…”

Empresa familiar e as dificuldades enfrentadas pelos membros da terceira geração

“…As entrevistas tiveram uma duração média de uma hora, sendo uma entrevista com o fundador, cinco com a segunda geração e quatro com a terceira geração. Posteriormente foi feita a transcrição das entrevistas, leitura flutuante do material, releitura das proposições e das questões gerais iniciais da pesquisa e construção de categorias analíticas, (MILES; HUBERMAN, 1994). Para este último procedimento, os autores sugerem estruturar as questões de interesse com base na literatura e agrupar os dados coletados em categorias.…”

“…The instrument to collect data was an individually guided recorded interview with all of the family managers (1ª, 2ª e 3ª generation). The technique applied, was suggested for Miles & Huberman (1994) to group the data in analytical categories to facilitate the analyzed speeches contained in the blocks of responses. As a result, the transition the business to the third generation owners has been strongly associated with the relation between family and business by the following factors: a) the succession process influenced by emotional and family values; b) conflicts, rivalries and divergences of strategic visions and business goals between the family generations; c) lack of professional criteria to hire relatives; and d) fragility of communication and consequent asymmetry of information among the family members.…”