TMT diversity and innovation ambidexterity in family firms

Purpose – Family firms that simultaneously engage in multiple levels of innovation – incremental andradical – are likely to enjoy performance advantages across generations. The purpose of this paper is to research under which management conditions (i.e. top management team (TMT) diversity in terms of generational or non-family involvement) family firms are more likely to achieve innovation ambidexterity. Also, the paper addresses the mediating role of open innovation (OI) breadth in this relationship. Design/methodology/approach – A large cross-sectional sample of 335 small- and medium-sized family firms is used. The hypotheses were tested in a mediation model. The relationship between TMT diversity andambidexterity is measured using a binominal regression analysis, the one between TMT diversity and OIbreadth using a Tobit model. Findings – Drawing on the family firm upper echelon perspective, the results indicate that TMT diversity induced through external managers and multiple generations is positively related to innovation ambidexterity. As the mediation analysis reveals, the relationship can be explained by the higherpropensity of diverse TMTs to get involved in OI breadth. The findings add to the discussion on family firm heterogeneity and its influence on different kinds of innovation. Originality/value–So far, few studies have been concerned with ambidextrous family firms. Contrary totheir reputation, this study identifies family firms as radical as well as open innovators. As such, this research takes account not only of the heterogeneity of family firms, but also of the heterogeneity of family firm innovation

Family Ownership and Firm Performance: A Closer Look at the Evidence from Public Companies in Chile

We revisit the evidence presented in Martinez et al. (2007) using new data and estimation techniques that take into account unobserved firm heterogeneity. The results of the earlier study are found to be robust to the new procedures since performance of family firms continues to be superior to non-family firms. We then add the risk dimension to the earlier analysis using a risk-adjusted ROA variable, and family firms again performed better. A test of the standard deviations of ROA for both firm categories revealed that family firms not only perform better but also show less volatility in their returns.Family firms, performance.

Working in family firms: less paid but more secure? Evidence from French matched employer-employee data

We study the compensation package offered by family firms. Using matched employer-employee data for a sample of French establishments in the 2000s, we first show that family firms pay on average lower wages to their workers. This family/non-family wage gap is robust to controlling for several establishment and individual characteristics and does not appear to be due either to the differential of productivity between family and non-family firms or to unobserved establishment and individual heterogeneity. Moreover, it is relatively homogeneous across workers with different gender, educational attainment and age. By contrast, the family/non-family wage gap is found to be larger for clerks and blue-collar workers than for managers, supervisors and technicians, for whom we find no significant wage gap. As a second step, we investigate why workers stay in family firms while being paid less. We show that these firms offer greater job security. We find evidence that the rate of dismissal is lower in family than in non-family firms. We also show that family firms rely less on dismissals and more on hiring reductions when they downsize. These results are confirmed by subjective data: the perceived risk of dismissal is significantly lower in family firms than in non-family ones. We speculate that our results can be explained either by a compensating wage differential story or by a model in which workers sort in different firms according to their preferences.family firms ; wages ; job security ; linked employer-employee data

Does Family Control Affect Trade Performance? Evidence for Italian Firms

This paper examines whether the export decision of firms is affected by their ownership structure, specifically it looks at whether family control is an obstacle to entering foreign markets. The underlying assumption is that family firms are risk averse. Risk aversion may be an obstacle to entering foreign markets, as far as these are perceived as more volatile and risky than the domestic one, particularly when such choice entices bearing relatively high sunk costs. We develop an illustrative theoretical model that shows how the combination between high risk aversion and low initial productivity may hinder family firms' decision to enter foreign markets, particularly distant ones. The empirical analysis, based on a detailed panel data set of Italian firms covering the years from 1995 to 2003, confirms such predictions by showing that family controlled firms do indeed export less than other type of companies even after controlling for firm heterogeneity in productivity, size, technology and access to credit.firm structure, foreign markets, family firms, exports

Women entrepreneurs and family firm heterogeneity: Evidence from an emerging economy

