Markets, Hierarchies, and Families: Toward a Transaction Costs Theory of the Family Firm
48 Pages Posted: 4 Oct 2009 Last revised: 14 Jun 2011
Date Written: October 2, 2009
Abstract
Why do family businesses exist? What factors explain their versatility, limitations and success within and across different industrial and geographic contexts? We develop a transaction-cost framework that addresses these questions. In doing so, we identify a class of asset we term generic non-tradables (GNTs), that are firm-specific, but generic in application. We reason that family firm governance provides relative advantages in developing, sustaining, and appropriating value from GNTs through combinations with other types of assets. We propose that these advantages as well as some concomitant disadvantages explain the versatility, limitations and success of family business enterprise.
Keywords: Family firm, corporate governance, competitive advantage, transactions cost
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