Are All Non‐Family Managers (NFMs) Equal? The Impact of NFM Characteristics and Diversity on Family Firm Performance

15 Pages Posted: 11 Nov 2016

See all articles by Martina Binacci

Martina Binacci

Luiss Guido Carli University - Department of Business and Management

Enzo Peruffo

Luiss Guido Carli University

Raffaele Oriani

Luiss Guido Carli University

Alessandro Minichilli

Bocconi University - Department of Management and Technology

Date Written: November 2016

Abstract

Manuscript Type. Empirical.

Research Question/Issue. Although non‐family managers (NFMs) can be expected to influence firm performance, this issue is largely under‐investigated. In this study, we examine how diversity inside the non‐family component of the top management team (non‐family team, or NFT) influences family firm performance. More specifically, we investigate the performance effects of three specific sources of NFT diversity (NFT size; NFT tenure diversity; and NFT dominant functional diversity).

Research Findings/Insights. The analysis of 584 survey responses by top managers representing 97 complete NFTs (and the related top management teams, TMTs) out of the top 500 family‐controlled firms in the Italian furniture industry indicates that (1) NFT‐dominant functional diversity improves firm performance; (2) a U‐shaped relationship exists between NFT tenure diversity and family firm performance; (3) an inverted U‐shaped relationship exists between NFT size and family firm performance. Additionally, we show that the relation between non‐family manager characteristics and firm performance is moderated by family dominance in the entire TMT, that is, the proportion of family to non‐family managers.

Theoretical/Academic Implications. Our results call for further exploration regarding the demographic characteristics of non‐family managers and their effect on the performance of family firms. In this way, they have several implications for the family business literature, contributing to the growing debate on the socio‐emotional wealth (SEW) perspective of family firms’ behaviors. Moreover, our results highlight the importance of better contextualizing research on strategic leadership and strategic leaders.

Practitioner/Policy Implications. Our study suggests that the choice of outsiders should take into account not only their “market value” and reputation, but also the attributes of other NFMs among the company's executives, providing guidance to family owners in their decisions about professionalization.

Keywords: Corporate Governance, Top Management Team, Non‐Family Team, Family Dominance

Suggested Citation

Binacci, Martina and Peruffo, Enzo and Oriani, Raffaele and Minichilli, Alessandro, Are All Non‐Family Managers (NFMs) Equal? The Impact of NFM Characteristics and Diversity on Family Firm Performance (November 2016). Corporate Governance: An International Review, Vol. 24, Issue 6, pp. 569-583, 2016, Available at SSRN: https://ssrn.com/abstract=2867683 or http://dx.doi.org/10.1111/corg.12130

Martina Binacci (Contact Author)

Luiss Guido Carli University - Department of Business and Management ( email )

Via Salvini, 3
Rome, 00198
Italy

Enzo Peruffo

Luiss Guido Carli University ( email )

Via O. Tommasini 1
Rome, Roma 00100
Italy

Raffaele Oriani

Luiss Guido Carli University ( email )

Viale Romania, 32
Rome, 00196
Italy
+390685225908 (Phone)

Alessandro Minichilli

Bocconi University - Department of Management and Technology ( email )

Via Roentgen 1
Milan, MI 20136
Italy

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