Abstract

http://ssrn.com/abstract=306130
 
 

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From Cronies to Professionals: The Evolution of Family Firms


Utpal Bhattacharya


Hong Kong University of Science & Technology - HKUST School of Business and Management

B. Ravikumar


Federal Reserve Bank of Saint Louis

January 2004


Abstract:     
We develop a dynamic model where each generation in a family can continue operating its inherited production technology or it could hire a professional to do the same. Though the professional is more qualified, his interests are not aligned with the interests of the family. In the context of an overlapping generations framework, we analyze how this tradeoff affects the evolution of the family firm. We find that family firms initially grow in size by accumulating capital and later professionalize their management after reaching a critical size.

Number of Pages in PDF File: 19

Keywords: Family business, agency theory, corporate governance

JEL Classification: G30, F30, J41

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Date posted: April 19, 2002  

Suggested Citation

Bhattacharya , Utpal and Ravikumar, B., From Cronies to Professionals: The Evolution of Family Firms (January 2004). Available at SSRN: http://ssrn.com/abstract=306130 or http://dx.doi.org/10.2139/ssrn.306130

Contact Information

Utpal Bhattacharya (Contact Author)
Hong Kong University of Science & Technology - HKUST School of Business and Management ( email )
Clear Water Bay
Kowloon
Hong Kong
B. Ravikumar
Federal Reserve Bank of Saint Louis ( email )
411 Locust St
Saint Louis, MO 63011
United States
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