Abstract

http://ssrn.com/abstract=1673677
 
 

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Must Love Kill the Family Firm?


Vikas Mehrotra


University of Alberta - Department of Finance and Statistical Analysis

Randall Morck


University of Alberta - Department of Finance and Statistical Analysis; National Bureau of Economic Research (NBER)

Jungwook Shim


Independent

Yupana Wiwattanakantang


National University of Singapore - Department of Finance/Strategy and Policy

September 2010

NBER Working Paper No. w16340

Abstract:     
Family firms depend on a succession of capable heirs to stay afloat. If talent and IQ are inherited, this problem is mitigated. If, however, progeny talent and IQ display mean reversion (or worse), family firms are eventually doomed. This is the essence of the critique of family firms in Burkart, Panunzi and Shleifer (2003). Since family firms persist, solutions to this succession problem must exist. We submit that marriage can transfuse outside talent and reinvigorate family firms. This implies that changes to the institution of marriage – notably, a decline in arranged marriages in favor of marriages for “love” – bode ill for the survival of family firms. Consistent with this, the predominance of family firms correlates strongly across countries with plausible proxies for arranged marriage norms. Interestingly, family firm dominance interacted with arranged marriage norms also correlates with lower GDP per capita, suggesting that cultural inertia may also impede convergence to more efficient economic organization.

Number of Pages in PDF File: 40

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Date posted: September 8, 2010  

Suggested Citation

Mehrotra, Vikas and Morck, Randall and Shim, Jungwook and Wiwattanakantang, Yupana, Must Love Kill the Family Firm? (September 2010). NBER Working Paper No. w16340. Available at SSRN: http://ssrn.com/abstract=1673677

Contact Information

Vikas Mehrotra (Contact Author)
University of Alberta - Department of Finance and Statistical Analysis ( email )
School of Business
University of Alberta
Edmonton, Alberta T6G 2R6
Canada
780-492-2976 (Phone)
780-492-3325 (Fax)

Randall K. Morck
University of Alberta - Department of Finance and Statistical Analysis ( email )
2-32C Business Building
Edmonton, Alberta T6G 2R6
Canada
780-492-5683 (Phone)
780-492-3325 (Fax)

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Jungwook Shim
Independent ( email )
No Address Available
United States
Yupana Wiwattanakantang
National University of Singapore - Department of Finance/Strategy and Policy ( email )
Business School
Mochtar Riady Building #7-44, 15 Kent Ridge Dri
Singapore, 117592
Singapore
65-6516-1912 (Phone)
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