Attitudes of Family Firms Towards Outside Investors: The Importance of Organizational Identification
Jeroen Neckebrouck, Sophie Manigart and Miguel Meuleman, 2017. Attitudes of Family Firms towards Outside Investors: The Importance of Organizational Identification. Venture Capital: An International Journal, 19(1-2):29-51. dx.doi.org/10.1080/13691066.2016.1255414
Posted: 25 Feb 2017 Last revised: 15 Sep 2017
Date Written: October 18, 2016
More and more family firms open their capital for outside investors, yet existing studies mainly conclude that family firms are more reluctant than nonfamily firms to hand over control to outside investors. In this study, we build on an organizational identification perspective to explore why family firms differ in their attitudes towards outside investors. We hypothesize that family members who identify strongly with their firms are less willing to cede control to outside investors and, if they do cede control, have a stronger preference for investors who may readily identify with family firms, such as family offices or high net worth individuals, rather than investors who may not fit well with a familial identity, such as private equity sponsors or financial investors. We also hypothesize that social identification mediates the relationship between important family firm governance characteristics and preferences for outside investor. Exploratory evidence from a sample of Belgian family firms is supportive of most of our predictions.
Keywords: family firms, outside investors, equity, organizational identification, governance, succession
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