Why Family Businesses Struggle
Dysfunctional, prone to nepotism and family conflict, uninterested. This is how family businesses are often seen. Even in the business press, the family business model is regularly portrayed as outmoded or problematic. However, recent evidence shows that family firms tend to outperform their widely traded competitors. A research study in the Journal of Finance found that family businesses outperform public companies on key dimensions such as stock price and return on equity. The Credit Suisse Bank’s global index shows that family firms have outperformed the MSCI World Index by 4.8 percent since January 2007.1 How can this disparity be explained? Our work as researchers, teachers, and consultants suggests that family businesses can indeed be both the best and the worst: the best because they have some unique strengths (long-term vision, strong values, committed ownership); the worst, because they are more complex than other businesses, and they require more attention, better planning, and governance — which they do not always receive.
KeywordsFamily Firm Parallel Planning Family Business Wall Street Journal Family Ownership
Unable to display preview. Download preview PDF.
- 2.Carlock, R.S. “Farview Electronics to be sold?” (unpublished INSEAD case study, 2010).Google Scholar
- 3.Freud, S. Civilization and its Discontents, (London: Hogarth Press, 1955).Google Scholar
- 6.Gersick, K. E., Davis, J. A., McCollom Hampton, M., and Lansberg, I. Generation to Generation: Life Cycles of the Family Business (Boston, Mass.: Harvard Business School Press, 1997).Google Scholar
- 7.Erikson, E. H. Childhood and Society (New York: W.W. Norton, 1950).Google Scholar
- 9.Adapted from Sigelman, C. K. and Shaffer, D. R. Life-Span Development, (Belmont, Calif: Brooks/Cole, 1991);Google Scholar
- Eggers, J. H., Leahy, K. T., and Churchill, N. C. The Seasons of a Man’s Life, New York: Balantine Books, 1978); “Stages of small business growth revisited: Insights into growth path and leadership/management skills in low and high growth companies,” in Bygrave, W. D., Birely, S., Churchill, N. C., Gatewood, E., Hoy, F., and Wetzel, W. E. (eds), Frontiers of Entrepreneurship Research (Boston, Mass.,: Babson College, 1994).Google Scholar