Faculty of law blogs / UNIVERSITY OF OXFORD

The Family Firm: A Synthesis, Stylized Facts, and Future Research Directions


Time to read

4 Minutes


Dániel Kárpáti
PhD Student at the Department of Finance, Tilburg University
Luc Renneboog
Professor of Corporate Finance, Tilburg University, and a research member of the European Corporate Governance Institute (ECGI)
Jeroen Verbouw
Researcher at the Department of Finance and the Tilburg School of Economics and Management at Tilburg University and a PhD student at Ghent University

Family firms are the most prevalent ownership form in any economy and are responsible for more than 70% of the worldwide GDP. Their prominence has cultivated a multidisciplinary and progressively expanding literature that has increased our understanding of topics related to family ownership and governance, family firm characteristics, organizational strategy, business and family values, and succession. Collectively, these studies identified how family and nonfamily firms differ and the implications thereof for firms, their stakeholders, and society. Nevertheless, family firm scholars increasingly point to the unambiguous heterogeneity among family firms, which might help to explain how, why, and when a firm’s family character contributes to organizational culture, corporate strategy and behavior, and outcomes thereof.

In our recent paper The Family Firm: A Synthesis, Stylized Facts, and Future Research Directions, we comprehensively review the recent and topical literature on the heterogeneous characteristics of family firms. We organize our review around five main topics: business and family values, succession, family firm strategies, family ownership and governance, and financial policies. We additionally provide stylized facts on various sources of family firm heterogeneity based on detailed survey data on more than 900 Dutch family firms. Lastly, we delineate a promising research agenda to push the field further.

Business and family values. Despite the clear fragmentation and overall empirical inconclusiveness, not many papers on business values study the moderating role of family firm heterogeneity. This is surprising as, for instance, family values and culture, families’ legitimizing role, parenting, and educational experiences can play influential roles in the importance that family managers appropriate to business ethics, social responsibility, gender diversity, and entrepreneurial orientation. While crucial to understand how family influence differentiates family firms, family values have also received scant empirical attention. Family firms furthermore differ based on their predefined goals and socioemotional wealth preservation, however, most attention has been devoted to the latter.

Succession. A large and longstanding literature has developed to better understand succession in family firms and has placed particular focus on the outcome, the ease of the process, and the drivers thereof. The qualities of the successor(s), the family context, the generational stage, and the incumbents’ characteristics have been identified as sources of family firm heterogeneity. While typically reluctant to external investors, somebut not allfamily firms also increasingly resort to private equity investors to facilitate the succession of their firm.

Family firm strategies. A bourgeoning literature has examined organizational strategies in family firms and thereby focused on strategies for growth, strategies for innovation, risk-taking, diversification, and implications thereof on firm growth and performance. As main growth strategies, internationalization, restructurings, and acquisitions have been researched quite extensively. Significant sources of family firm heterogeneity have been identified based on family ownership, management, and governance levels. While family firms generally innovate less and have lower risk-taking propensities compared to nonfamily firms, heterogeneous family ownership and involvement, agency costs, emotional attachment to the firm, generational stage, and succession intentions make innovation and risk-taking also differ substantially between family firms. In general, family firms seem to outperform nonfamily firms, albeit very weakly, but grow slower. Family ownership and control matter greatly for performance and explain variations thereof between family firms.

Family ownership and governance. Family firms are, by definition, characterized by the presence and dominant influence that members of a common family exert, which can differ greatly between family firms. Furthermore, who owns or controls the family firm (eg, based on the generational stage) and the extent of this control (ie, based on the ownership, governance, and/or management of the firm) are also important sources of family firm heterogeneity. Family firm boards, for instance, can consist entirely of family members or include a minorityor even a majorityof outside professionals, which further depends on the generational stage of the firm. As a result of the separation and nature of ownership and control in family firms, family firms are susceptible to significant agency risks as (family) managers might be inclined to not act in the best interests of the (nonfamily) owners and act opportunistically by underinvesting, shunning risk, and appropriating managerial perquisites. Moreover, altruism towards other family members, nepotism, free riding, and intergenerational conflicts can substantially aggravate agency costs and thereby hurt firm performance and valuation.

Financial policies. Capital structure decisions in family firms typically differ from those in nonfamily firms, but the literature is inconsistent regarding the difference in leverage levels or the source of external capital. Family control and involvement, firm age, and size have been proposed as important drivers of family firm heterogeneity. It is furthermore not clear whether and how family firms differ from nonfamily firms in their dividend policy. Lastly, although often praised for their positive and enduring impact on employment, family owners pay lower wages, invest less in training, and might discriminate among employees based on their link to the family. Nevertheless, family firms also engage in fewer job cuts compared to nonfamily firms.

Stylized facts. Our survey data illustrates that family firms indeed exhibit substantial heterogeneity along the five main topics we consider and that different dimensions of heterogeneity are often strongly correlated. Most studies consider family firm heterogeneity in isolation. Our analysis demonstrates that there are important interactions between, for instance, family values and more traditional factors that constitute family firms. We, therefore, emphasize that accounting for intercorrelations between the sources of family firm heterogeneity ought to be considered in empirical research.

Future research directions. Family firm scholars have progressively considered various sources of family firm heterogeneity in their research. Still, some dimensions such as those related to family ownership, control, and governance have received ample scholarly attention, whereas others such as those related to family and business values, organizational strategy, or the firm’s institutional environment remain remarkably underexplored.



Daniel Karpati is a PhD student at the Department of Finance of Tilburg University.

Luc Renneboog is a professor at the Department of Finance and the Tilburg School of Economics and Management at Tilburg University.

Jeroen Verbouw is a researcher at the Department of Finance and the Tilburg School of Economics and Management at Tilburg University, and a PhD student at Ghent University.


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