Traditionally, family firm studies have assumed there is a single family behind the firm. We challenge this assumption and argue that the distinction between multi-founding family firms and single-founding family firms matters. We theorize that multi-founding family firms, based on mutual monitoring among families, have corporate governance advantages (less principal–agent and principal–principal problems) in terms of reduced founder CEO entrenchment and a lower probability of descendent leadership. Furthermore, we argue that multi-founding family firms exhibit higher levels of innovation and performance. Based on U.S. firms during 2001 to 2010, we find robust support for our arguments.
AlchianA. A.DemsetzH. (1972). Production, information costs, and economic organization. American Economic Review, 62(5), 777–795.
2.
AmitR.DingY.VillalongaB.ZhangH. (2015). The role of institutional development in the prevalence and performance of entrepreneur and family-controlled firms. Journal of Corporate Finance, 31, 284–305.
3.
AndersonR. C.DuruA.ReebD. M. (2009). Founders, heirs, and corporate opacity in the United States. Journal of Financial Economics, 92(2), 205–222.
4.
AndersonR. C.MansiS. A.ReebD. M. (2003). Founding family ownership and the agency cost of debt. Journal of Financial Economics, 68(2), 263–285.
5.
AndersonR. C.ReebD. M. (2003). Founding-family ownership and firm performance: Evidence from the S&P 500. Journal of Finance, 58(3), 1301–1327.
6.
AndersonR. C.ReebD. M. (2004). Board composition: Balancing family influence in S&P 500 firms. Administrative Science Quarterly, 49(2), 209–237.
7.
AndersonR. C.ReebD. M.ZhaoW. (2012). Family-controlled firms and informed trading: Evidence from short sales. The Journal of Finance, 67(1), 351–385.
8.
BennedsenM.WolfenzonD. (2000). The balance of power in closely held corporations. Journal of Financial Economics, 58(1–2), 113–139.
9.
BerroneP.CruzC.Gomez-MejiaL. R. (2012). Socioemotional wealth in family firms: Theoretical dimensions, assessment approaches, and agenda for future research. Family Business Review, 25(3), 258–279.
10.
BerroneP.CruzC.Gomez-MejiaL. R.Larraza-KintanaM. (2010). Socioemotional wealth and corporate responses to institutional pressures: Do family-controlled firms pollute less?Administrative Science Quarterly, 55(1), 82–113.
11.
BhagatS.BoltonB. (2008). Corporate governance and firm performance. Journal of Corporate Finance, 14(3), 257–273.
12.
BlackB.JangH.KimW. (2006). Does corporate governance predict firms’ market values? Evidence from Korea. Journal of Law, Economics, and Organization, 22(2), 366–413.
13.
BoekerW. (1992). Power and managerial dismissal: Scapegoating at the top. Administrative Science Quarterly, 37(3), 400–421.
14.
BoivieS.WithersM. C.GraffinS. D.CorleyK. G. (2021). Corporate directors’ implicit theories of the roles and duties of boards. Strategic Management Journal, 42(9), 1662–1695.
15.
CalabròA.MinichilliA.AmoreM. D.BrogiM. (2018). The courage to choose! Primogeniture and leadership succession in family firms. Strategic Management Journal, 39(7), 2014–2035.
16.
CarneyM.Van EssenM.GedajlovicE. R., et al. (2015). What do we know about private family firms? A meta–analytical review. Entrepreneurship Theory and Practice, 39(3), 513–544.
17.
CastaniasR. P.HelfatC. E. (2001). The managerial rents model: Theory and empirical analysis. Journal of Management, 27(6), 661–678.
18.
ChangS.-J.ShimJ. (2015). When does transitioning from family to professional management improve firm performance?Strategic Management Journal, 36(9), 1297–1316.
19.
ChenG.ChittoorR.VissaB. (2021). Does nepotism run in the family? CEO pay and pay-performance sensitivity in Indian family firms. Strategic Management Journal, 42(7).
