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Entrepreneurship, Inherited Control and Firm Performance in Italian SMEs

Author

Listed:
  • Marco CUCCULELLI

    () (Universita' Politecnica delle Marche, Dipartimento di Management ed Organizzazione Aziendale)

  • Giacinto MICUCCI

    () (Banca d'Italia - Ancona)

Abstract

Despite the pervasive presence of family business worldwide, especially among small and medium sized companies, nearly all past studies on family founder succession have focused on large, public companies. We evaluate the issue of the inherited firm control on performance in an economic setting with a large presence of small- and medium-sized private firms run as family businesses. Our paper contributes to the existing literature in three ways. The first concerns the sample characteristics. By focusing on the transfer of business in private SMEs, our study helps to fill a gap in the existing literature that is largely concerned with public companies listed in official market. We set up a unique dataset by matching two different data sources: firstly, a cross-sectional survey dataset collected directly from more than 3,500 companies by means of a questionnaire and, secondly, a company account dataset drawn from Cerved. We merge survey data with balance sheet data in order to perform the econometric analysis. The article's second contribution is related to the effect on performance caused by the transfer of business within the family. Our major results show i) a founder effect in the Italian manufacturing industry and ii) a large drop in the post-succession performance in family-run businesses. Finally, we provide new evidence on the relationship between pre-succession firm (and industry) characteristics and past succession performance. By using a performance-based control group matching method to control for the effect of a pure mean reverting process in firm performance, we show that the observed large drop in the post-succession company performance is attributable to good performing companies, especially when operating in highly competitive industries.

Suggested Citation

  • Marco CUCCULELLI & Giacinto MICUCCI, 2006. "Entrepreneurship, Inherited Control and Firm Performance in Italian SMEs," Working Papers 258, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  • Handle: RePEc:anc:wpaper:258
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    References listed on IDEAS

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    1. David Sraer & David Thesmar, 2007. "Performance and Behavior of Family Firms: Evidence from the French Stock Market," Journal of the European Economic Association, MIT Press, vol. 5(4), pages 709-751, June.
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    4. Ralph Chami, 2001. "What is Different About Family Businesses?," IMF Working Papers 01/70, International Monetary Fund.
    5. Bhattacharya, Utpal & Ravikumar, B, 2001. "Capital Markets and the Evolution of Family Businesses," The Journal of Business, University of Chicago Press, vol. 74(2), pages 187-219, April.
    6. Parrino, Robert, 1997. "CEO turnover and outside succession A cross-sectional analysis," Journal of Financial Economics, Elsevier, vol. 46(2), pages 165-197, November.
    7. Gary S. Becker & Nigel Tomes, 1994. "Human Capital and the Rise and Fall of Families," NBER Chapters,in: Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education (3rd Edition), pages 257-298 National Bureau of Economic Research, Inc.
    8. Anderson, Ronald C. & Mansi, Sattar A. & Reeb, David M., 2003. "Founding family ownership and the agency cost of debt," Journal of Financial Economics, Elsevier, vol. 68(2), pages 263-285, May.
    9. Huson, Mark R. & Malatesta, Paul H. & Parrino, Robert, 2004. "Managerial succession and firm performance," Journal of Financial Economics, Elsevier, vol. 74(2), pages 237-275, November.
    10. Randall Morck & David Stangeland & Bernard Yeung, 2000. "Inherited Wealth, Corporate Control, and Economic Growth The Canadian Disease?," NBER Chapters,in: Concentrated Corporate Ownership, pages 319-372 National Bureau of Economic Research, Inc.
    11. Faccio, Mara & Lang, Larry H. P., 2002. "The ultimate ownership of Western European corporations," Journal of Financial Economics, Elsevier, vol. 65(3), pages 365-395, September.
    12. repec:hrv:faseco:30747196 is not listed on IDEAS
    13. Denis, David J & Denis, Diane K, 1995. " Performance Changes Following Top Management Dismissals," Journal of Finance, American Finance Association, vol. 50(4), pages 1029-1057, September.
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    Cited by:

    1. Ugo FRATESI, 2010. "The National and International Effects;of Regional Policy Choices: Agglomeration Economies, Peripherality and Territorial Characteristics," Working Papers 344, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    2. Luca RICCETTI, 2010. "Minimum Tracking Error Volatility," Working Papers 340, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    3. Andrea GANZAROLI & Gianluca FISCATO & Luciano PILOTTI, 2006. "Does business succession enhance firms’ innovation capacity? Results from an exploratory analysis in Italian SMEs," Departmental Working Papers 2006-29, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    4. Habermann, Harald, 2017. "Business takeovers and firm growth: Empirical evidence from a German panel," Working Papers 01/17, Institut für Mittelstandsforschung (IfM) Bonn.
    5. Denise Diwisch & Peter Voithofer & Christoph Weiss, 2009. "Succession and firm growth: results from a non-parametric matching approach," Small Business Economics, Springer, vol. 32(1), pages 45-56, January.
    6. Fabio FIORILLO & Agnese SACCHI, 2010. "I Want to Free-ride. An Opportunistic View on Decentralization Versus Centralization Problem," Working Papers 346, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.

    More about this item

    Keywords

    SMEs governance; entrepreneurship; inherited control; matching control group; mean revision;

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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