Family firms add to the economic and social well-being of countries. While research on heterogeneity of family firms is gaining momentum, it has mostly been gender-neutral. The study fills this gap by examining heterogeneity of family firms owned and managed by women, in the context of a developing country—Brazil. The study draws upon the resource-based view of the firm to investigate the relationships between firm performance, family involvement, and financial resources at the start-up phase. An inductive analysis reveals two patterns. First, family firms that are started with the family achieve better performance than firms that are launched without the family and later evolve into a family business. Second, family firms that are funded with women entrepreneur’s own savings achieve worse performance than family firms that are started with borrowed funds. The results are useful for strategic decision making in fostering family businesses headed by women and proactive public policies for future innovation to enhance the success of women entrepreneurs

Does Family Control Affect Trade Performance? Evidence for Italian Firms

This paper examines whether the export decision of firms is affected by their ownership structure, specifically it looks at whether family control is an obstacle to entering foreign markets. The underlying assumption is that family firms are risk averse. Risk aversion may be an obstacle to entering foreign markets, as far as these are perceived as more volatile and risky than the domestic one, particularly when such choice entices bearing relatively high sunk costs. We develop an illustrative theoretical model that shows how the combination between high risk aversion and low initial productivity may hinder family firms’ decision to enter foreign markets, particularly distant ones. The empirical analysis, based on a detailed panel data set of Italian firms covering the years from 1995 to 2003, confirms such predictions by showing that family controlled firms do indeed export less than other type of companies even after controlling for firm heterogeneity in productivity, size, technology and access to credit.

Family involvement and firms’ establishment mode choice in foreign markets

Extant literature on foreign entry increasingly recognizes firms’ heterogeneity as a potential reason for inconsistency in results on the establishment mode choice, i.e. whether and under which conditions firms should choose to enter a new country through a greenfield investment or an acquisition. Our study contributes to this debate by identifying family ownership and family involvement in management as potential powerful sources of such heterogeneity. Integrating international business studies with both corporate finance literature on family firms and recent contributions from the Socio Emotional Wealth perspective on family ownership, we claim that, due to greater risk aversion and lower access to information, the family involvement either in the firm ownership and management leads to a higher propensity towards greenfield initiatives (vs. acquisitions). However, we also find that such a propensity decreases with international experience especially in family-owned firms given the greater ability of professionalized management to overcome family-related concerns on making acquisitions. Our analysis on 1,045 foreign initiatives undertaken by 311 Italian family and non-family firms between 2003 and 2013 confirms our expectations – indicating family ownership as a significant driver of international business choices

Disentangling the effect of family involvement on innovativeness and risk taking: the role of decentralization

This study investigates the effect of family involvement on family firms' entrepreneurial behavior through decentralization. Borrowing from agency theory and using a sample of 145 entrepreneurs, this study contributes to entrepreneurship literature by providing a fine-grained explanation about how a decision-making mechanism such as decentralization influences the relationship between family involvement and innovativeness, and risk taking of family firms. Furthermore, this study demonstrates the importance of considering heterogeneity of family firms and the focal role of decentralization in spurring up firm-level entrepreneurship

Internationalization propensity in family-controlled public firms in emerging markets: The effects of family ownership, governance, and top management team heterogeneity

Internationalization propensity is a growing issue faced by family firms. This study contributes to the family business literature by developing a conceptual framework that can identify the family and managerial determinants that affect the extensiveness of internationalization. Drawing on the socioemotional wealth and upper echelon perspectives, it empirically examines the association among family heterogeneity (i.e., family participation is heterogeneous in terms of ownership and governance oversight), top management team (TMT) heterogeneity (i.e., the TMT’s background is heterogeneous in terms of its overseas education and industry experience), and internationalization propensity in publicly traded enterprises. The analysis of data collected from 105 public firms in Taiwan shows that active family participation in ownership and governance oversight and TMT overseas industry experience heterogeneity are significantly and positively associated with internationalization propensity. However, family ownership is found to be significantly but negatively associated with internationalization propensity. We finally discuss the implications of the presented findings for practitioners and organizational theorists