20.
ChenH.-L.HsuW.-T. (2009). Family ownership, board independence, and R&D investment. Family Business Review, 22(4), 347–362.
21.
ChenS.ChenX.ChengQ. (2008). Do family firms provide more or less voluntary disclosure?Journal of Accounting Research, 46(3), 499–536.
22.
ChrismanJ. J.PatelP. C. (2012). Variations in R&D investments of family and nonfamily firms: Behavioral agency and myopic loss aversion perspectives. Academy of Management Journal, 55(4), 976–997.
23.
CohenJ.CohenP.WestS. G., et al. (2013). Applied multiple regression/correlation analysis for the behavioral sciences. Mahwah, NJ: Routledge.
24.
CruzC.Larraza–KintanaM.Garcés–GaldeanoL., et al. (2014). Are family firms really more socially responsible?Entrepreneurship Theory and Practice, 38(6), 1295–1316.
25.
DaltonD. R.HittM. A.CertoS. T., et al. (2007). The fundamental agency problem and its mitigation: Independence, equity, and the market for corporate control. Academy of Management Annals, 1(1), 1–64.
26.
DenisD. J.DenisD. K. (1994). Majority owner-managers and organizational efficiency. Journal of Corporate Finance, 1(1), 91–118.
27.
DezsöC. L.RossD. G. (2012). Does female representation in top management improve firm performance? A panel data investigation. Strategic Management Journal, 33(9), 1072–1089.
28.
DharwadkarR.GeorgeG.BrandesP. (2000). Privatization in emerging economies: An agency theory perspective. Academy of Management Review, 25(3), 650–669.
29.
DragoR.GarveyG. T. (1998). Incentives for helping on the job: Theory and evidence. Journal of Labor Economics, 16(1), 1–25.
30.
DuranP.KammerlanderN.Van EssenM., et al. (2016). Doing more with less: Innovation input and output in family firms. Academy of Management Journal, 59(4), 1224–1264.
31.
DuranP.OrtizM. (2020). When more is better: Multifamily firms and firm performance. Entrepreneurship Theory and Practice, 44(4), 761–783.
32.
DyerW. G. (2018). Are family firms really better? Reexamining “examining the ‘family effect’on firm performance”. Family Business Review, 31(2), 240–248.
33.
EdmansA.MansoG. (2011). Governance through trading and intervention: A theory of multiple blockholders. Review of Financial Studies, 24(7), 2395–2428.
34.
EngelP. J.HackA.KellermannsF. W. (2015). Setting the right mix—analyzing outside directors’ pay mix in public family firms. Journal of Family Business Strategy, 6(2), 130–140.
35.
FalatoA.KadyrzhanovaD.LelU. (2014). Distracted directors: Does board busyness hurt shareholder value?Journal of Financial Economics, 113(3), 404–426.
36.
FamaE. F. (1980). Agency problems and the theory of the firm. Journal of Political Economy, 88(2), 288–307.
37.
FamaE. F.JensenM. C. (1983). Separation of ownership and control. Journal of Law and Economics, 26(2), 301–325.
38.
Fattoum-GuedriA.GuedriZ.DelmarF. (2018). Multiple blockholder structures and family firm performance. Entrepreneurship Theory and Practice, 42(2), 231–251.
39.
FeldmanE. R.AmitR. R.VillalongaB. (2016). Corporate divestitures and family control. Strategic Management Journal, 37(3), 429–446.
40.
FirthD. (1993). Bias reduction of maximum likelihood estimates. Biometrika, 80(1), 27–38.
41.
GedajlovicE.CarneyM.ChrismanJ. J., et al. (2012). The adolescence of family firm research: Taking stock and planning for the future. Journal of Management, 38(4), 1010–1037.
42.
GentryR. J.HarrisonJ. S.QuigleyT. J., et al. (2021). A database of CEO turnover and dismissal in S&P 1500 firms, 2000–2018. Strategic Management Journal, 42(5), 968–991.
