Family Involvement in Ownership and Management: Exploring Nonlinear Effects on Performance

Authors


  • We Kindly express our gratitude to Daniela Montemerlo and Luca Gnan for their valuable support in data collection. We also acknowledge precious comments and indications received from Joseph Astrachan, Franz Kellermans, and two anonymous reviewers. Previous versions of this article were presented in 2008 at the Family Enterprise Research Conference, the Babson College Entrepreneurship Research Conference, and the Academy of Management Meeting. We thank participants at the above-mentioned conferences who helped us improve the quality of the manuscript. We also acknowledge the financial support of Università IULM.

Salvatore Sciascia, Instituto di Economiae Marketing, Università IULM, Milano; tel: +39 02 89141 2638; Salvatore.Sciascia@iulm.it.

Pietro Mazzola, Università IULM, Milano; Pietro.Mazzola@iulm.it.

Abstract

Research on the performance of family firms is growing, but results are mixed, especially for nonlisted companies. Thus, on the basis of the co-presence of benefits and disadvantages of family involvement in ownership and management, we explored the presence of nonlinear effects of these two variables on performance. We run regression analyses on data drawn from 620 privately held family firms in Italy: A negative quadratic relationship between family involvement in management and performance was found, but we did not find any association between family involvement in ownership and performance. Our results suggest that in privately held firms the positive effects that previous literature associates with the presence of family managers do not appear strong enough to compensate for the disadvantages deriving from a nonmonetary goal orientation, nor do they compensate for the costs deriving from the need to solve conflicts between family managers and the impossibility of enlarging the company's social and intellectual capital through the employment of nonfamily managers. Moreover, the quadratic nature of the relationship calls for greater attention to be paid to these effects by family business owners, especially in those cases where family involvement in management is high.

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