Review Article - Family Firms: Controversies Over Corporate Governance, Performance, and Management

11 Pages Posted: 3 Oct 2006

See all articles by Hubert Shea

Hubert Shea

LVMH Moet Hennessy Louis Vuitton China

Date Written: September 2006

Abstract

Chandler and his disciples have posited that modern corporations with professional management teams, separation of ownership and management, and emphasis on scale and scope economies are more innovative and efficient than family firms. They conclude that personal capitalism in the form of family ownership is dysfunctional that can barely maintain themselves in the modern business world. Theories of firm value creation also argue that concentration of family ownership extracts control premium at the expense of minority shareholders. Moreover, organisational theorists tend to criticise family firms as ephemeral, confusing, nepotistic, and autocratic. Therefore, family firm is seemed not to be the best form of organisation in the modern business world.

Despite of the above criticisms, mounting evidence has revealed that family firms are still playing a significant role in emerging and developed economies in terms of generation of new employment and GDP growth. A number of world-class firms including Michelin, Armani, Wal-mart, Fidelity, Home-Depot, and IKEA are founded and controlled by families. In the structure of all firms, the estimated shares of family firms are 75% and 80% in Britain and the US respectively. Even in Asia, a plethora of literature has revealed that family firms continue to represent a powerful force in Australia, Taiwan, Hong Kong, Singapore, and mainland China.

The objective of this article is to undertake a review of three key management controversies surrounding the study of family firms so that some specific recommendations can be made for further research.

Keywords: family firms, corporate governance, performance, management

JEL Classification: M13, D21, D23

Suggested Citation

Shea, Yiu Ting, Review Article - Family Firms: Controversies Over Corporate Governance, Performance, and Management (September 2006). Available at SSRN: https://ssrn.com/abstract=934025 or http://dx.doi.org/10.2139/ssrn.934025

Yiu Ting Shea (Contact Author)

LVMH Moet Hennessy Louis Vuitton China ( email )

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Shanghai, Shanghai 200051
China
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