43.
Gomez-MejiaL.HoskissonR.MakriM., et al. (2011a). Innovation and the preservation of socioemotional wealth: The paradox of R&D investment in family controlled high technology firms. (Unpublished manuscript). Mays Business School, Texas A&M University.
44.
Gomez-MejiaL. R.CampbellJ. T.MartinG., et al. (2014). Socioemotional wealth as a mixed gamble: Revisiting family firm R&D investments with the behavioral agency model. Entrepreneurship Theory and Practice, 38(6), 1351–1374.
45.
Gomez-MejiaL. R.CruzC.BerroneP., et al. (2011b). The bind that ties: Socioemotional wealth preservation in family firms. Academy of Management Annals, 5(1), 653–707.
46.
Gomez-MejiaL. R.HaynesK. T.Nunez-NickelM., et al. (2007). Socioemotional wealth and business risks in family-controlled firms: Evidence from Spanish olive oil mills. Administrative Science Quarterly, 52(1), 106–137.
47.
Gomez-MejiaL. R.Nunez-NickelM.GutierrezI. (2001). The role of family ties in agency contracts. Academy of Management Journal, 44(1), 81–95.
48.
Gomez-MejiaL. R.PatelP. C.ZellwegerT. M. (2018). In the horns of the dilemma: Socioemotional wealth, financial wealth, and acquisitions in family firms. Journal of Management, 44(4), 1369–1397.
49.
GrossmanS. J.HartO. D. (1980). Takeover bids, the free-rider problem, and the theory of the corporation. The Bell Journal of Economics, 42–64.
50.
HendersonA. D.MillerD.HambrickD. C. (2006). How quickly do CEOs become obsolete? Industry dynamism, CEO tenure, and company performance. Strategic Management Journal, 27(5), 447–460.
51.
HochbergY. V.LindseyL. (2010). Incentives, targeting, and firm performance: An analysis of non-executive stock options. The Review of Financial Studies, 23(11), 4148–4186.
52.
JensenM.MecklingW. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305–360.
53.
JohnsonS.La PortaR.Lopez-de-SilanesF., et al. (2000). Tunneling. American Economic Review, 90(2), 22–27.
54.
JohnsonW. B.MageeR. P.NagarajanN. J., et al. (1985). An analysis of the stock price reaction to sudden executive deaths: Implications for the managerial labor market. Journal of Accounting and Economics, 7(1-3), 151–174.
55.
JohnstonD. C. (2001). Dozens of rich americans join in fight to retain the estate tax. New York Times. (accessed September 26, 2001).
56.
KaplanS. N.MintonB. A. (2012). How has CEO turnover changed?International Review of Finance, 12(1), 57–87.
57.
KellermannsF. W.EddlestonK. A.ZellwegerT. M. (2012). Article commentary: Extending the socioemotional wealth perspective: A look at the dark side. Entrepreneurship Theory and Practice, 36(6), 1175–1182.
58.
KimH.KimH.LeeP. M. (2008). Ownership structure and the relationship between financial slack and R&D investments: Evidence from Korean firms. Organization Science, 19(3), 404–418.
59.
KingG.ZengL. (2001). Logistic regression in rare events data. Political Analysis, 9(2), 137–163.
60.
KoganL.PapanikolaouD.SeruA., et al. (2017). Technological innovation, resource allocation, and growth. Quarterly Journal of Economics, 132(2), 665–712.
61.
La PortaR.López de SilanesF.ShleiferA. (1999). Corporate ownership around the world. Journal of Finance, 54(2), 471–517.
62.
LaevenL.LevineR. (2008). Complex ownership structures and corporate valuations. Review of Financial Studies, 21(2), 579–604.
63.
Le Breton–MillerI.MillerD. (2006). Why do some family businesses out–compete? Governance, long–term orientations, and sustainable capability. Entrepreneurship Theory and Practice, 30(6), 731–746.
