Must Love Kill the Family Firm? Some Exploratory Evidence

Mehrotra, Vikas; Mørck, Randall; Shim, Jungwook; Wiwattanakantang, Yupana

doi:10.1111/j.1540-6520.2011.00494.x

Cited by 60 publications

(48 citation statements)

References 101 publications

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“…Thus, a lack of suitable managerial skills could undermine the competitiveness of the business and reduce its economic performance. In this perspective, results are consistent with the perspective of "familiness", considered by the RBV as a factor that may prevent the development of the business and affect their performance (Bloom and Van Reenen, 2007;Mehrotra et al, 2011).…”

Section: Findings and Discussionsupporting

confidence: 85%

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Firm performance and economic crisis: Family versus non-family businesses in Italy

Cesaroni¹,

Sentuti²

2017

Afr. J. Bus. Manage.

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This study investigates the performance of medium-sized family businesses -hereafter MSFBsduring the economic recession by comparing family and non-family firms, and correlating the organisational performance to the family ownership and firms' solvency. An empirical research study was carried out on a sample of 128 Italian medium-sized businesses -hereafter MSBs -(76 family and 52 non-family businesses). We used the AIDA -Bureau van Dijk database to collect data referring to three years 2007, 2009 and 2014, respectively corresponding to the pre-crisis phase -2007, the great recession -2009, and the post-crisis phase -2014. STATA software was used for analysing data and the analysis was organised into three steps. First, we collected the descriptive statistics. Then, we used a t-test to determine if businesses' performance and solvency significantly differ in family and nonfamily businesses subgroups. In the last step, we performed a regression analysis to examine the relationship between firms' profitability (dependent variable) and family ownership and solvency (independent variables). Contrary to previous research, we found that MSFBs performed worse at each stage of the crisis, especially during the harshest phase of the crisis. Results also show that family ownership negatively affected businesses' profitability. On the contrary, solvency positively affected firms' profitability at each stage of the crisis. Finally, we analysed and discussed a model case study, to better understand financial and economic dynamics of family firms during the analysed period. Although family firms' performance during the recession period has been widely studied, they generally referred to large companies. Analyses haven't considered MSBs, even if in recent years they have played an important role in several economic systems and show some distinctive features that can significantly differentiate them from large companies. The main contribution this study brings to the literature is investigating family business performance during a downturn, paying attention to MSBs.

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Section: Findings and Discussionsupporting

confidence: 85%

“…Moreover, nepotism and entrenchment can prevent family firms from hiring qualified and competent managers (Bloom and Van Reenen, 2007;Mehrotra et al, 2011).…”

Section: Literature Reviewmentioning

confidence: 99%

Firm performance and economic crisis: Family versus non-family businesses in Italy

Cesaroni¹,

Sentuti²

2017

Afr. J. Bus. Manage.

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“…In these societies, to quote Sharma and Manikutty (2005: 301), Bleaders are viewed as stewards of the family business and are more likely to feel the pressure to act in concert with the wishes of the family collective.F amilies in traditional societies are therefore more likely to reinforce the role of family logic in the business by cultivating identification with the business among the younger generation from early age. Family patriarchs in such societies are also more likely to prefer arranged marriages for their children based on the needs of the family business (Mehrotra, Morck, Shim, & Wiwattanakantang, 2011). Such marriages are often used to expand family influence by forming familial bonds with important families or individuals, but they also serve to reduce the family vulnerability to inter-generational loss of interest by core members by bringing in new family members that are potentially interested in working in the family firm.…”

Section: Theoretical Foundationmentioning

confidence: 99%

“…Such marriages are often used to expand family influence by forming familial bonds with important families or individuals, but they also serve to reduce the family vulnerability to inter-generational loss of interest by core members by bringing in new family members that are potentially interested in working in the family firm. To quote Mehrotra et al (2011Mehrotra et al ( : 1124, Barranged marriages might bring in highly capable sons-in-laws (or daughters-in-law) who can take management roles in the family business; or sons-and daughters-in laws thought better able to foster talent in their children.Î n this paper we argue that institutional logics exercise pervasive influence on the management and evolution of family firms. In general, however, this influence is covert and informal.…”

Section: Theoretical Foundationmentioning

confidence: 99%

Family values and inter-institutional governance of strategic decision making in Indian family firms

2017

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In this paper we use new venture creation in Indian family firms to explore the family firm as an inter-institutional system. We argue that in societies where the traditional family dominates social and economic life, the relationship between the two institutions, the firm and the family, is managed via inter-institutional logics. These inter-institutional logics help reconcile the tensions that often arise in the family firms during strategic decision making. We use archival and interview data on 36 new ventures in eight Indian family firms to identify these logics. Our analysis shows that the interaction between firm and family institutional logics in Indian family firms generates four sub-logics: economic, expertise, reputation and attachment. These four logics are used to frame and screen new venture opportunities and justify resource allocation. Key words Family firms . Family values . New venture creation . Emerging markets . Inter-institutional systemThe evolution of family firms in traditional societies is influenced by the key strategic decisions that members of the family make, both in their capacity as owners who must protect the long-term interests of the family, and in their capacity as decision makers who must guide the growth of the firm. Broadly speaking, there are two views of how family firm evolution shapes this interaction. The first, which is often labeled the Asia Pac J Manag (2017) 34:901-930

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“…These successors are not only “key actors” but also represent a succession decision aspect that once made is typically irreversible, with enduring impact on firm performance (Mehrotra et al. ).…”

Section: Introductionmentioning

confidence: 99%

Examining the Impact of Inherited Succession Identity on Family Firm Performance

Yoo¹,

Schenkel²,

Kim³

2014

Journal of Small Business Management

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The vast majority of research on family firm performance following intergenerational succession draws on either agency or stewardship theory, resulting in conflicting findings and conclusions. In this study, we depart from the mainstream by focusing on how inherited successor identity and its combined influence with successors’ broader socioeconomic context exert impact on intergenerational post‐succession performance. Drawing on social embeddedness perspective, we hypothesize that a non‐first‐son‐based succession identity disproportionately better positions successors to take advantage of the informational exchange relationships and entrepreneurial opportunities, particularly when succession identity interacts with independent outside board members, as well as large blocks of outside shareholders, while simultaneously avoiding the pressures and constraints associated with “family tradition” aspects of the family business system. Data collected from a sample of Korean family firms showed support for this moderation hypothesis. These results suggest the need for more theoretically grounded research on the inherited identity of successors to help draw a more realistic and balanced picture of social dynamics in family firm performance.

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Must Love Kill the Family Firm? Some Exploratory Evidence

Cited by 60 publications

References 101 publications

Firm performance and economic crisis: Family versus non-family businesses in Italy

Firm performance and economic crisis: Family versus non-family businesses in Italy

Family values and inter-institutional governance of strategic decision making in Indian family firms

Examining the Impact of Inherited Succession Identity on Family Firm Performance

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