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The Survival of Family Firms: The Importance of Control and Family Ties

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  • Enrico Santarelli
  • Francesca Lotti

Abstract

The aim of this article is to analyze the survival patterns of a group of family firms which have already spent at least 25 years in the market. To this end, we use the Kaplan-Meier product limit estimator supplemented with qualitative information gathered by direct observation and discussions with entrepreneurs. The main findings are that small family firms which have reached their 30th year in the market face a very high risk of sudden exit, increasing with firm age. Further control carried out by means of interviews with entrepreneurs identifies problems connected with succession as one of the main causes of the decision to close down.

Suggested Citation

  • Enrico Santarelli & Francesca Lotti, 2005. "The Survival of Family Firms: The Importance of Control and Family Ties," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 12(2), pages 183-192.
  • Handle: RePEc:taf:ijecbs:v:12:y:2005:i:2:p:183-192
    DOI: 10.1080/13571510500127246
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    References listed on IDEAS

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    1. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-670, May.
    2. Thomas F. Cooley & Vincenzo Quadrini, 2001. "Financial Markets and Firm Dynamics," American Economic Review, American Economic Association, vol. 91(5), pages 1286-1310, December.
    3. Bjuggren, Per-Olof & Sund, Lars-Goran, 2002. "A Transaction Cost Rationale for Transition of the Firm within the Family," Small Business Economics, Springer, vol. 19(2), pages 123-133, September.
    4. Enrico Santarelli, 2001. "Ricambio generazionale e continuità dell'impresa: un'applicazione dello stimatore di Kaplan-Meier," L'industria, Società editrice il Mulino, issue 1, pages 141-172.
    5. Forni, Mario & Paba, Sergio, 2002. "Spillovers and the Growth of Local Industries," Journal of Industrial Economics, Wiley Blackwell, vol. 50(2), pages 151-171, June.
    6. Severin Borenstein & Joseph Farrell, 1998. "Inside the Pin-Factory: Empirical Studies Augmented by Manager Interviews," NBER Books, National Bureau of Economic Research, Inc, number bore98-1, April.
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    Citations

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    Cited by:

    1. Richard I.D. Harris & Qian Cher Li, "undated". "Export-market dynamics and the probability of firm closure: Evidence for the UK," Working Papers 2008_17, Business School - Economics, University of Glasgow.
    2. Aleid E. Brouwer, 2003. "An empirical study on the relationship between the spatial environment and the survival of old firms in the Netherlands," ERSA conference papers ersa03p108, European Regional Science Association.
    3. Brouwer Aleid & Pellenbarg Pieter, 2011. "The Importance of Place in Corporate Identity an Investigation on the Presence of Old Dutch Firms on the Internet," European Spatial Research and Policy, De Gruyter Open, vol. 18(2), pages 79-94, November.
    4. Jellal, Mohamed, 2009. "Family Capitalism Corporate Governance Theory," MPRA Paper 17886, University Library of Munich, Germany.
    5. Roberta Piergiovanni, 2010. "Gibrat's Law in the "Third Italy": Firm Growth in the Veneto Region," Growth and Change, Wiley Blackwell, vol. 41(1), pages 28-58.
    6. Nzinga Broussard & Ralph Chami & Gregory Hess, 2015. "(Why) Do self-employed parents have more children?," Review of Economics of the Household, Springer, vol. 13(2), pages 297-321, June.
    7. Dawn DeTienne & Melissa Cardon, 2012. "Impact of founder experience on exit intentions," Small Business Economics, Springer, vol. 38(4), pages 351-374, May.
    8. Cucculelli, Marco & Micucci, Giacinto, 2008. "Family succession and firm performance: Evidence from Italian family firms," Journal of Corporate Finance, Elsevier, vol. 14(1), pages 17-31, February.

    More about this item

    Keywords

    Succession; Survival Function; Kaplan-Meier Estimator; Hazard Function; Italy; JEL Classifications: L20; C34; C41; M13;

    JEL classification:

    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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