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Family-business-and-financial-performance

Family-business-and-financial-performance
Family-business-and-financial-performance

Family business and?nancial performance:Current state of knowledge and future research challenges

Chiara Mazzi

University of Florence,Department of Business Administration,Via delle Pandette9,50127Florence,Italy

1.Introduction

Gaining a position of competitive advantage is often dif?cult for companies in today’s complex,turbulent world.Identifying the factors that determine the improved performance of?rms allows us to better exploit their speci?c resources and competencies and to make strategic choices that improve their ability to take advantage of future opportunities(Habbershon,Williams,& MacMillan,2003).

Among the various factors that are positively associated with business performance,?rm structure and governance have been studied extensively,from both a theoretical and an empirical standpoint.Corporate governance deals with the separation of ownership and management and investigates how investors get managers to return their money(Shleifer&Vishny,1997).The impact of?rms’ownership structure and management composi-tion on the performance and growth of the economic system is currently the object of intense debate(e.g.,Anderson&Reeb,2003; Barontini&Caprio,2006;Corbetta,1995;Sraer&Thesmar,2007; Villalonga&Amit,2006).The public company model has long been considered the optimal paradigm for larger?rms in terms of value creation and ef?cient allocation of resources(Berle&Means,1932; Fama&Jensen,1983).Nevertheless,both theoretical analysis and empirical evidence show that widely held companies controlled by professional managers constitute the exception rather than the norm,even in Anglo-Saxon countries.Recent studies have demonstrated that among the world’s listed companies,a high percentage of corporate stock is concentrated in the hands of only one or a few owners,who are most commonly the members of an entrepreneurial dynasty(Claessens,Djankov,Fan,&Lang,2002; Faccio&Lang,2002;La Porta,Lopez-De Silanes,&Shleifer,1999). In today’s global economic system,family?rms are generally acknowledged as the prevailing actors in both industrialized and developing countries(Astrachan&Shanker,2003;Corbetta,1995; Zahra&Sharma,2004).Consequently,the performance of family ?rms has gained increased attention in the literature on business strategy and?nancial economics.

A large part of the debate has focused on the study of the relationships between family ownership/control/management and ?rm performance,with particular concern for?nancial relations. However,these studies do not provide homogeneous results(Le Breton-Miller&Miller,2008).They clearly exhibit a certain degree of mismatch as regards some of the relevant issues.The family business de?nition dilemma(Astrachan,Klein,&Smyrnios,2002; Klein,Astrachan,&Smyrnios,2005),that is the absence of a commonly acknowledged de?nition for this class of?rms,is immediately apparent.Besides,empirical evidence is in?uenced by the choices made by single authors with regard to research design,methodology,data collection method,sample character-istics,and contextual variables associated with the environment in which?rms operate(Miller,Le Breton-Miller,Lester,&Cannella,

Journal of Family Business Strategy2(2011)166–181

A R T I C L E I N F O

Article history:

Received27December2010 Received in revised form9June2011 Accepted7July2011

Keywords:

Family business

Financial performance

Ownership structure

Family management

Value and wealth creation Systematic literature review A B S T R A C T

The present study investigates the link between family ownership/control/management and?rm performance,focusing on?nancial relations.This study aims to reconstruct the existing theoretical framework and systematize the current state of knowledge,distinguishing between widely corroborated ?ndings and those that have not been clearly substantiated.Towards this aim,the present work analyses 23articles that were selected according to systematic review criteria in the most relevant databases for social sciences research.The lack of homogeneity in the results of previous studies suggests that the relationships between family business and corporate performance are complex and very probably moderated or mediated by factors that have not been included in these analyses.The main areas that need further investigation are as follows:(i)the multidimensional concept of performance and the shift from wealth creation to value creation,(ii)the validity and perspectives of theoretical approaches to the study of family?rms,(iii)the family business de?nition dilemma and its implications,and(iv)the growing interest in privately held family?rms.These topics represent strategic challenges and opportunities for future research.

?2011Elsevier Ltd.All rights reserved.

E-mail address:chiara.mazzi@uni?.it.

Contents lists available at ScienceDirect Journal of Family Business Strategy j ou r n a l h o m e p a g e:w w w.e l s e v i e r.co m/l oc a t e/j f b s

1877-8585/$–see front matter?2011Elsevier Ltd.All rights reserved. doi:10.1016/j.jfbs.2011.07.001

2007;Villalonga&Amit,2006;Westhead&Cowling,1998).The same concept of performance,given the distinct nature of the family business,does not only bring into play an economic-?nancial meaning but other variables as well(Astrachan& Jaskiewicz,2008;Chrisman,Chua,&Litz,2003;Davis&Tagiuri, 1989;Sharma,Chrisman,&Chua,1997;Tagiuri&Davis,1992).In conclusion,the lack of shared paradigms results in a higher complexity when reading and comparing previous results.

The importance of the link between family business and?rm performance calls for an analysis of the current state of knowledge and a systematization of the existing results as preliminary steps to facilitate future studies.In management research,literature review process is a key tool,and is used to enable the researcher both to map and assess the existing intellectual territory and to develop the existing body of knowledge(Tran?eld,Denyer,&Smart,2003).

The present work intends to answer the following main research questions:(1)What kind of theoretical and methodologi-cal frameworks were applied in studying the link between family business and?rm performance?(2)What is the current state of knowledge concerning the aforementioned link?(3)What are the emerging cues and tools for analyzing this issue?The main purpose of this study,therefore,is to reconstruct a theoretical framework through a literature review and,at the same time,to reorganize issues that are still ambiguously determined or insuf?ciently addressed.Further,some considerations on the development of future research strategies will be used to try to contribute to the scienti?c debate underway.

The structure of the paper is as follows.First,the categories of costs and bene?ts affecting the link between family business and ?rm performance will be analysed with reference to three theoretical frameworks(resource-based view,agency theory, and stewardship theory).Then,the methodology of the analysis will be described,with particular attention to the strategy used to select the studies included in the systematic review.The central part of the paper will describe the selected studies in view,on the one hand,of the systematization of the evidence produced so far and,on the other hand,of the emergence of common tendencies and contrasting features.The information collected through the review will constitute the basis of a critical discussion that will speci?cally identify implications for future research.

2.Theoretical framework

Habbershon et al.(2003)suggest that in family-in?uenced ?rms,there are complex arrays of systemic factors that impact on strategy processes and?rm performance outcomes.According to Dyer(2006),the systemic factors constitute a set of attributes that families bring into the?rm,commonly combined in the term ‘‘family effect’’.Families are thought to in?uence?rm performance primarily through family goals,relationships,and resources.The interaction of these factors with business variables can determine potential bene?ts that translate into higher performance levels and,conversely,potential costs that hinder successful results.

Theoretical research on family business has concentrated on applying mainstream theories of the?rm to explain how family ?rms may be different from non-family?rms and to better appreciate the bene?ts and costs present in these?rms and their impact on corporate performance.Researchers using the strategic management approach have begun to rely on two theoretical frameworks that represent a con?uence of insights from the?elds of strategic management,?nance and economics:the resource-based view of the?rm(RBV)and agency theory.These theories potentially assist in explaining important strategic management issues in family?rms,such as the formulation and content of goals and strategies,strategy implementation and control,leadership, and succession(Chrisman,Chua,&Sharma,2005).Furthermore,both theoretical perspectives have a performance orientation. Other researchers propose that family business could be accurately described by stewardship theory,as an alternative perspective that can usefully complement the agency framework in explaining entrepreneurial,organizationally centered behavior(Corbetta& Salvato,2004).Pro-organizational collectivistic behaviors can motivate family members to hold family?rm objectives higher than their individual objectives.These can help family business members avoid stagnation(Miller,Le Breton-Miller,&Scholnick, 2008;Zahra,2003).Stewardship theory is a potentially suitable vantage point from which to address family business dynamics and explain differences in organizational performance(Eddleston& Kellermanns,2007).

2.1.Resource-based view and familiness

The resource-based view(RBV)is used as a theoretical framework model from the?eld of strategic management for identifying the complex,intangible and dynamic resources of an enterprise and assessing its competitive advantage(Penrose,1959; Rumelt,1984;Wernerfelt,1984).Following Prahalad and Hamel (1990),the real source of advantage are to be found in manage-ment’s ability to consolidate corporatewide technologies and production skills into competencies that empower individual businesses to adapt quickly to changing opportunities.Core competencies are the collective learning in the organization: communication,involvement,and a deep commitment to working across organizational boundaries.According to Teece(1982),the idiosyncratic resources and competencies are potential sources of sustainable competitiveness and superior performance,provided that they are inimitable and strongly embedded in the?rm.In the long run,a sustainable competitive advantage then depends on dynamic capabilities,that is on the?rm’s ability in building, adapting,integrating,and recon?guring internal and external organizational skills,resources and functional competences to address rapidly changing environments(Teece,Pisano,&Shuen, 1997).

An RBV approach has the potential to help identifying the resources and capabilities that make family?rms unique and allow them to develop family-based competitive advantages (Chrisman et al.,2005).Based on RBV,Habbershon and Williams (1999)de?ne familiness as the unique bundle of resources a particular?rm has because of the systems interaction between the family,its individual members,and the business.According to Habbershon et al.(2003),the family business social system is a ‘‘metasystem’’comprised of three broad subsystem components: the controlling family unit—representing the history,traditions, and life cycle of the family;the business entity—representing the strategies and structures utilized to generate wealth;and the individual family member—representing the interests,skills and life stage of the participating family owners/managers.This de?nition of familiness provides a uni?ed systems perspective on family-?rm performance capabilities and competitive advantage. Considering the family?rm as a dynamic system of interactions among all its subsystems,any model intended to measure its performance must necessarily take into account the way these interactions play and generate continuous synergies,instead of simply describing statically their conditions of existence.This depiction makes clear that family?rms are complex and dynamic entities,rich with peculiar,intangible features.Habbershon and Williams(1999)refer to positive in?uences of the familiness factor as‘‘distinctive’’and note that they hold the potential to provide an advantage in terms of wealth creation.The authors refer to negative in?uences of the familiness factor as‘‘constric-tive’’and note that they hold the potential to constrain competitiveness.

