what’s so special about family firms?
Brayden
Peter Klein points to a new book by the economic historian David Landes that tracks some of the world’s most famous family businesses. This NY Times review of the book is intriguing, but it also raises what I think is an important question: what is unique about family firms? The reviewer writes that the book makes a good argument for the prominence of family firms. A third of Fortune 500 firms are still family businesses (depending, I suppose, on what you consider to be a family firm).
Wal-Mart is still overseen by Sam Walton’s son. The family controls about 40 percent of the company’s stock, and a third generation is moving up through the Walton business empire. It’s a good question whether professional outsiders would have maintained, for good or for ill, the almost religious commitment to cost-cutting that the heirs seem to have inherited from the old man.
Something about holding up Wal-Mart as the paragon of family business just seems wrong. Anyone who has followed Wal-Mart over the last decade realizes that the Walton clan may still have a significant ownership stake in the company but they have very little to do with the day-to-day operations. Wal-Mart seems like the classic case of the professionalization of a family firm. The CEO, CFO, and entire management team could be executives at any corporation. Sure, some of the ideals embraced by the company were passed down from Sam Walton, but this happens in any company. Cost-cutting is part of the organizational identity of Wal-Mart and also one of its distinctive competencies. But is it correct to say that it is symptomatic of the family firm? I doubt it.
Personally, the idea that family firms are unique in some way is appealing to me. As someone who believes that our theories have made organizations appear too generic and have tried to erase important distinctions, I think it’s important to look for those core, institutional characteristics that mark the boundaries of various organizational types. But I’m not sure what those characteristics are in family firms. An ASR article by Ingram and Lifschitz takes us in the right direction, I think (see also this post by Teppo and this one by Peter). Still, this seems like a substantive area of organizational research that is still seriously understudied.
