Married to the firm? A large‐scale investigation of the social context of ownership
| Date | 01 December 2016 |
| DOI | http://doi.org/10.1002/smj.2441 |
| Author | Andrea Patacconi,Sharon Belenzon,Rebecca Zarutskie |
| Published date | 01 December 2016 |
Strategic Management Journal
Strat. Mgmt. J.,37: 2611–2638 (2016)
Published online EarlyView 17 November2015 in Wiley Online Library (wileyonlinelibrary.com) DOI: 10.1002/smj.2441
Received 28 February 2013;Finalrevision received 11 August 2015
MARRIED TO THE FIRM? A LARGE-SCALE
INVESTIGATION OF THE SOCIAL CONTEXT
OF OWNERSHIP
SHARON BELENZON,1*ANDREA PATACCONI,2
and REBECCA ZARUTSKIE3
1Fuqua School of Business, Duke University, Durham, North Carolina, U.S.A.
2Norwich Business School, University of East Anglia, Norwich, U.K.
3Federal Reserve Board, Washington, District of Columbia, U.S.A.
Research summary: Using a large sample of private rms across Europe, we examine how the
social context of owners affects rm strategyand performance. Drawing on embeddedness theory
and the institutional logics perspective, we argue that embeddedness in a family, in particular
the nuclear family, can strengthen identication and commitment to the rm, but can also induce
owners to behave more conservatively. Consistent with this argument, we nd that family-owned
rms have higher prot margins, returns on assets, and survival rates compared to single-owner
or unrelated-owners’ rms, but also invest and grow more slowly, hold greater reserves of cash,
and rely less on external debt. These differences are most pronounced when the two largest
shareholdersare married. Our results highlight the key role of marital ties in explainingdifferences
in behavior and performance among rms.
Managerial summary: Despite the prevalence of the married-couple ownershipstructure in rms,
little research has been dedicated to understanding how these rms are managed and perform.
We examine the behavior and performance of rms owned by married couples in a large panel
of closely held Western European rms. We nd that married-owner family rms are managed
more conservatively relative to rms with unrelatedowners and even to other family-owned rms.
In particular, married-owner family rms invest and grow more slowly and rely less on external
nance. However, they also exhibit greater performance stability and higher protability. Our
ndings suggest that social relationships among owners have a large impact on rm strategy
and performance, and highlight some potential trade-offs to performance when married couples
control rms. Copyright © 2015 John Wiley & Sons, Ltd.
INTRODUCTION
Family rms are prevalent across the world and
comprise a signicant share of assets and economic
activity. It is tting, therefore, that researchers have
Keywords: social context; institutional logics; family own-
ership; marital ties; conservatism
*Correspondence to: Sharon Belenzon, Duke University, Fuqua
School of Business, 100 Fuqua Drive,Durham, NC 27708, U.S.A.
E-mail: sb135@duke.edu
JEL Classication: D22, D23, G32, O16.
Copyright © 2015 John Wiley & Sons, Ltd.
devoted signicant effort to understanding how
family involvement in a business affects corporate
strategy. Most scholars concur that a fundamental
difference between family and nonfamily rms is
that factors such as emotional attachment to the
rm and affective ties among owners play a more
important role in family rms than in nonfamily
rms (Gersick et al., 1997; Gomez-Mejia et al.,
2007). However, a systematic examination of these
factors is still largely missing (Berrone, Cruz, and
Gomez-Mejia, 2012; Chrisman, Chua, and Steier,
2005). In this paper, we examine the social context
2612 S. Belenzon, A. Patacconi, and R. Zarutskie
of ownership. Wedistinguish among different types
of social ties among owners and show that these
distinctions have important consequences for rm
strategy and performance.
Previous research on the effects of family own-
ership has yielded mixed or conicting results.
On the one hand, the literature suggests that,
especially among founder-managed rms and in
developed countries, family ownership improves
nancial performance (Miller, Le Breton-Miller,
and Scholnick, 2008; Minichilli, Corbetta, and
MacMillan, 2010; Villalonga and Amit, 2006).