64.
LeeJ. M.YoonD.BoivieS. (2020). Founder CEO succession: The role of CEO organizational identification. Academy of Management Journal, 63(1), 224–245.
65.
LeitgöbH. (2013). The problem of modeling rare events in ml-based logistic regression: Assessing potential remedies via mc simulations. In: 5th conference of European survey research association, Lisbon, Portugal.
66.
LewbelA. (2012). Using heteroscedasticity to identify and estimate mismeasured and endogenous regressor models. Journal of Business & Economic Statistics, 30(1), 67–80.
67.
LiS. (2018). Increased non-family ownership in family-owned firms: How does it affect CEO turnover-performance sensitivity?Strategic Management Journal, 39(13), 3434–3457.
68.
LiangK. Y.ZegerS. L. (1986). Longitudinal data analysis using generalized linear models. Biometrika, 73(1), 13.
69.
LlachJ.NordqvistM. (2010). Innovation in family and non-family businesses: A resource perspective. International Journal of Entrepreneurial Venturing, 2(3-4), 381–399.
70.
LohwasserT. S.HochF.KellermannsF. W. (2022). Strength in stability: A meta-analysis of family firm performance moderated by institutional stability and regime type. Entrepreneurship Theory and Practice, 46(1), 117–158.
71.
López-de-ForondaÓ.López-IturriagaF. J.Santamaría-MariscalM. (2007). Ownership structure, sharing of control and legal framework: International evidence. Corporate Governance: An International Review, 15(6), 1130–1143.
72.
LumpkinG. T.BrighamK. H. (2011). Long–term orientation and intertemporal choice in family firms. Entrepreneurship Theory and Practice, 35(6), 1149–1169.
73.
ManiD.DurandR. (2019). Family firms in the ownership network: Clustering, bridging, and embeddedness. Entrepreneurship Theory and Practice, 43(2), 330–351.
74.
MarchJ. G. (1991). Exploration and exploitation in organizational learning. Organization Science, 2(1), 71–87.
75.
MartinG.Gómez–MejíaL. R.BerroneP., et al. (2017). Conflict between controlling family owners and minority shareholders: Much ado about nothing?Entrepreneurship Theory and Practice, 41(6), 999–1027.
76.
MasulisR. W.ZhangE. J. (2019). How valuable are independent directors? Evidence from external distractions. Journal of Financial Economics, 132(3), 226–256.
77.
MauryB.PajusteA. (2005). Multiple large shareholders and firm value. Journal of Banking and Finance, 29(7), 1813–1834.
78.
MazzelliA.KotlarJ.De MassisA. (2018). Blending in while standing out: Selective conformity and new product introduction in family firms. Entrepreneurship Theory and Practice, 42(2), 206–230.
79.
McConaughyD. L.WalkerM. C.HendersonG. V.Jr., et al. (1998). Founding family controlled firms: Efficiency and value. Review of Financial Economics, 7(1), 1–19.
80.
MillerD.Le Breton-MillerI.LesterR. H., et al. (2007). Are family firms really superior performers?Journal of Corporate Finance, 13(5), 829–858.
81.
MillerD.Le Breton-MillerI.ScholnickB. (2008). Stewardship vs. Stagnation: An empirical comparison of small family and non-family businesses. Journal of Management Studies, 45(1), 51–78.
82.
MiroshnychenkoI.De MassisA.MillerD., et al. (2021). Family business growth around the world. Entrepreneurship Theory and Practice, 45(4), 682–708.
83.
MorckR.ShleiferA.VishnyR. W. (1988). Management ownership and market valuation: An empirical analysis. Journal of Financial Economics, 20, 293–315.
84.
MorckR.WolfenzonD.YeungB. (2005). Corporate governance, economic entrenchment, and growth. Journal of Economic Literature, 43(3), 655–720.
85.