C.Mazzi/Journal of Family Business Strategy2(2011)166–181167

According to Sirmon and Hitt(2003),the main resources that distinguish family from non-family?rms are:human capital,social capital,survivability capital,patient capital,and governance structure.In particular,social capital–which derives from reciprocal,trusting relationships between individuals and orga-nizations,facilitating actions and creating value(Adler&Kwon, 2002;Nahapiet&Ghoshal,1998)–is a unique family resource that constitute distinctive familiness(Pearson,Carr,&Shaw,2008):the family is a source,builder,and user of social capital(Bubolz,2001). Social capital is by de?nition socially complex,related to norms, values,cooperation,vision,purpose,and trust that exist in the family?rm(Pearson et al.,2008).The family social capital–which is affected by dynamic factors such as family nucleus and dynasty stability,intra-group and inter-group interactions,family mem-ber’s interdependence,and closure within the family–may strongly in?uence the?rm’s organizational social capital through isomorphic pressures,organizational identity and rationality, human resource practice,and social network overlaps(Arregle, Hitt,Sirmon,&Very,2007).As stated by Pearson et al.(2008), familiness arises from the synergies among three dimensions of social capital that represent the behavioral and social resources of the family business system:structural,cognitive,and relational. These resources create family?rm capabilities,which serve as an additional dimension of the familiness construct.

Consistent with Sirmon and Hitt(2003),resources are neces-sary but not suf?cient to achieve a sustainable competitive advantage.Rather,resources must also be managed appropriately, following a resource management process model composed of three complementary and interdependent components:resource inventory(evaluating,shedding,and adding),resource bundling, and resource leveraging.The effective management of family business resources can lead to wealth creation both for the family and the business.

Zellweger,Eddleston,and Kellermanns(2010)developed a new model to describe how familiness can vary among families and the families that are most likely to be able to develop familiness.The authors distinguish three dimensions:the components of the ‘‘involvement approach’’(Chrisman et al.,2005),which consider the family involvement in ownership,management and control; the components of the‘‘intention-based approach’’(Chua,Chris-man,&Sharma,1999),which describe the essence of a family business and its vision;and the‘‘organizational identity’’(Albert& Whetten,1985),which describes the collective behavior and identity of the organization.The overlapping of these dimensions allows to rise above the qualitative assessment of the typology of familiness(that is,distinctive or constrictive),and to separate categories of families according to their aptitude to develop unique resources and competencies that in?uence differently the levels of performance and competitiveness.

Commenting upon the work of Habbershon et al.(2003), Chrisman et al.(2003)stressed the point that wealth creation is not necessarily the only or even primary goal of all family?rms and that they are concerned with a complex system of economic and noneconomic goals(Astrachan&Jaskiewicz,2008;Davis&Tagiuri, 1989;Sharma et al.,1997;Tagiuri&Davis,1992).Chrisman and Carroll(1984)have demonstrated that?rms that pursue noneco-nomic goals can enhance their economic performance through the systemic,synergistic effect of these noneconomic goals on wealth creation.According to Chrisman et al.(2003),in light of this two-dimensional framework,it is correct to substitute wealth creation with the more general goal of value creation,which corresponds to the maximization of the family business system’s utility function. Thus,wealth creation becomes a means to achieve the?nal goal, which is overall value creation.Accordingly,Chrisman et al.(2003) restated Habbershon et al.’s(2003)de?ning function of a family business system as‘‘the systemic vision of the familial coalition that generates distinctive familiness for transgenerational value creation.’’

2.2.Agency theory in a family perspective

The mainstream governance literature has largely focused on agency theory with the aim of explaining economic behaviors arising from the separation of ownership,control,and manage-ment(Shleifer&Vishny,1997).Following Jensen and Meckling (1976),an agency relationship is a contract under which a subject, called the principal,engages another subject,called the agent,in performing some tasks or services on his behalf by partly delegating his decision-making authority.According to Eisenhardt (1989),the principal-agent relationship is based on human assumptions(self-interest,bounded rationality,risk aversion), organizational assumptions(goal con?ict among members, information asymmetry),and information assumptions(purchas-able commodity).Fama and Jensen(1983)stated that non-equity partners,who do not take residual risks,do not suf?ciently act upon the interests of the company,since the goals of principal and agent are not aligned in the maximization of the utility function. When the information is not complete,the principal does not know exactly what the agent has done.The agency problems can then take on two aspects:adverse selection,which refers to the misrepresentation of skills and abilities by the agent,and moral hazard,which refers to the lack of effort on the part of the agent (Eisenhardt,1989).To control the adverse selection problem, principals have to incur higher search and veri?cation costs.To control the moral hazard problem,principals must establish appropriate incentives for the agent and monitor his doings.The costs incurred by these activities are called agency costs(Jensen& Meckling,1976).

While agency problems can arise in transactions between any two groups of stakeholders,researchers applying agency theory to family?rms have concentrated primarily on relationships between owners and managers,and secondarily between majority and minority shareholders(Chrisman et al.,2005).

As regards owner–manager agency problems–which Villa-longa and Amit(2006)refer to as Agency Problem I–the mainstream literature pointed out that if the ownership is concentrated in the hands of one or a few shareholders,who at times also take on managing roles,it is possible to establish better systems of corporate governance(Jensen&Meckling,1976; Shleifer&Vishny,1997).Therefore,the strong involvement of family members in terms of ownership and management in family ?rms potentially cushions the risk of opportunistic behaviors and favors the alignment of interests(Fama&Jensen,1983). Consequently,there would be a reduction of con?icts among the different categories of subjects(Becker,1974;Daily& Dollinger,1992;Eisenhardt,1989).Contrary to the prediction of agency models,Chrisman,Chua,and Litz(2004)suggested that family?rms are anything but immune to the problems of principal-agent dysfunction.Schulze,Lubatkin,and Dino(2003) stated that family ownership does not appear to represent the kind of governance‘‘panacea’’that is often attributed to owner-management by agency theorists.According to La Porta,Lopez-De Silanes,and Shleifer(1999),family?rms appear to experience agency problems that are costly to mitigate,which may eventually make them especially prone to internal dysfunctions.In the?rst place,attitudes of‘‘altruism’’can be so strong and asymmetric (Jensen&Meckling,1976;Schulze,Lubatkin,Dino,&Buchholtz, 2001)as to reveal a‘‘dark side’’,which generates agency problems whose monitoring is too costly because members of the family are already residual owners of the?rm(Schulze et al.,2003).Free riding,opportunistic behaviors may exacerbate until they cause ‘‘shirking’’(Schulze et al.,2001,2003),that is an absolute

C.Mazzi/Journal of Family Business Strategy2(2011)166–181 168

indifference to the active managing roles and maybe a squandering of the resources that the family had earned by hard work.However, as stated above,not all research about agency costs related to altruism in family business has reached negative conclusions:if altruism is reciprocal and symmetrical,it can mitigate agency problems and lead to competitive advantages in pursuing certain business opportunities and in the long-run?rm survival(Carney, 2005).

Moving on to owner–owner agency problems–called Agency Problem II by Villalonga and Amit(2006)–the members of a family owning a high share of equity capital may use their controlling position in the?rm to extract private bene?ts rather than to maximize the overall value of the?rm,at the expense of minority shareholders(Go′mez-Mej?′a,Nun?ez-Nickel,&Gutierrez,2001).In addition,family shareholders usually occupy the top management positions,regardless of their degree of ability or the speci?c business requirements.Morck,Shleifer,and Vishny(1988) presented some evidence that?rm values are positively related to the degree of managerial ownership at lower levels of ownership.The relation weakens at higher levels,suggesting that high levels of managerial ownership may shield entrenched managers from the discipline of the market for corporate control. This problem is more serious if entrenchment is accompanied by a pyramidal corporate structure(Mork&Yeung,2003).In family business groups,a family might engage in tunneling,that is intra-group transactions at altered market prices aimed at transferring the losses and gains from one family?rm to another,and thus concealing eventual pro?ts from minority shareholders.However, as stated by Shleifer and Vishny(1997),family businesses have advantages in incentives and monitoring when the political and legal system of a country do not provide suf?cient protection against the expropriation of minority shareholders.

2.3.Stewardship theory

Corbetta and Salvato(2004)proposed stewardship theory (Davis,Schoorman,&Donaldson,1997)as an alternative perspective,which may usefully complement the agency frame-work in explaining the determinants of organizational actors’willingness to pursue entrepreneurial opportunities and growth. Consistent with the stewardship theory,many business leaders and managers do not aspire to goals merely based on the maximization of their utility;instead,they altruistically behave as stewards and follow a righteous path aimed at obtaining bene?cial results for the whole organization(Davis et al.,1997; Donaldson,1990;Donaldson&Davis,1991).

