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The influence of family ownership on SME performance: evidence from public firms in Taiwan

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Abstract

The relationship between family ownership and firm performance has gained increased attention in the business strategy and financial economics literature. Most existing studies use large companies as the research sample; studies that explicitly investigate the influence of family ownership on the performance of small- and medium-sized enterprises (SMEs) remain sparse. This study raises this issue explicitly by investigating the influence of founding-family ownership on the return on assets and Tobin’s q of 341 public SMEs in Taiwan, during the period of 2002–2006. It emerges from the data that family ownership is prevalent and substantial in Taiwan, representing half of the public SMEs and accounting for more than 11 percent of their outstanding equity. It was found that the influence of family ownership on SME performance is positive and significant. Overall, the results suggest that family ownership is an effective organizational structure for SMEs in Taiwan.

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Notes

  1. According to Dyer (2006), clan family firms are likely to be small, first-generation family firms that are owned and managed by family members highly committed to both the success of the firm and family. Large family firms where the family maintains significant ownership but relies on professional managers to run the enterprise are examples of professional family firms. The mom and pop family firms are represented by small “mom and pop” enterprises, such as family-owned restaurants or family farms, which may be operated by a family for generations, but the owning family has not made an effort to cultivate family assets to help the firm grow. Finally, family firms that are comprised of multiple generations of highly conflicted family members seem to be examples of self-interested family firms. As this study uses public SMEs in Taiwan as the research sample, family firms covered in the current study are more likely to be in the category of clan family firm.

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Acknowledgments

The helpful comments on the earlier version of this paper from Constantinos Markides, participants of the Academy of Management Annual Meeting, Strategic Management Society Annual Conference, the editor of this Journal and two anonymous reviewers, are gratefully acknowledged. This paper also benefits from the financial support provided by the Taiwan National Science Consul. All errors remaining are the author’s.

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  1. National Taiwan University, Taipei, Taiwan, Republic of China

    Wenyi Chu

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Chu, W. The influence of family ownership on SME performance: evidence from public firms in Taiwan. Small Bus Econ 33, 353–373 (2009). https://doi.org/10.1007/s11187-009-9178-6

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