Married to the Firm? A Large-Scale Investigation of the Social Context of Ownership

52 Pages Posted: 8 Aug 2014

See all articles by Sharon Belenzon

Sharon Belenzon

Duke University; NBER; Duke Innovation & Entrepreneurship Initiative

Andrea Patacconi

University of East Anglia (UEA) - Norwich Business School

Rebecca Zarutskie

Federal Reserve Banks - Federal Reserve Bank of Dallas

Date Written: August 6, 2014

Abstract

Using a large sample of private firms across Europe, we examine how the social context of owners affects firm strategy and performance. Drawing on embeddedness theory and the institutional logics perspective, we argue that embeddedness in a family, particularly the nuclear family, can strenghten identification and commitment to the firm, but can also induce owners to behave more conservatively. Consistent with this argument, we find that family-owned firms have higher profit margins, returns on assets, and survival rates compared to single-owner or unrelated-owners firms, but also invest and grow more slowly, hold greater reserves of cash, and rely less on external debt. These differences are largest when a married couple holds a majority of the firm's equity. Family ties among firm owners, particularly marital ties, appear to facilitate conservation of cash and lower operating costs, which increases firm survival but which also dampens investment and growth.

Suggested Citation

Belenzon, Sharon and Patacconi, Andrea and Zarutskie, Rebecca, Married to the Firm? A Large-Scale Investigation of the Social Context of Ownership (August 6, 2014). Available at SSRN: https://ssrn.com/abstract=2476944 or http://dx.doi.org/10.2139/ssrn.2476944

Sharon Belenzon (Contact Author)

Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0204
United States

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
(1) 617 588 1484 (Phone)

Duke Innovation & Entrepreneurship Initiative ( email )

215 Morris St., Suite 300
Durham, NC 27701
United States

Andrea Patacconi

University of East Anglia (UEA) - Norwich Business School ( email )

Norwich
NR4 7TJ
United Kingdom

Rebecca Zarutskie

Federal Reserve Banks - Federal Reserve Bank of Dallas ( email )

2200 North Pearl Street
Dallas, TX 75265
United States

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