These attitudes seem to be especially prevalent among family ?rms in which leaders are either emotionally linked to the family (Miller&Le Breton-Miller,2006).A good steward in a family?rm is a decision maker who is a caretaker of a family’s assets,who desires to pass a healthier and stronger business to future generations(Davis,Allen,&Hayes,2010).The pursuit of stewardship can be easily recognized as a determinant of family ?rm superior performance and as a source of competitive advantage(Eddleston&Kellermanns,2007;Miller et al.,2008). Miller and Le Breton-Miller(2006)describe that stewardship in a family business can take three common forms.First,family owners and managers are often deeply preoccupied with assuring the continuity or longevity of the enterprise and its mission,and therefore invest in building the business for the long-run bene?t of various family members.This can usually ensure more stability and unity in strategic structuring,through a‘‘patient’’capital raising to support growth and more investments in R&D,in image-and reputation-building and in the acquisition of larger market shares(Miller et al.,2008).Second,stewardship is revealed in the behavior towards employees and co-workers through the creation of a work environment that fosters the emergence of talented groups of people,enlivened by feelings of trust and loyalty and by a strong belief in corporate culture(Ward,2005).Third,the aspiration to longevity allows to set up long-lasting trust relationships with stakeholders(Tagiuri&Davis,1996).Among family employees,value commitment and trust are related positively,and agency perceptions negatively,to a sense of stewardship in family?rms.Still the level of value commitment and trust is high among non-family employees(Davis et al.,2010).

Furthermore,it is generally accepted that wealth creation is not necessarily the only or even the primary goal of all family businesses(Davis&Tagiuri,1989;Sharma et al.,1997;Tagiuri& Davis,1992).Family?rms are arenas characterized by?nancial and non?nancial family goals(Chrisman et al.,2004).When ?nancial goals prevail,family members’motivation to operate in the family?rm will be based on lower-order needs and extrinsic factors,thus favoring the emergence of agency relationships.On the contrary,when non?nancial goals prevail,this will foster motivation based on higher-order needs and intrinsic factors,thus favoring steward-principal relationships(Corbetta&Salvato, 2004).Hence,the stewardship and altruism perspectives have the potential to capture both the?nancial and non?nancial motives related to the?rm and the family(Zahra,2003).

Consequently,the model of man underlying stewardship theory is based on a steward whose behavior is ordered such that pro-organizational,collectivistic behaviors have higher utility than individualistic,self-serving behaviors(Corbetta&Salvato,2004). Miller and Le Breton-Miller(2006)argue that family businesses outperform non-family businesses because these?rms do not have to invest in free-rider agency costs,and,as a result,have higher ?nancial performance because of the superior attitudes of stewardship that help avoiding stagnation.

3.Methodology

Although I am aware that the activity of reviewing suffers from partial incompleteness or involuntary omissions,I have tried to adhere to the most rigorous and least biased research methodolo-gy.Indeed,I have adhered to the stages of systematic review recommended by Tran?eld et al.(2003):(1)planning the review, (2)conducting the review,(3)reporting and dissemination.

In the planning stage,I followed review protocol(Davies& Crombie,1998),which is a plan that helps to protect objectivity by providing explicit descriptions of the steps to be taken.The protocol based on the questions and goals laid out in the present research contains information on the search strategy for the identi?cation of relevant studies,the criteria for inclusion/ exclusion of these studies in the review,and the sample selected.

The sampling of articles on the link between family business and?rm?nancial performance was made through a search of keywords in the titles and abstracts of articles in the most relevant databases for social sciences research:Business Source Premier (EBSCO),EconLit(EBSCO),Emerald Fulltext,JSTOR,Science Direct (Elsevier),Scopus(Elsevier),SpringerLink,SSRN-Social Science Research Network,Web of Science(ISI),Wiley InterScience Journals.Following Kontinen and Ojala(2010),a manual search was also conducted of the most acknowledged journals in family business research,Family Business Review and Journal of Family Business Strategy,although they were already included in the databases.The string search was focused on various combinations of the following keywords:family?rms,family business,family-in?uenced?rms,family involvement,ownership,performance,?rm performance,?nancial performance and value.The time range of observation covered the years from2000to date,and the studies were selected after reading their abstracts and evaluating the pertinence of their issues.The articles were excluded from the

C.Mazzi/Journal of Family Business Strategy2(2011)166–181169

sample if they only made a theoretical contribution or used only descriptive statistics (e.g.,Dyer,2006;Gallo,Tapies,&Cappuyns,2004;Lee,2004;Sacristan-Navarro &Gomez-Anson,2007),if they dealt with non?nancial performance (e.g.,Chrisman et al.,2003;Zellweger &Nason,2008),or if focused on speci?c performance details (e.g.,on risk taking in Naldi,Nordqvist,Sjoberg,&Wiklund,2007).

The sample thus obtained was composed of 23articles,arranged as shown in Table 1.

Most articles (18out of 23)were published between 2006and 2010.The highest concentration of related articles (7)is from for the year 2008.The journals with most contributions are Family Business Review (5)and the Journal of Corporate Finance (4).Two articles were also published by Entrepreneurship Theory &Practice and the Journal of Family Business Strategy .All other sources contain only one sampled article each.

4.Conducting the review:theoretical ?ndings and descriptive statistics

4.1.The research sample:de?nition of family ?rm and selection criteria

Although many years have gone by since the scienti?c community recognized de?ning the family ?rm as the ?rst and most obvious challenge facing family business researchers (Handler,1989),this question is still open.In fact,there is no commonly acknowledged de?nition that allows the construction of a shared framework that integrates the different disciplinary approaches (Chrisman et al.,2005).The rational organization of this research area and the de?nition of its boundaries and concepts have not been completed yet (Zahra &Sharma,2004).The ‘‘family business de?nition dilemma’’(Astrachan et al.,2002;Klein et al.,2005)is still waiting to be solved.This is obvious if we compare the manifold de?nitions used in the reviewed studies,which are given in Table 2.

Most authors de?ne family business with reference to the involvement approach (Chrisman et al.,2005),which takes into account the structural and organizational factors of ?rms.As brie?y mentioned above,this approach is based on the identi?ca-tion of four core governance dimensions:family ownership,family control,managerial role of family members,and generations involved in the business (Miller &Le Breton-Miller,2006).The level or threshold required for a ?rm to be designated as a family business can vary quite signi?cantly,giving rise to broader or restricted de?nitions.Therefore,these dimensions in?uence sample size,marking out the inclusion threshold for the family business category;consequently,these dimensions also in?uence

the results of these studies (Villalonga &Amit,2006).The comparison between the de?nitions then makes sense,because it shows how variations in the de?nition strategy can impact the evidence and conclusions produced (Miller et al.,2007).

Another approach to de?ning the family business is the intention-based approach (Chua et al.,1999).This method focuses on the family’s vision of the business,and describes its ‘‘essence’’in terms of the purpose of the family in maintaining control,its corporate behavior and vision for transgenerational value creation,and the idiosyncratic resources derived from its involvement in the business (Chrisman et al.,2003).This approach is seldom used in studies applied speci?cally to the evaluation of ?nancial perfor-mance (e.g.,Westhead &Howorth,2006).

A third de?nition approach,which combines some elements of both the involvement and the intention-based approaches,applies the F-PEC scale (Astrachan et al.,2002;Klein et al.,2005).Family ?rms are considered as belonging to a ‘‘genre including many

species’’(Dematte

`&Corbetta,1993)and the level of family in?uence on the business is measured as a continuous variable by three main dimensions:Power,Experience and Culture.The Power dimension of family in?uence is measured by ownership,governance,and management involvement.This scale also takes into account the legal,political,and economic considerations associated with different countries.The Experience subscale is measured in relation to succession (generation of ownership,generation active in management,and generation active on the governance board)and the number of family members who contribute to the business.The Culture dimension assesses the extent to which family and business values overlap,as well as the family’s commitment to the business.These three dimensions comprise the F-PEC,an index of family in?uence that enables comparisons across businesses with regard to level of family involvement and its effects on performance.

The samples adopted in the majority of studies in this ?eld are comprised of companies listed in regulated markets.Analyses of listed public companies,however,while convenient from a data collection standpoint,are certainly confounded and limited in their explanatory power for the broad community of family ?rms (Westhead &Cowling,1998).In fact,all over the world,family ?rms tend to concentrate in the size group of small and medium-sized enterprises (SMEs),where listed companies represent only a tiny portion (Arosa,Iturralde,&Maseda,2010;Sciascia &Mazzola,2008;Westhead &Howorth,2006).In recent years,increasing attention has been paid to unlisted ?rms as well,as shown by the amount of contributions to the research area of privately held family ?rms (Arosa et al.,2010;Chrisman et al.,2004;Cucculelli &Micucci,2008;Lindow,Stubner,&Wulf,2010;Miller et al.,2008;Rutherford,Kuratko,&Holt,2008;Schulze et al.,2003;Sciascia &

Table 1

Distribution of the articles sampled by year of publication and source.

Journal

2001

2002

2003

20042005

20062007

20082009

2010

Total Entrepreneurship Theory &Practice 1

1

2European Financial Management 11Family Business Review

2

1

25Journal of Banking &Finance 11Journal of Business Venturing 1

1Journal of Corporate Finance

1

12

4Journal of European Economic Association 1

1Journal of Family Business Strategy

2

2Journal of Finance and Quantitative Analysis 1

1Journal of Financial Economics 1

1Journal of Management Studies

1

1Journal of Small Business Management 1

1Small Business Economics 1

1The Journal of Finance

1

1Total

1

3

1

5

3

7

1

2

23

C.Mazzi /Journal of Family Business Strategy 2(2011)166–181

170

Table2

Outline of family?rm de?nitions and sample selection criteria.

