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Identifying and classifying family businesses

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Abstract

One of the main challenges facing those researching family business is that of defining what exactly constitutes a family business when considering whether family businesses and non-family businesses are different or not. Most research on the definition of family firms has been conceptual-based, and the choice of definition has lacked empirical support. Previous research has not yet obtained conclusive results regarding the differences between family and non-family firms. Moreover, very few countries worldwide have explicit database information to enable them to recognize family firms. This research uses an abductive method to identify family-involved firms (FIFs) with homogeneous features compared to the rest of firms regarding performance, an essential indicator of the firm’s success. Second and later generation FIFs, despite their internal differences, make up a uniform group of firms when considering several dimensions of performance (leverage, efficiency and profitability), and differ significantly from the rest of firms. At the same time we test whether entrepreneurial firms (lone- founder firms) should be considered family firms or non-family firms, according to their behavior. Results agree with making a distinction between lone-founder firms, in which no relatives are involved as internal stakeholders, and FIFs.

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Notes

  1. Public administration and defence; obligatory national health service; associative activities; home activities, such as employers of domestic staff as well as producers of goods and services for own use; the activities of extraterritorial organizations and organisms.

  2. The CNAE-2009 is integrated in the Statistical Classification of Economic Activities in the European Union, usually known as NACE (Rev. 2), and is similar to the Standard Industrial Classification (SIC).

  3. The suppression of elements of the sample supposes a loss of information. We have been very cautious, only eliminating the values in every sector size that are placed out of the interval \((Q_{1} - 3R_{Q} ,\quad Q_{3} + 3R_{Q} )\) where Q1 is quartile 1, Q3 is quartile 3 and RQ is the inter-quartile range or the difference between quartiles 1 and 3. This treatment of extreme values offers the advantage of robustness.

  4. “…procedures based on the mean are often very sensitive to the occurrence of extreme or outlying observations (specially in small samples), which is why so-called distribution free or non-parametric methods are considered” (Andersen et al. 1987).

  5. For succession, a threshold of 25 years is used to create a proxy measure. If a company is <25 years old, it is considered to be in the first-generation stage. If it is more than 25 years old, it is assumed that a succession has been completed.

  6. Broadly speaking, we can affirm that the classification table result is >70 % and the LR and Wald test results are <.01. The Nagelkerke pseudo R2 and ROC curve is not high but is adequate.

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Authors and Affiliations

  1. Faculty of Economics, University of Málaga, El Ejido s/n, 29071, Málaga, Spain

    J. Diéguez-Soto & P. López-Delgado

  2. Faculty of Economics, University of Almería, Ctra. Sacramento s/n La Cañada de San Urbano, 04120, Almería, Spain

    A. Rojo-Ramírez

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  1. J. Diéguez-Soto
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  2. P. López-Delgado
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  3. A. Rojo-Ramírez
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Correspondence to J. Diéguez-Soto.

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Diéguez-Soto, J., López-Delgado, P. & Rojo-Ramírez, A. Identifying and classifying family businesses. Rev Manag Sci 9, 603–634 (2015). https://doi.org/10.1007/s11846-014-0128-6

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