Many firms around the world, both small and large, are family firms. For example, more than 60% of all German firms with a revenue greater than one million Euro belong to the group of family firms (Klein, 2000). In the US, 20% of Fortune 500 firms have a family as the largest holder of voting rights (Villalonga and Amit, 2006). Family firms and their role in the economy have been widely debated in the academic literature. In his seminal works The Visible Hand: The Managerial Revolution in American Business and Scale and Scope: The Dynamics of Industrial Capitalism, the renowned business historian Alfred DuPont Chandler argues that large firms run by a cadre of salaried managers are managed better and care more about their long-term competitive advantage as compared to ‘personal enterprises,’ which he refers to as “firms managed by individuals or by a small number of associates, often members, of founder’s families, assisted by only a few salaried managers” (Chandler, 1990, p. 235). Chandler attributes Britain’s industrial decline relative to the US and Germany before World War II to the strong persistence of family firms in that country. He further argues that the shift toward salaried managers running large enterprises is responsible for the growth and strength of US industries in the early years of modern capitalism (1850-1920).
KeywordsFamily Firm Family Business Private Equity Salaried Manager Family Owner
Unable to display preview. Download preview PDF.