A contentious and prominent research question in the management literature is whether publicly listed family firms (FFs) outperform other types of corporations. Through a research synthesis of all available studies on the performance of US FFs, we address this question directly. We also extend the debate by raising three salient follow-up questions. First, is the performance differential between FFs and non-FFs attributable to a unique set of strategic choices? Second, do FF performance effects persist across generational transitions in FF control? Third, are performance differentials across generations attributable to intergenerational shifts in corporate governance and strategy?
With respect to our primary research question, we find that the balance of evidence indicates that (US) FFs outperform other types of public corporations. We also evaluate competing narratives regarding which strategies are characteristic of FFs, and demonstrate that their diversification, internationalization, and financing strategies mediate the FF-performance relationship in manners consistent with the narratives advanced by certain leading FF scholars, but not others. Further, we find that the performance of (US) FFs drops dramatically after the first generation and show that this negative performance differential is due to the much more conservative patterns of strategic decision making enacted by successor generations.
In addition to providing the most comprehensive evidence to date regarding the performance attributes of FFs, we nuance several theoretical debates concerning the propensity of FFs to diversify, internationalize, and leverage their equity capital.
We identify value-creating strategic choices of FFs related to internationalization, diversification, and capital structure. We also identify strategic choices often made in successor-led FFs which reduce value. Both sets of findings are relevant to FF executives and consultants. The policy implications of the study are that in advanced liberal market economies high-quality capital market institutions are likely to contribute to FF outperformance vis-à-vis other types of publicly listed firms, but these findings may not hold in other types of national governance systems or in emerging markets.