Author/s Family business de?nition Sample

size

Data sources Countries Period

Allouche et al.(2008)Type B:family members hold management

positions or are on the board of directors and are

among the main shareholders;Type C:family

members do not hold top-ranking management

positions but are among the main shareholders;

Type D:family members hold top management

positions or are on the board of directors but are

not among the main shareholders 1271Wordscope

database—Kurashina’s

identi?cation of

family business

Japan1998and2003

Anderson and Reeb(2003)The family owns(any)share of risk capital and/or

some of its members are on the board of directors

403S&P500USA1992–1999

Andres(2008)(1)The founder and/or family members hold

more than25%of the voting shares;(2)if the

founding-family owns less than25%of the voting

rights the family members have to be represented

on either the executive or the supervisory board 275Frankfurt Stock

Exchange—Hoppenstedt

yearbooks

Germany1998–2004

Arosa et al.(2010)Family?rm if the main shareholder is a person or

a family with a minimum of20%of?rm equity

and there is a family relationship between this

shareholder and the directors based on the

coincidence of their surnames

586SABI database Spain2006

Barontini and Caprio(2006)The largest shareholder at the10%cut-off level is

a family and the family controls more than51%of

direct voting rights,or controls more than the

double of the direct voting rights of the second

largest shareholder 675WordScope database11Western-EU

Countries

1999–2001

Chrisman et al.(2004)A?rm that is owned and managed by family

members and seeks to ensure trans-generational

involvement through family succession 1141Small Business

Development Center

USA1998

Chu(2009)A?rm that has more than5%family

shareholdings and has at least one family

member on the board of directors 341Taiwan Stock

Exchange—Taiwan

Economic Journal

Taiwan2002–2006

Cronqvist and Nilsson(2003)A?rm with at least25%of the voting rights held

by the founder,the family,or a consolidated

group of subjects not necessarily belonging to the

same family 309Stockholm Stock

Exchange

Sweden1991–1997

Cucculelli and Micucci(2008)A?rm characterized by a trans-generational

involvement in the family succession 3548Survey dataset—Cerved

database

Italy1996–2000

King and Santor(2008)A?rm where a family owns more than20%of the

voting rights 613Statistics Canada

InterCorporate

Ownership database

(SEDAR)—Financial

Post Top500

Canada1998–2005

Lee(2006)Family business if founding family members or

descendants hold shares or if they are present on

the board of directors

403S&P500USA1999–2002

Lindow et al.(2010)Family in?uence on the business at different

degrees(F-PEC measurement)171German Family

Business Association

Germany2009

Martinez et al.(2007)(1)A?rm whose ownership is clearly controlled

by a family,where family members are on the

board of directors or top management;(2)A?rm

whose ownership is clearly controlled by a group

of two to four families,where family members are

on the board;(3)A?rm included in a family

business group;(4)A?rm included in a business

group associated with an entrepreneur that has

designated his family successor 175Bolsa de Comercio

de Santiago database

Chile1995–2004

Maury(2006)If the largest controlling shareholder has at least

10%of the voting rights is a family,an individual,

or an unlisted?rm 1672Faccio&Lang database

(2002)–WordScope

13Western-EU

Countries

1996–1999

McConaughy et al.(2001)A public corporation whose CEOs are either the

founder or a member of the founder’s family 219The Business Week

CEO1000–Compustat

USA1986–1988

Miller et al.(2007)Family?rm:a?rm in which multiple members of

the same family are involved as major owners or

managers,either contemporaneously or over

time;Lone-founder?rm:a?rm in which an

individual is one of the company’s founders with

no other family members involved,and is also an

insider(of?cer or director)or a large owner(5%or

more of the?rm’s equity)The authors replicate studies by:Anderson and Reeb(2003)and Villalonga and Amit(2006)

896Fortune1000USA1996–2000 100Compustat database USA2000

Miller et al.(2008)Family business when there is more than one

family member involved in the business 676Canadian database Western

Canada

2007

Rutherford et al.(2008)A business where at least two of the business’

of?cers or directors have the same last name 831American Family

Business survey

USA2002

Schulze et al.(2003)Family-owned and family-managed883 A.Andersen Center for

Family Business survey USA1995

C.Mazzi/Journal of Family Business Strategy2(2011)166–181171

Mazzola,2008;Westhead&Howorth,2006).Unlisted?rms certainly are a stimulating research topic,not only because of their numerical consistency,but also because previous studies exhibit a substantial discontinuity of results compared to the well-established trends found in the literature on listed companies (Arosa et al.,2010;Sciascia&Mazzola,2008;Westhead&Cowling, 1998).

Most studies are founded on a comparative analysis of family vs.non-family businesses(with the exceptions of Cucculelli& Micucci,2008;Lindow et al.,2010;Rutherford et al.,2008; Schulze et al.,2003;Sciascia&Mazzola,2008).Only Barontini and Caprio(2006),Maury(2006),and Miller et al.(2007)carried out a cross-country analysis,while the other authors restricted their attention to a single country or region.As many as nine studies applied to American?rms alone.The data collected can refer either to a single year or to a year range.The most widespread time interval on which studies focus is the years between the end of the twentieth century and the beginning of the twenty-?rst century.

4.2.Diffusion of family business

The family business de?nition dilemma affects the selection criteria of samples for empirical researches,and consequently the results of the analysis(Miller et al.,2007;Villalonga&Amit,2006; Westhead&Cowling,1998).What this means is that,by using different inclusion thresholds for the category of family business,it is possible to designate family?rms in the same initial sample rather than as a variable number of units with different qualitative features(Villalonga&Amit,2006).The theoretical choice obviously in?uences comparative studies with regard to prelimi-nary descriptive statistics of multivariate analyses,values of OLS regression coef?cients,and statistical signi?cance levels(Villa-longa&Amit,2006).Therefore,it is worthwhile reporting(Table3) the data on the percentages of family?rms identi?ed in the studies reviewed above,by taking into account the previously illustrated de?nition choices from which they derive.

With reference to the studies carried out on listed American companies,the percentage of family?rms of the total is about35% (Anderson&Reeb,2003;Lee,2006;Villalonga&Amit,2006), except in the study by Miller et al.(2007),who identify a47%of family business,where only29%can properly represents family ?rms and18%are instead lone founders.As already evidenced above,Villalonga and Amit(2006)add a whole set of de?nitions to the basic one,which involves different requirements as to the levels of family ownership,control and management.In details,it is obvious that the percentage of family?rms tends to get smaller moving from broader de?nition patterns to more restricted ones. For the unlisted American companies,as might be expected, Chrisman et al.(2004)demonstrate that the percentage of family ?rms rises to79%.

The samples composed of?rms from more countries are non homogeneous:according to Barontini and Caprio(2006),family ?rms represent on average53%of total businesses with varying, and occasionally rather wide oscillations for the different countries (from a minimum value of31.6%for Finland to a maximum of 76.9%for Italy);alternatively,Maury(2006)reports an averaged percentage of63%.These?gures are much higher compared to the ones established in previous studies(Faccio&Lang,2002;La Porta et al.,1999),which reported percentages of family business varying between30%and52%depending on the admitted thresholds.

Moving on to the results for the samples selected from only one country,Europe registers the highest percentages of family business,speci?cally:37%in Germany(Andres,2008),58.8%in Sweden(Cronqvist&Nilsson,2003),and71%in France(Sraer& Thesmar,2007).Non-European countries have instead:32%for Canada(King&Santor,2008),33%for Japan(Allouche,Amann, Jaussaud,&Kurashina,2008),44%for Chile(Martinez,Stohr,& Quiroga,2007),and54.3%for Taiwan(Chu,2009).As previously

Table2(Continued)

Author/s Family business de?nition Sample

size

Data sources Countries Period

Sciascia and Mazzola(2008)Family involvement in ownership(FIO):

percentage of the?rm’s equity held by the

owning family—Family involvement in

management(FIM):percentage of managers who

are also family members 620Project by Bocconi-Cattolica,

Chamber of Commerce

Italy2000

Sraer and Thesmar(2007)When the founder or a member of the founder’s

family is a blockholder of the company and this

block represents more than20%of the voting

rights 420DAFSA–web sites

–social security records

–SDC platinum–Euronext

France1994–2000

Villalonga and Amit(2006)(1)One or more family members are of?cers,

directors,or blockholders;(2)There is at least one

family of?cer and one family director;(3)The

family is the largest voteholder;(4)The family is

the largest shareholder;(5)One or more family

members from the second or later generation are

of?cers,directors,or blockholders;(6)The family

is the largest voteholder and has at least one

family of?cer and one family director;(7)The

family is the largest shareholder and has at least

20%of the votes;(8)One or more family members

are directors or blockholders,but there are no

family of?cers;(9)The family is the largest

voteholder,has at least20%of the votes,one

family of?cer and one family director,and is in

second or later generation

508Fortune500USA1994–2000

Westhead and Howorth(2006)Family?rm if more than50%of ordinary voting

shares is owned by members of the largest single

family group related by blood or marriage and the

company is perceived by the CEO managing

director/chairman to be a family business 240Dun and Bradstreet list United Kingdom1995

C.Mazzi/Journal of Family Business Strategy2(2011)166–181 172

stated,unlisted family?rms record high percentages all over the world:63%in Spain(Arosa et al.,2010),64%in the United Kingdom (Westhead&Howorth,2006),and79%in the USA(Chrisman et al., 2004).

Therefore,it seems obvious that the share of family ownership in the samples observed does not really measure the share of family?rms in the respective economies in all cases where the de?nitions used do not match.However,it is necessary to point out that the same effect may be present not only because of the choice of de?nition but also because of the choice of convenient samples.

4.3.Ownership concentration and control-enhancing mechanisms

Other variables determining the link between family?rms and performance are related to the concentration of ownership and control in excess of ownership(Villalonga&Amit,2006).Following standard methodology(Claessens et al.,2002;Faccio&Lang,2002; La Porta et al.,1999),ownership is expressed through the cash?ow rights held by the largest shareholder–taking into account the entire multiplicative chain of control–and control is measured in terms of voting rights—which are determined by the weakest link in the control chain.The direct cash?ow rights and the direct voting rights held by the largest shareholders are two different ?gures in the case of a share capital structure that departs from one share/one vote.The wedge,which is the difference or ratio between these two variables,measures the separation of owner-ship and control.The ultimate controlling owners can achieve control rights in excess of their ownership rights through control-enhancing devices such as dual-class shares,pyramiding,and cross-holdings.Dual-class shares refer to shares with superior voting rights;pyramiding is de?ned as the ultimate ownership of a ?rm running through a chain of ownership of intermediate corporations;and cross-holdings refer to horizontal and vertical ownership links among corporations,meaning that one company, directly or indirectly,controls its own stocks(Claessens et al., 2002;Faccio&Lang,2002;La Porta et al.,1999).

