Research on Top Management Teams (TMTs) in family controlled companies has been relatively scant so far. We extended the upper echelon perspective into the family business research in order to understand whether and how ‘familiness’ can provide further insights besides the classical TMTs’ demographics in explaining variations in firms’ financial performance. Moreover, we assess whether or not ‘familiness’ is always beneficial to firm performance, and to what extent. We tested our hypotheses on 93 TMTs out of a sample of 500 largest Italian family controlled companies by turnover we used for a questionnaire survey. We developed family firms-specific measures of TMTs’ ‘familiness’. Results indicated that while the presence of a family CEO was found to be beneficial for firm performance, the coexistence of ‘factions’ of family and nonfamily managers within the TMT had the potential to determine schisms among the subgroups and consequently to hurt firm performance. The support we found for the hypothesized U-shaped relationship between the ratio of family members in the TMT and firm performance represented a novel application of the ‘faultlines’ concept.
Top Management Teams in family controlled companies: ‘Familiness’, ‘faultlines’ and the impact on financial performance
MINICHILLI, ALESSANDRO;CORBETTA, GUIDO GIUSEPPE
2007
Abstract
Research on Top Management Teams (TMTs) in family controlled companies has been relatively scant so far. We extended the upper echelon perspective into the family business research in order to understand whether and how ‘familiness’ can provide further insights besides the classical TMTs’ demographics in explaining variations in firms’ financial performance. Moreover, we assess whether or not ‘familiness’ is always beneficial to firm performance, and to what extent. We tested our hypotheses on 93 TMTs out of a sample of 500 largest Italian family controlled companies by turnover we used for a questionnaire survey. We developed family firms-specific measures of TMTs’ ‘familiness’. Results indicated that while the presence of a family CEO was found to be beneficial for firm performance, the coexistence of ‘factions’ of family and nonfamily managers within the TMT had the potential to determine schisms among the subgroups and consequently to hurt firm performance. The support we found for the hypothesized U-shaped relationship between the ratio of family members in the TMT and firm performance represented a novel application of the ‘faultlines’ concept.
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