Marc van Essen

The universe of family firms is heterogeneous, and findings gleaned from publicly listed firms may not apply to the ubiquitous, but less frequently studied, privately held family firm (PFF). As PFFs are insulated from capital market pressures, owner-managers have greater latitude in setting strategic goals, which may result in different strategic choices and performance outcomes. By employing meta-analytical techniques on 48 studies conducted in nine countries, we synthesize prior PFF research. We show that PFFs prefer more conservative strategies, but contrary to received wisdom, this risk aversion does not hurt their performance. We conclude with an agenda for future research.

Research Question/Issue: A contentious and prominent research question in the management literature is whether publicly listed family firms (FFs) outperform other types of corporations. Through a research synthesis of all available studies on the performance of US FFs, we address this question directly. We also extend the debate by raising three salient follow-up questions. First, is the performance differential between FFs and non-FFs attributable to a unique set of strategic choices? Second, do FF performance effects persist across generational transitions in FF control? Third, are performance differentials across generations attributable to intergenerational shifts in corporate governance and strategy? Research Findings/Insights: With respect to our primary research question, we find that the balance of evidence indicates that (US) FFs outperform other types of public corporations. We also evaluate competing narratives regarding which strategies are characteristic of FFs, and demonstrate that their diversification, internationalization, and financing strategies mediate the FF-performance relationship in manners consistent with the narratives advanced by certain leading FF scholars, but not others. Further, we find that the performance of (US) FFs drops dramatically after the first generation and show that this negative performance differential is due to the much more conservative patterns of strategic decision making enacted by successor generations.

We provide an analysis of the costs and benefits of blockholding in Europe, where it is a dominant but certainly not universal corporate governance strategy for shareholders of publicly listed firms. We find that the effectiveness of blockholding is conditioned by the specific labor institutions that distinguish European countries from the rest of the world, and that these institutional effects involve both competition and cooperation between blockholders and collective labor interests. We also find that relational blockholders are better able to cope with, or benefit from, these institutional effects than arm's-length blockholders. Empirically we use advanced meta-analytic methods on a total sample of 748,569 firm-year observations, derived from 162 studies covering 23 European countries.

We offer a multilevel meta-analytic study of the firm performance-executive compensation relationship, comprising prior tests derived from 332 primary studies nested in 29 countries. Although our work modestly supports the optimal contracting theory-based expectation that compensation is positively associated with performance, it also reveals considerable cross-country variability in this relationship. We trace this variance to differences in the level of development of the formal and informal institutions protecting investors against managerial overcompensation and underperformance. In terms of intentionally devised and enforced formal institutions, we find significant positive moderating effects on the focal relationship of the rule of law and strength of investor protection variables. For self-enforcing informal institutions, we find similar effects for concentrated ownership and compensation-related entries in codes of good corporate governance. We also find that formal and informal institutions function in a complementary manner in shaping the performance sensitivity of executive compensation. The focal relationship becomes stronger when concentrated owners have access to well-functioning courts, and when informal norms of good governance are supported by shareholder protection laws. Our study thus suggests that optimal contracting theory must be supplemented with an institution-based view, to account for the conditioning effects of institutions on national contracting environments.

Research on business groups - legally independent firms tied together in a variety of formal and informal ways - is accelerating. Through meta-analytical techniques employed on a database of 141 studies covering 28 different countries, we synthesize this research and extend it by testing several new hypotheses. We find that affiliation diminishes firm performance in general, but also that affiliates are comparatively better off in contexts with underdeveloped financial and labor market institutions. We also trace the affiliation discount to specific strategic actions taken at the firm and group levels. Overall, our results indicate that affiliate performance reflects complex processes and motivations.

We present a meta-analysis of the relationship between concentrated ownership and firm financial performance in Asia. At the cross-national level of analysis, we find a small but significant positive association between both variables. This finding suggests that in regions with less than perfect legal protection of minority shareholders, ownership concentration is an efficient corporate governance strategy. Yet, a focus on this aggregate effect alone conceals the existence of true heterogeneity in the effect size distribution. We purposefully model this heterogeneity by exploring moderating effects at the levels of owner identity and national institutions. Regarding owner identity, we find that our focal relationship is stronger for foreign than for domestic owners, and that pure "market" investors outperform "stable" or "inside" owners whom are multiply tied to the firm. Regarding institutions, we find that a certain threshold level of institutional development is necessary to make concentrated ownership an effective corporate governance strategy. Yet we also find that strong legal protection of shareholders makes ownership concentration inconsequential and therefore redundant. Finally, in jurisdictions where owners can easily extract private benefits from the corporations they control, the focal relationship becomes weaker, presumably due to minority shareholder expropriation.