As might be expected,the studies that applied to large-sized listed American companies detect a rather limited percentage of family ownership concentration,accounting for an average value of18%of the total(Anderson&Reeb,2003;Lee,2006;Miller et al., 2007;Villalonga&Amit,2006).Instead,the same concentration is quite high for unlisted?rms,even in the American market,where it reaches a peak of70–90%(Chrisman et al.;Schulze et al.,2001).The authors who analysed the cross-country samples found the highest concentration of family ownership,in which the family was the only controlling shareholder in70%of cases(La Porta et al.,1999). In particular,Barontini and Caprio(2006)point out that the main shareholder family holds an average of36%of cash?ow rights and 46%of voting rights,which produces a wedge of about10%. However,the results on this point vary greatly from one country to another.

It is worthwhile stressing that,on average,family?rms are more concentrated than are other forms of ownership(with the sole exception of the results shown in Arosa et al.,2010),and their degree of concentration is generally higher in countries not belonging to the Anglo-Saxon sphere of in?uence.Besides,the use of control-enhancing mechanisms is widespread and causes distortion effects on performance(Cronqvist&Nilsson,2003; King&Santor,2008).Villalonga and Amit state that about50%of family?rms resort to control-enhancing devices,compared to the 13%of non-family?rms.

https://www.doczj.com/doc/3f11094910.html,ernance and ownership structure

As might be assumed,family businesses are characterized by the presence of fewer non-family blockholders,who range between8%and16%against the12–21%in non-family businesses (Anderson&Reeb,2003;Villalonga&Amit,2006).The weight of outside directors is also signi?cantly lower,since they are present in44%of cases for family?rms against the61%in non-family?rms (Anderson&Reeb,2003).Furthermore,family?rms have less recourse to stock-based management incentive tools and rather prefer to offer pay incentives,career advancements,and a strengthening of management image and reputation(Schulze et al.,2003).This is mostly the case when the CEO is a family member who already has enough motivation to run the business ef?ciently and to focus on long-period performance.Indeed,Anderson and Reeb(2003)argue that a family-?rm CEO’s earnings from equity-based incentives are,compared to his or her gross salary,10 percentage points lower than those of a non-family CEO.It also often appears that the salary and the bonus system of family-?rm CEOs are consistently lower and less performance-sensitive than those of their non-family colleagues(McConaughy,Matthews,& Fialko,2001;Sraer&Thesmar,2007).

Table3

The diffusion of family business in the reviewed studies.

Author/s Countries Percentage of family?rms on the whole sample

Allouche et al.(2008)Japan33%type B;4%type C;2%type D

Anderson and Reeb(2003)USA35%

Andres(2008)Germany37%

Arosa et al.(2010)Spain63%

Barontini and Caprio(2006)11Western Europe countries53%

Chrisman et al.(2004)USA79%

Chu(2009)Taiwan54.3%

Cronqvist and Nilsson(2003)Sweden58.8%

Cucculelli and Micucci(2008)Italy100%only family?rms

King and Santor(2008)Canada32%

Lee(2006)USA35%

Lindow et al.(2010)Germany100%only family?rms

Martinez et al.(2007)Chile44%

Maury(2006)13Western Europe countries63%

McConaughy et al.(2001)USA–

Miller et al.(2007)USA47%(family?rms:29%–lone founder:18%)

Miller et al.(2008)Western Canada–

Rutherford et al.(2008)USA100%only family?rms

Schulze et al.(2003)USA100%only family?rms

Sciascia and Mazzola(2008)Italy100%only family?rms

Sraer and Thesmar(2007)France71%

Villalonga and Amit(2006)USA37%(26–20–19–19–14–12–8–7%)

Westhead and Howorth(2006)United Kingdom64%

C.Mazzi/Journal of Family Business Strategy2(2011)166–181173

Among the variables that in?uence the governance and, consequently,the performance of family?rms,it is necessary to take into account not only the internal variables of the single business but also institutional and contextual(country speci?c) factors(Gedajlovic,Carney,Chrisman,&Kellermanns,2010).These can,in fact,determine the quality of the legal environment and the level of protection of minority shareholders(see antidirector rights in Maury,2006,and the governance index in Villalonga&Amit, 2006).The legal/institutional variable is important when compar-ing data from different countries and evaluating the results (Villalonga&Amit,2010).

4.5.Family involvement in management

Many of the reviewed studies provide useful information for an assessment of the family members’involvement in managerial roles(CEO,chairman,or other executive roles).Family manage-ment and family ownership/control are the main variables used to measure the degree of family involvement and its effect on performance.

On average,in American?rms,the role of CEO is covered by the founder himself in15%of cases,by one of his heirs in30%of cases, and by an outsider in55%of cases(Anderson&Reeb,2003;Lee, 2006;Villalonga&Amit,2006).The European cross-country analysis carried out by Barontini and Caprio(2006)demonstrates that family members are absent from the board of directors in only 15%of family?rms,and one of them is the CEO in35%of cases.In the remaining50%of?rms,one or more family members are on the board of directors in nonexecutive roles.In detail,if we distinguish ?rms in which the founder is still present(31%)from those guided by the second or third generation(69%),we get the following results.In founder-controlled?rms,the founder is the CEO in50% of cases,one of his descendants is in11%of cases,and the founder has a nonexecutive role in39%of cases.In descendant-?rms,the position of CEO is held by a descendant in27%of cases,founding-family members sit on the board of directors in55%of cases,and founding-family members have no executive roles in18%of cases. Looking at the evidence for individual countries,the data are quite diverse.

Overall,the degree of family involvement in management, independent of the roles covered by its members,is reportedly between33%(Maury,2006)and80%(Barontini&Caprio,2006). The proportion of founder-controlled?rms depends on the business age and lifecycle.The presence of professional CEOs is more marked in Anglo-Saxon countries and,for all the countries,in later-than-?rst-generation family?rms.The presence of heirs on the board of directors is still high,particularly in nonexecutive roles,suggesting their willingness to maintain a role of control over professional CEOs.

4.6.Age,size and industry distribution

Family?rms are,in general,signi?cantly younger than non-family?rms.On the basis of their samples,Anderson and Reeb (2003)established that family?rms were founded,on average,76 years ago,while non-family?rms were founded,on average,89 years ago.For family and non-family?rms that are beyond the second generation,Villalonga and Amit(2006)record ages of63 and74years,respectively.Lee(2006)?nds the respective average ages to https://www.doczj.com/doc/3f11094910.html,ler et al.(2007),while con?rming that family?rms are younger(67years,as opposed to72years), also?nd that31%of these?rms are still in their?rst generation and 69%are in their second generation,and that lone-founder?rms are even younger(25years).According to Andres(2008),German ?rms also follow this trend,with family businesses generally younger(82years,as opposed to92years).Sraer and Thesmar (2007)argue that family?rms are younger when managed by their founders,while if they have descendants or professional managers they are older than non-family?rms(with ages of32,84,70,and 66years for the four cases).However,there are two exceptions to this general rule:according to Arosa et al.(2010)and Chu(2009), family?rms are said to be more long-lived than their non-family counterparts(Arosa et al.,2010;Chu,2009).

With regard to size,the more logical result is that family?rms are smaller than non-family?rms(Anderson&Reeb,2003;Andres, 2008;Lee,2006;Miller et al.,2007;Villalonga&Amit,2006).The most employed parameter to measure?rm size is the value of total assets(or log total assets).Other proxies used to estimate the size of?rms are sales,net sales and number of employees.Family?rms with professional managers are,on average,larger than those managed by founders or their heirs.

The industry distribution is usually made using the Standard Industrial Classi?cation(SIC)codes:on average,family?rms appear in more than70%of business sectors.It is not easy to generalize this variable because of the relatively consistent differences between the studies reviewed.Yet,it is possible to af?rm that entire industries are dominated by family?rms (Villalonga&Amit,2010).The most represented sectors are the food industry,textiles,industrial machinery,durable consumer goods,retail sales and personal services.Consistent with the competitive advantage hypothesis,industries are more likely to remain under family control when ef?cient scale and capital are smaller,the environment is more noisy(and monitoring needs are greater),and investment horizons are long with less stock turnover (Villalonga&Amit,2010).

5.Conducting the review:empirical?ndings and multivariate analysis

5.1.The methodological approaches

Most studies investigating the relationship between family business and?rm performance conduct a comparative analysis of family vs.non-family businesses.The main goal is clearly to evaluate whether performance can be in?uenced by a particular form of organization(and,eventually,in which ways).

From a methodological standpoint,a favorite analysis tool of comparative studies is the estimate of a regression model.Unlike descriptive statistics,which relate the selected variables only to the main component of the de?nition chosen,multivariate regression models allow the simultaneous inclusion of multiple variables that can in?uence the dependent variable.Keeping in mind the differences in the de?nition of family?rm,the regression is generally conducted with dichotomic variables(dummy),that take the value of1if a speci?ed condition is satis?ed,and0 otherwise.Most studies use OLS multiple linear regression models. Some studies employ the logit model(Miller et al.,2008)or the probit model(Cronqvist&Nilsson,2003).

