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Family Firms, Paternalism, and Labor Relations

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Author Info
Holger M. Mueller
Thomas Philippon
Abstract

Using firm-, industry-, and country-level data, we document a link between family ownership and labor relations. Across countries, we find that family ownership is relatively more prevalent in countries in which labor relations are difficult, consistent with firm-level evidence suggesting that family firms are particularly effective at coping with difficult labor relations. Our cross-country results are robust to controlling for minority shareholder protection and various other potential determinants of family ownership. Our results also hold if we use strike data from the 1960s to predict cross-country variation in family ownership thirty years later. We address causality in two ways. First, we instrument our measure of the quality of labor relations using 'Labor Origin', a variable describing the extent to which the emerging European liberal states in the 18th and 19th centuries confronted guilds and labor organizations. Second, making use of within-country variation at the industry level, we show that - controlling for industry and country fixed effects - industries that are more labor dependent have relatively more family ownership in countries with worse labor relations.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12739.

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Date of creation: Dec 2006
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Handle: RePEc:nbr:nberwo:12739

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Find related papers by JEL classification:
D21 - Microeconomics - - Production and Organizations - - - Firm Behavior
D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
G30 - Financial Economics - - Corporate Finance and Governance - - - General
J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining

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