MunariF.OrianiR.SobreroM. (2010). The effects of owner identity and external governance systems on R&D investments: A study of western European firms. Research Policy, 39(8), 1093–1104.
86.
Muñoz-BullónF.Sanchez-BuenoM. J. (2011). The impact of family involvement on the R&D intensity of publicly traded firms. Family Business Review, 24(1), 62–70.
87.
NguyenB. D.NielsenK. M. (2010). The value of independent directors: Evidence from sudden deaths. Journal of Financial Economics, 98(3), 550–567.
88.
ParkS. H.ChungS. H.RajagopalanN. (2021). Be careful what you wish for: CEO and analyst firm performance attributions and CEO dismissal. Strategic Management Journal, 42(10), 1880–1908.
89.
ParrinoR. (1997). CEO turnover and outside succession a cross-sectional analysis. Journal of Financial Economics, 46(2), 165–197.
90.
Pérez-GonzálezF. (2006). Inherited control and firm performance. American Economic Review, 96(5), 1559–1588.
91.
PieperT. M.SmithA. D.KudlatsJ., et al. (2015). Article commentary: The persistence of multifamily firms: Founder imprinting, simple rules, and monitoring processes. Entrepreneurship Theory and Practice, 39(6), 1313–1337.
92.
RobertsS. (2017). Jeff brotman, founder of retail juggernaut Costco, dies at 74. New York Times. (accessed August 9, 2021).
93.
Schwartz-ZivM.VolkovaE. (2023). Is blockholder diversity detrimental? [Unpublished working paper]. Hebrew University of Jerusalem. http://dx.doi.org/10.2139/ssrn.3621939
94.
StrikeV. M.BerroneP.SappS. G., et al. (2015). A socioemotional wealth approach to CEO career horizons in family firms. Journal of Management Studies, 52(4), 555–583.
95.
TitusV. K.Jr.AndersonB. S. (2018). Firm structure and environment as contingencies to the corporate venture capital-parent firm value relationship. Entrepreneurship Theory and Practice, 42(3), 498–522.
96.
UmC. T.GuoS.-L.LumineauF., et al. (2022). The downside of CFO function-based language incongruity. Academy of Management Journal, 65(6), 1984–2013.
97.
van EssenM.CarneyM.GedajlovicE. R., et al. (2015). How does family control influence firm strategy and performance? A meta-analysis of U.S. Publicly listed firms. Corporate Governance: An International Review, 23(1), 3–24.
98.
VillalongaB.AmitR. (2006). How do family ownership, control and management affect firm value?Journal of Financial Economics, 80(2), 385–417.
99.
VillalongaB.AmitR. (2010). Family control of firms and industries. Financial Management, 39(3), 863–904.
100.
VillalongaB.AmitR.TrujilloM.-A., et al. (2015). Governance of family firms. Annual Review of Financial Economics, 7(1), 635–654.
101.
WagnerD.BlockJ. H.MillerD., et al. (2015). A meta-analysis of the financial performance of family firms: Another attempt. Journal of Family Business Strategy, 6(1), 3–13.
102.
WeisbachM. S. (1988). Outside directors and CEO turnover. Journal of Financial Economics, 20, 431–460.
103.
WooH.-S.BernsJ. P.SolanellesP. (2022). How rare is rare? How common is common? Empirical issues associated with binary dependent variables with rare or common event rates. Organizational Research Methods. 10944281221083197.
104.
ZellwegerT. M.KellermannsF. W.ChrismanJ. J., et al. (2012). Family control and family firm valuation by family CEOs: The importance of intentions for transgenerational control. Organization Science, 23(3), 851–868.
Supplementary Material
Please find the following supplemental material available below.
For Open Access articles published under a Creative Commons License, all supplemental material carries the same license as the article it is associated with.
For non-Open Access articles published, all supplemental material carries a non-exclusive license, and permission requests for re-use of supplemental material or any part of supplemental material shall be sent directly to the copyright owner as specified in the copyright notice associated with the article.