We should also pay attention to the application of the matched-pairs methodology(Allouche et al.,2008;McConaughy et al.,2001; Miller et al.,2007).In this method,pairs of?rms belonging to the family and non-family groups,and with similar features and characteristics,are compared while neutralizing some of the potential factors of variability in performance.Subsequently,a Student’s t-test is performed to test whether the differences raised are statistically signi?cant.

5.2.Performance variables

The main purpose of reviewing these studies is to analyse the link between the family nature of a?rm and its?nancial performance,where the latter is a dependent variable that must

C.Mazzi/Journal of Family Business Strategy2(2011)166–181 174

?nd expression in a dimension representative of the?rm’s ‘‘ef?ciency.’’Performance variables can be ascribed to two main categories:accounting and market.Accounting variables are the followings:Return On Assets—ROA,which is undoubtedly the most used variable;Ebit;Ebitda;Return On Equity—ROE(Lindow et al., 2010;Maury,2006;Sraer&Thesmar,2007);and Return On Sales—ROS(Cucculelli&Micucci,2008).The variables usually employed to measure market performance are Tobin’s q—estimated as the ratio of the?rm’s market value to the replacement cost of its assets (Anderson&Reeb,2003;Chu,2009;Cronqvist&Nilsson,2003; Villalonga&Amit,2006)or as the ratio between book value of total assets minus book value of shareholders’equity plus market value of shareholders’equity,and book value of total assets(Barontini& Caprio,2006),or as the market value of common equity plus the book value of total assets minus common equity and deferred taxes divided by the book value of total assets(Maury,2006)—and the market-to-book ratio(McConaughy et al.,2001;Sraer&Thesmar, 2007).

We should note that some studies make use of other performance variables:Lee(2006)analyses the growth rates of employment,payoffs,gross income,and pro?t margin;Chrisman et al.(2004)and Schulze et al.(2003)refer to sales growth;King and Santor(2008)include the debt to total assets ratio;and Sciascia and Mazzola(2008)replicate the analysis using the growth rate of sales,income and pro?ts,increase in ROA and ROE, reduction in the debt-equity ratio,and growth rate of dividends.

5.3.Family?rm performance

As stated above,family involvement in the?rm can be evaluated from two main points of view:the presence of the family as shareholder/voteholder and its presence in the?rm’s management bodies.

5.3.1.Family ownership/control and?rm performance

Studies of listed companies generally report that family ownership and control are positively and signi?cantly related to accounting performance but have a less statistically robust association with market performance(Allouche et al.,2008; Anderson&Reeb,2003;Andres,2008;Barontini&Caprio,2006; Chu,2009;Lee,2006;Martinez et al.,2007;Maury,2006;Miller et al.,2007;Sraer&Thesmar,2007;Villalonga&Amit,2006).A particularly positive impact is shown in the context of the youngest family?rms.Firm size in these?rms is positively associated with pro?tability,suggesting the existence of econo-mies of scale.However,according to some authors,these results can be partly biased by the different de?nitions of family business employed in the single https://www.doczj.com/doc/3f11094910.html,ler et al.(2007),for example, replicated some earlier studies and veri?ed that only lone-founder ?rms are signi?cantly better performers,while family?rms in the strictest sense show no statistical signi?cance.Furthermore,the results for unlisted family?rms are rather diversi?ed.There appears to be no statistically signi?cant association between family ownership and performance(Chrisman et al.,2004;Schulze et al.,2001;Sciascia&Mazzola,2008;Westhead&Howorth,2006). Depending on the familiness component and outcome measures, unlisted?rms may hinder performance(Rutherford et al.,2008). Nevertheless,unlisted family?rms exhibit much care about the preservation and nurturing of their business,the fostering of talent, the effective deployment of employees,and the development of stable relationships(Miller et al.,2008).

The link between the concentration of ownership and control held by families and the performance of listed companies shows a nonlinear trend that is subject to variations depending on the percentage of property or voting rights retained by the family (Anderson&Reeb,2003;Maury,2006;Sciascia&Mazzola,2008).However,the percentage threshold at which these variations occur is not univocally determined.Anderson and Reeb(2003)suggest that the in?ection point can be identi?ed as a31%ownership share. Over this threshold,the advantage is still positive but no more statistically signi?cant,given the prevalence of the entrenchment effect.Somewhat contrary to this result,Maury(2006)demon-strates that the relationship is always positive,but is highly signi?cant only at a percentage of controlling shares higher than 30%for accounting performance,and at the intervals of10–20% and30–40%for market performance.With regard to unlisted?rms, Sciascia and Mazzola(2008)argue that the relationship between family ownership concentration and pro?tability is positive but not signi?cant,and does not even conform to nonlinear or inverted-U-shaped models.

The effect of separation of ownership and control on business performance is de?nitely consistent.The use of control-enhancing mechanisms has a negative,signi?cant effect on market perfor-mance,and a nonsigni?cant effect on accounting performance (Barontini&Caprio,2006;Cronqvist&Nilsson,2003;King& Santor,2008;Maury,2006).When the control rights exceed the cash?ow rights,the better performance of family?rms is undermined,with a stronger negative effect as the wedge increases.This means that the likelihood of an expropriation of minority shareholders is greater as the difference between control rights and cash?ow rights increases(Barontini&Caprio,2006; Claessens et al.,2002;Faccio&Lang,2002).

5.3.2.Family management and?rm performance

The involvement and the role of family members in the?rm’s management have an impact on performance that can be analysed on its own.Even in this case,results are complex and mixed.

As regards accounting performance,listed family?rms outperform non-family?rms when a family member serves as CEO(founder-CEO or descendant-CEO).The presence of a hired-CEO is largely nonsigni?cant(Anderson&Reeb,2003;Andres, 2008;Barontini&Caprio,2006;Maury,2006;Sraer&Thesmar, 2007).Founding-family controlled?rms are better performers in terms of value and operating ef?ciency(Cronqvist&Nilsson,2003). Among unlisted?rms,on the other hand,inherited management can even hurt the family?rm performance(Cucculelli&Micucci, 2008).As indicated by Sciascia and Mazzola(2008),family involvement in management has a negative quadratic relationship with performance(U-shaped).This means that performance decreases as family involvement increases and that the decrease is more noticeable at higher levels of involvement.The sole exception of a positive correlation with performance is repre-sented by variables seldom used in research,such as absolute growth in sales revenues(Westhead&Howorth,2006).

Moving on to market performance,the results obtained are quite different.The founder effect always has a positive impact. The role of outsiders is,on the other hand,controversial,as it showed either a positive(Anderson&Reeb,2003)or a null(Andres, 2008;Barontini&Caprio,2006;Villalonga&Amit,2006) relationship with market performance.The presence of descen-dants in active roles turned out to be nonsigni?cant(Anderson& Reeb,2003;Andres,2008;Maury,2006)or even to have a negative impact on performance(Villalonga&Amit,2006).Family members sitting on the board as nonexecutive directors seem to have a positive and signi?cant in?uence on all kinds of performance (Barontini&Caprio,2006;Lee,2006)or no impact at all(Maury, 2006).

6.Discussion

The last stage in the process of systematic review is the working out of results and the dissemination of the gathered information.

C.Mazzi/Journal of Family Business Strategy2(2011)166–181175

The aim of systematic review is to provide collective insights through the theoretical synthesis of?elds and sub-?elds.For academics,the reviewing process increases methodological rigor. For practitioners and managers,a systematic review helps in developing a reliable knowledge base(Tran?eld et al.,2003). Therefore,I will now arrange the?ndings,provide a critical evaluation,and draw from this evaluation re?ections that might drive future research.

The review clearly shows that it is not possible to provide a de?nite answer about the sort of correlation that emerges between family business and the?nancial performance of such?rms.This work is an attempt to investigate this correlation by analytically observing its main variables of in?uence.Unlike the literature review procedures used in single studies,which unavoidably leave out features of no consequence to the development of the analysis, the present study tries to take into account all the main aspects of family involvement that may have a visible in?uence on business performance.This allows to us focus on common trends and pay particular attention to emerging or opposing tendencies,indepen-dent of the context of reference.

Most comparative studies remark that listed,family-owned companies outperform non-family?rms.This result seems robust for positive and statistically signi?cant regression coef?cients at the5%or1%level with regard to accounting performance,while the association with market performance appears less certain and signi?cant.The relationship between ownership concentration and?rm performance is,on the whole,nonlinear,which means that an incentive effect on performance is present in moderately concentrated shareholding.Above a certain level of concentration (corresponding to the in?ection point),this trend reverses, subdued by the agency costs that have an entrenchment effect. The association between business outcomes and the degree of separation of ownership and control turns negative as the wedge increases.This result can be attributed to the potentially opportunistic behavior of family shareholders that affects minority shareholders.It can therefore be traced back to the quality of the legal environment:if this quality were suf?ciently high,it would guarantee more protection to minority shareholders and reduce the incentive to seek control-enhancing mechanisms.

The results of studies investigating the presence of the family in business management clarify the strength of the founder effect. Founder-led family?rms achieve signi?cantly better performance than do non-family,descendant-controlled,or professionally managed?rms.This does not necessarily imply that when the role of CEO or chairman is assumed by an heir,family?rms underperform compared to other?rms;it simply means that they will not reach the levels attained by founder-controlled?rms, often performing not too differently from non-family?rms.Finally, family?rms led by professional managers outperform when the founder takes on nonexecutive roles;in the absence of monitoring by the founder,the most common result is that of the?rm not obtaining statistically signi?cant results.

Among the studies that investigate samples of unlisted?rms, we?nd quite different?ndings.The relationship between family ownership and performance turns out to be nonsigni?cant,while the presence of family members in the management has a negative quadratic relationship with performance.These results can be interpreted in two different ways.The?rst interpretation focuses on the pathological side of family business,and emphasizes how the positive effects found in public companies can be undermined by the disadvantages arising from the overlapping of family and business in contexts that are not rigidly regulated.The second interpretation,on the other hand,maintains that the value usually associated with the presence of the family in a?rm is not directly mirrored by increased economic and?nancial outcomes,but shows up in different performance categories.