On the other hand, family ownership has been
associated with a number of problems, includ-
ing low investment, conservative cash policies,
and slow growth (Block, 2012; Gallo, Tapies, and
Cappuyns, 2004; Miller, Le Breton-Miller, and
Lester, 2013a; Mishra and McConaughy, 1999;
Patel and Chrisman, 2014). Drawing on embedded-
ness theory (Granovetter, 1985; Le Breton-Miller
and Miller, 2009; Le Breton-Miller, Miller, and
Lester, 2011; Uzzi, 1997) and the institutional log-
ics perspective (Friedland and Alford, 1991; Miller,
Le Breton-Miller, and Lester, 2011; Thornton and
Ocasio, 2008), we argue that these ndings can-
not be properly understood without examining the
social context in which owners operate. Institu-
tional logics provide social actors with “assump-
tions and values, usually implicit, about how to
interpret organizational reality, what constitutes
appropriate behavior, and how to succeed” (Thorn-
ton, 2004: 70). The social context of ownership,
as captured by the nature and intensity of affective
ties among shareholders, can inuence how owners
manage their rms (Gomez-Mejia, Nunez-Nickel,
and Gutierrez, 2001; Greenwood, Deephouse, and
Xiao Li, 2007; Miller et al., 2011). Lone owners,
or owners with no affective ties to other share-
holders, may be more willing to take on risk and
adopt strategies of growth. Family owners, by con-
trast, may perceive themselves as “family nurtur-
ers” and may use the rm to generate stable, secure
income for family members (Miller et al., 2011).
This conservative logic is likely to be most pro-
nounced among married owners who may perceive
the rm as a legacy or bequest to their children.
These altruistic concerns may translate into a con-
cern for the long-term performance and survival
of the rm, which may induce married owners to
both work hard (thus raising prots) and behave
conservatively.
We study the social context of ownership using
detailed data on a large panel of private rms
across Europe. We distinguish among lone or single
owners, family owners, and unrelated owners. We
dene family-owned rms as those having at least
two blood relatives who are shareholders with the
same last name holding a majority of the company
shares. Thus, our focus is on family ties between
owners, rather than family ties between employees
and owners or between current and future owners.
Family-owned rms represent 25 percent of rms in
our sample of 228,253 rms, and almost 40 percent
of the 152,245 rms with at least two sharehold-
ers. Among family-owned rms, we distinguish
between rms that are predominantly owned by a
married couple versus those that are predominantly
owned by other types of family members, such as
parents and children or siblings.
Our analysis indicates that family owners are
associated with more conservative management
strategies and slower growth. Family-owned rms
rely more on internal cash reserves and less on
outside debt when nancing their assets. Also, sales
growth and investment rates at family-owned rms
are on average lower than at nonfamily-owned
rms. Associated with these more conservative
strategies are stronger measures of nancial
performance. Family-owned rms on average
have higher returns on assets, prot margins, and
survival rates than nonfamily-owned rms. The
ability or willingness of family owners to keep
wages down partly explains their superior nancial
performance.
The results are strongest for rms whose two
largest shareholders are married to each other.
Married owners are especially likely to adopt con-
servativestrategies relative to other types of owners.
The results hold both cross-sectionally and when
focusing only on rms that experience ownership
changes and are strengthened when instrumenting
for married family ownership. We control for
several factors that could bias our results, such
as differences between genders and ownership
concentration at the family level, and nd that our
results are robust. One important caveat is that
the vast majority of rms in our sample are very
small— the median rm has just eight employees.
For the owners of these small rms, providing
a secure source of income to family members is
likely to be a major concern. More research is
needed to establish to what extent our ndings
generalize to much larger family-owned rms.
Copyright © 2015 John Wiley & Sons, Ltd. Strat. Mgmt. J.,37: 2611–2638 (2016)
DOI: 10.1002/smj
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