7.Implications and challenges for future research

It is evident from a discussion of results that the study of the link between family business and?rm performance raises many aspects that need to be further explored.The inconsistencies raised in previous studies suggest that the relationship is complex and very likely to be moderated or mediated by factors not included in the analyses(Chrisman,Chua,Pearson,&Barnett,2010).Therefore, the questions open up and the knowledge gaps indicate future strategic challenges for researchers in the family business?eld, both theoretically and empirically,where these two levels of analysis are mutually linked.

Table4summarizes the main topic areas that represent,in the current state of knowledge,the most important development opportunities.In this table,I trace emerging cues and tools for the improvement of future research.The issues identi?ed are based on the gaps between the knowledge found in the articles in the review and the knowledge to which the research?eld of family business performance should aspire to in the medium term.

As can be seen in the table,Column1shows four broad topic areas:wealth and value creation,theoretical frameworks,family business de?nition dilemma,and privately held family?rms. Column2provides the cues for the development of the theoretical context,while Column3connects them to the empirical progress necessarily required to test and validate the concepts expressed in the theory.Below,I shall consider the topic areas in Column1 individually.

7.1.From wealth creation to value creation

As stated above,family?rms are concerned with not only ?nancial returns but also noneconomic goals(Astrachan& Jaskiewicz,2008;Chrisman et al.,2003;Davis&Tagiuri,1989; Sharma et al.,1997;Tagiuri&Davis,1992)as well as the socio-emotional wealth obtained through their business(Go′mez-Mej?′a, Haynes,Nu′n?ez-Nickel,Jacobson,&Moyano-Fuentes,2007).By noneconomic advantages and socio-emotional wealth the authors

Table4

Theoretical and empirical directions for future research.

Topic area Theoretical challenges Empirical challenges

Wealth and value creation Alter the concept of performance by shifting focus from wealth

creation to value creation Build a unique performance index by integrating economic and noneconomic goals

Theoretical frameworks Combine different theoretical approaches with complementary

theories Employ theoretical constructs to identify the variables that in?uence the function of value creation

Family business

de?nition dilemma Build a set of reference attributes by bringing together theoretical

components from both the involvement and the essence

approaches

Build and empirically test a family business de?nition index on a

continuous scale,comparing different construction

methodologies

Privately held family?rms Ascertain that unlisted small and medium-sized?rms represent

the family business universe much more signi?cantly than do

their listed counterparts Improve the evaluation tools of intangible family assets in order to verify how private family?rms monetize or convert their intangible assets and social capital reputational advantages into economic wealth

C.Mazzi/Journal of Family Business Strategy2(2011)166–181 176

refer to aspects of the?rm that are emotionally linked to the family’s affective dimension,such as the protection of family ties, independence and continuity of family in?uence,perpetuation of the family dynasty,relationships with employees,social reputa-tion and identity,links with the territory and the local community, and so on.According to Astrachan and Jaskiewicz(2008),the total value of a business is not only composed of its?nancial worth and private bene?ts,as is usually assumed by traditional?nancial theory,but emotional components also have an impact on valuation.It may well be that family business goals and thus performance can be considered along multiple dimensions:?nancial performance,?rm survival,family?nancial bene?t, family non?nancial bene?t,and societal bene?t(Astrachan, 2010).Family?rms do indeed belong to the category of?rms characterized by a‘‘warm heart-deep pocket’’(Sharma,2004), which combines high levels of human-emotional capital(family dimension)and?nancial capital(business dimension).Further-more,stakeholder theory suggests that the greater the extent of family involvement and in?uence,the more importance that family?rms should attach to family-centered noneconomic goals (FCNE)and the more these goals should re?ect the underlying vision,attitudes,and intentions of the controlling family(Go′mez-Mej?′a et al.,2007;Zellweger&Astrachan,2008;Zellweger& Nason,2008).

According to Chrisman et al.(2010),analyzing only the economic-?nancial side of the cause–effect relationship between family business and performance does reduce its explicative power.The inconsistencies that emerge in previous studies suggest that this link is in?uenced by complex variables that must be more clearly identi?ed and tested.Hence,performance research in family business may be more complex than single-metric performance(Astrachan,2010).As stated by Chrisman et al. (2003),because family?rms have both economic and noneco-nomic goals,the?nancial performance variable of wealth creation should be substituted with a more complex performance variable of value creation.

However,the measurement of noneconomic performance and value creation raises uncertainties about how to make it operational,which methodology to use,and whether it is possible to generalize its results.The theoretical assumption does not seem to have a simple empirical answer:if standard accounting and the economic measures of?rm performance understate the value created by family?rms,which alternative measures should we apply?A future strategic challenge for the scienti?c community is then to develop a function of value creation that is mathematically robust and testable and that takes into account the informative effectiveness of both the economic-?nancial data and the?gures related to family-centered noneconomic goals.In my opinion,a good starting point is the seminal work by Chrisman et al.(2010), who stated that family involvement(ownership,management and number of participating generations)gives the controlling family the ability to in?uence?rm behavior and that family essence (transgenerational family control intentions and family commit-ment)is fundamental to partially mediating the relationship between family involvement and family-centered noneconomic goals.These authors focused on noneconomic goals such as the family harmony,family social status,and identity linkage between family and?rm,and measured them on a5-point Likert scale.By identifying the factors that determine the manner in which the family in?uences?rm behavior,the adoption of these goals should differ among the heterogeneity of family?rms as well as between family and non-family?rms.Following this direction,I think it is advisable to search for a measure of value creation that recombines both economic and noneconomic goals in a unique index.

A further suggestion is to persevere with a thorough investigation of how results are in?uenced by the identity of the controlling family,the family’s generation,and which family members are involved in management(linear and nonlinear relationships).In other words,we need to evaluate combinations of the variables of family ownership/control/management with the variables of founder/descendant/outsider.In addition,it could be useful to explore how the relationship between family?rms and value creation could be in?uenced and mediated by variables seldom used in previous studies,such as family strategic choices (Van Essen,Carney,Gedajlovic,Heugens,&Van Oosterhout,2011), earnings per share and analyst forecast dispersion(Zellweger, Meister,&Fueglistaller,2007),and so on.

7.2.The validity and perspectives of the theoretical frameworks

As discussed in the theoretical framework,RVB theory has made many contributions to identifying the complex,intangible,and dynamic resources and capabilities that allow family?rms to develop family-based competitive advantages.It is therefore clear that the expansion of the goal set(economic and noneconomic)is fundamental to this theoretical approach.In fact,Chrisman et al. (2003)maintained that there will be differences in the mix and importance of the various resources and capabilities that constitute familiness,depending on the mix and importance of the goals pursued.Scholars believe that the unique value-creating potential of family?rms may reside in their capacity to develop and leverage intangible assets such as social capital,trust,reputation,and tacit knowledge(Arregle et al.,2007;Pearson et al.,2008;Sirmon&Hitt, 2003;Zahra,2010).However,the value of intangible assets is not easily quanti?ed.In the belief that this theoretical perspective can greatly contribute to the analysis of family?rms’value creation, future researchers should quantify and validate the speci?c resources and capabilities that lead to distinctive familiness.

The agency theoretic approach to family?rms is primarily based on owner–owner and owner–manager agency problems (Chrisman et al.,2005)that re?ect altruism and entrenchment. However,the results achieved in the studies conducted on Agency Problems I and II are contradictory.Future research will have to verify how and within which thresholds family?rms are actually able to mitigate the dark side of altruism and the entrenchment effect,and boost performance.I suggest that an analysis of the role of the institutional setting may provide valuable insights on its mitigating effect on Agency Problem II.Following Gedajlovic et al. (2010),the extent to which the positive and negative effects of family governance occur depends largely on the existence of speci?c institutional,legal,and political factors.Moreover, Villalonga and Amit’s investigation(2010),which is founded on the competitive advantage and the private bene?ts of control hypotheses,should be further developed.The authors demonstrate that when founders and their families are in control,the competitive advantage explanation dominates,thereby bene?ting all shareholders.Furthermore,families are more likely to maintain control when the scale of ef?ciency is small,the need to monitor employees is high,investment horizons are long,and the?rm has dual-class stock.This means that family?rms are able to mitigate owner–manager con?icts and ensure value maximization for all shareholders even in the presence of control-enhancing mecha-nisms.Family?rms seem to pursue a more balanced goal set,and, consequently,agency theory can determine the speci?cations of the function of value creation.

According to stewardship theory,family owners and managers do not aspire to goals merely based on the maximization of their utility;instead,they altruistically behave as stewards and follow a righteous path aimed at creating value for the whole organization. The stewardship and altruism perspectives capture both the ?nancial and non?nancial motives related to the?rm and the family.Following Corbetta and Salvato(2004),when non?nancial

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goals prevail,motivation based on higher-order needs and intrinsic factors is fostered,thus favoring steward-principal relationships. This suggests that it may be possible to use stewardship theory as a special case of agency theory that involves perfect reciprocal altruism.On the contrary,however,Schulze and Gedajlovic(2010) state that the use of the agency-based and stewardship-based models of governance as antagonists is mistaken.However,despite its potential,stewardship theory has not been extensively adopted in research that investigate the relationship between family?rms and value creation.Therefore,future research needs to explore this promising theoretical framework.

Given the diversity of theories and levels of analysis commonly employed in family?rm research,there appear to be multiple streams of thought that have sometimes led to differences in interpretation.It also seems clear that the RBV,agency and stewardship theories rely on assumptions that may only partially hold,and that they all leave gaps that need to be?lled if we want to capture the complexity of family?rms.In any case,taken alone, none of the theoretical perspectives used seems to be able to explain performance differences.Consistent with Hirsch,Michaels, and Friedman(1987),I recommend the use of one theory with complementary theories.Progress in teasing out the evident contradictory and complex features of the family?rm-perfor-mance link is best achieved through the application of multiple and combined perspectives rather than mono-theoretical views (Carney,van Essen,Gedajlovic,&Heugens,2010).Following Eddleston,Chrisman,Steier,and Chua(2010)and Le Breton-Miller and Miller(2009),we can combine the different theoretical approaches by building on the value creation concept.

However,it should not be forgotten that,in addition to the theories recalled above,there are other views that might provide a key to understanding the relationship under discussion.For example,the resource dependence perspective(Pfeffer&Salan-cick,1978)–the main argument of which is that organizations are controlled by environmental contingencies,or by dependence upon the environment for strategic resources–was applied by Voordeckers,Van Gils,and Van den Heuvel(2007)to investigate the board composition in small-and medium-sized family?rms. Transaction cost economics(Coase,1937;Williamson,1979)–which studies the relationship between market and hierarchy–was used by Gedajlovic and Carney(2010)to establish that once the family is introduced into the economic equation,the point of indifference between hierarchical and market governance shifts depending on the relative importance of generic non-tradable assets,such as social capital vs.professional management, technological complexity,and capital.

7.3.Going beyond the family business de?nition dilemma

The family business de?nition dilemma is still subject to widespread debate.A framework has not yet been developed to help integrate the many promising approaches(from strategic management,organizational theory,economics,sociology,psy-chology,and so on)used by researchers to study family?rms (Chrisman et al.,2005).The de?nition question clearly plays a fundamental role:the standard adopted will have a strong effect on the results obtained in the different studies(Miller et al.,2007; Villalonga&Amit,2006;Westhead&Cowling,1998).The lack of a generally acknowledged de?nition and of interpretive models imposes caution in making comparisons and generalizations.Any attempt at sharpening boundaries of the family-?rm concept may be bene?cial,but also have unfavorable consequences.Family businesses are not homogeneous entities but consist of different types of family business and the level of family in?uence on the business is the result of synergic interactions among quantitative and qualitative variables that have different degrees of intensity (Chrisman et al.,2005;Sharma,2004).It is obvious that family ?rms have many distinctive features,but these are also tightly associated with the legal and institutional context in which they operate(Allouche et al.,2008).On the whole,contextual factors appear to have a strong explanatory power in terms of the competitiveness of a particular?rm(Gedajlovic et al.,2010). Therefore,a monolithic and standardized de?nition would not take into account the clarifying ability of these variables.

At the current stage of development in this?eld of study,it is unrealistic,and maybe not even desirable,to expect that researchers will agree on a single de?nition of family business. Following Chrisman et al.(2005),ideally,all researchers should start with a common de?nition and should distinguish particular types of family businesses through a hierarchical system of classi?cation consistent with that de?nition.An essential step would be to develop a whole set of de?nition variables that allow, in the?rst place,a separation of family from non-family?rms,and, in the second place,an evaluation of the opportunity to construct, for the former class,a tool that measures the degree of interpenetration between family and business.The recommenda-tion is to keep in mind the cues offered by the F-PEC scale (Astrachan et al.,2002;Klein et al.,2005)that measures the degree of family in?uence on business as a continuous variable rather than as a dichotomous one.Dichotomous variables would in fact hide the degrees and types of family in?uence,and their different cut-off levels make comparisons across studies rather complex.Several researchers have used,where possible,continuous measures of the components of family involvement and family essence(e.g.,Holt, Rutherford,&Kuratko,2010;Klein et al.,2005;Lindow et al.,2010; Rutherford et al.,2008).

I recommend the example put forward by a number of studies in the accounting?eld that have long devoted attention to the de?nition of a disclosure index aimed at measuring the quality of mandatory or voluntary disclosure.Such an index is used as an independent variable in the study of the relationship between the quality of?nancial statement disclosure(IAS compliance)and dependent variables such as cost of equity(e.g.,Botosan,1997), cost of debt(Sengupta,1998),or IPO prospectuses(Cazavan-Jeny& Jeanjean,2007).Future research can focus on building a family business de?nition index(FBDI)that captures different levels of familiness(I call it‘‘familinex,’’which is a contraction of ‘‘familiness index’’)by drawing inspiration and taking cues from methodological approaches already well-established in this?eld of investigation.Particularly interesting in this regard are the dichotomous unweighted approach(applied in the accounting ?eld by Cooke,1992)and the weighted method(developed by Al-Shiab,2008).The unweighted approach gives equal weight to the individual items/variables that compose each of the de?nition categories taken into account.For example,in the de?nition category of family involvement,variables such as family owner-ship,control,and management are scored1if present and0 otherwise.The index for each company is then calculated as the ratio of the total variables available to the maximum possible score applicable.The weighted method,instead,will assign a weighted value to every single de?nition variable so as to reduce the distortions involved in applying the calculation of a simple average.Each variable is weighted on the basis of the maximum value it can possibly have,then summed to the others,and?nally normalized.

The controversial results obtained with the employment of disclosure indexes have led some scholars to maintain that the integration of many variables of both a quantitative and a qualitative nature in a single index can entail a loss of informative power.More speci?cally,such an index will make it impossible to explore the causality link between the dependant variable and each single variable included in the index.To get around this

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problem,the single variables should be autonomously speci?ed in the model(individually,or in groups with a principal component analysis).

The critical points that future research developments should take focus on are the following:the complexity of data collection, as this tool takes in a lot of information that is not directly observable;the need to?nd simpli?ed measures for qualitative features;and the complexity of data coherence and operationa-lization for both quantitative and qualitative features.The chosen method may have econometric implications that affect the explanatory power of OLS regressions and the correlations between dependent and independent variables.A robust and reliable index should allow comparisons across businesses concerning the family’s level of involvement,its essence,and its effects on value creation as well as other business behaviors.My conclusion is that simultaneously applying more than just one method will provide more robust results and more informative ?ndings.

7.4.Privately held family businesses

Another area of future research is privately held family?rms. Due to the absence of readily available?nancial data,studies on private family?rms are relatively rare compared with the large body of research on publicly listed family?rms(Carney et al., 2010).Analyses of quoted public companies,while convenient from a data collection standpoint,are certainly confounded and limited in their explanatory power for the broad community of family?rms(Westhead&Cowling,1998).It is in fact obvious that listed companies only represent a small part in the entire universe of research,and that any study that investigates the association between privately held family?rms and small and medium-sized enterprise performance is of academic signi?-cance(Chu,2009).

As evidenced in the present work,unlisted?rms constitute a stimulating research object not only because of their numerical consistency but also because of the substantial discontinuity of the existing results compared to the well-established trends found in literature for listed companies.Through meta-analytical techni-ques,Carney et al.(2010)con?rm that there is no signi?cant difference between unlisted family?rms and non-family?rms in terms of economic-?nancial performance.Notwithstanding this, there has been no slowdown in their diffusion and popularity, probably because family businesses produce certain advantages that cannot be appreciated by standard measurement tools.The recommendation here is then to intensify the study of unlisted family?rms and to better explore the possible critical variables that affect their economic and noneconomic goals.

It is obvious that their‘‘private’’status and opaqueness poses several methodological and measurement challenges:reliable data are dif?cult to obtain because income-based measures of perfor-mance may be understated owing to incentives to minimize reported taxable income and also because,in most countries,there are different legal obligations for private family?rms to disclose their activities or?nancial performance(Daily&Dalton,1992).It is therefore necessary to explore how private family?rms monetize or convert their intangible assets and social capital reputational advantages into economic wealth,considering how the standard measurement tools do not provide appreciable results.To explore these aspects it may be useful to expand the use of behavioral theory based on socio-emotional wealth,which focuses on non-?nancial aspects of the business that meet the family’s affective needs.Go′mez-Mej?′a et al.(2007)stated that family?rms are willing to accept a performance hazard and to accept below-target performance in order to retain family control and preserve socio-emotional wealth.According to the outcome of the present study,this assertion appears particularly effective for unlisted family ?rms.

8.Implications for practice

From a managerial perspective,an exploration of the critical variables aimed at value creation in family?rms can help create awareness of both the strengths,which can eventually be implemented,and the weaknesses,so as to possibly avoid damaging behavior.Accordingly,family managers(that in many cases are also owners)should be careful to keep in balance the features that determine the strong points of the family-business synergy and to prevent them from turning into weaknesses or loss of competitive advantage.

In family businesses better performance can be determined through the unique family resources and competencies that develop into distinctive familiness,the ability to mitigate(under certain conditions)agency problems,and stewardship behavior. Taken together,these factors can be directed to the pursuit of a complex goal set comprised of both economic and noneconomic aims for the bene?t of the family,the business,and the shareholders.Family managers ought to harmonize concerns for value and wealth creation without sacri?cing economic goals for noneconomic ones.They must try and make them complementary to each other and create a self-fuelled,circular feedback process.

On the other hand,family?rms appear to have weak points that may eventually make them vulnerable to internal dysfunctions.To avoid stagnation,family managers ought to minimize the effect of features that can impede value creation,such as paternalism, excessive altruism,and entrenchment effects.They could over-come these disadvantages by improving their managerial culture and detaching themselves from a family perspectives that negatively affect business.Among the practical measures that can be taken,there is the regular monitoring of in-house behaviors, the impact of in-house behaviors on business results,the training of descendants,the supervising of these descendants’actual ability to direct the business,and the partnering of professional managers.

The in-depth exploration of these critical variables would also allow policymakers and institutions to?nally evaluate the role of family?rms in the economic and social context.

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