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Family Firms and the Great Recession: Out of Sight, Out of Mind?

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  • Leandro D’Aurizio
  • Livio Romano

Abstract

The purpose of this paper is to study how family firms, compared to widely-held companies, reacted to the 2008 economic crisis in terms of employment adjustments. By using a difference-in-difference approach, we provide empirical evidence that di- vergent paths of adjustment between family and non-family firms exist, with family firms systematically preferring to safeguard workplaces close to the firm's headquarters, compared to other plants. We offer a new theoretical framework consistent with these findings, that we define the social recognition motive, based on the psychological rela- tion linking the family owner with his community of reference. We investigate possible alternative explanations for the results, most of whom can be ruled out in our setting. Finally, we test more directly for the validity of the social recognition theory, finding encouraging results in line with the predictions.

Suggested Citation

  • Leandro D’Aurizio & Livio Romano, 2011. "Family Firms and the Great Recession: Out of Sight, Out of Mind?," Economics Working Papers ECO2011/28, European University Institute.
  • Handle: RePEc:eui:euiwps:eco2011/28
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    References listed on IDEAS

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    8. Federico Cingano & Paolo Pinotti, 2013. "Politicians At Work: The Private Returns And Social Costs Of Political Connections," Journal of the European Economic Association, European Economic Association, vol. 11(2), pages 433-465, April.
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    Citations

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    Cited by:

    1. Francesca Modena & Concetta Rondinelli & Fabio Sabatini, 2014. "Economic Insecurity and Fertility Intentions: The Case of Italy," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(S1), pages 233-255, May.
    2. Andrew Ellul & Marco Pagano & Fabiano Schivardi, 2014. "Employment and Wage Insurance within Firms - Worldwide Evidence," EIEF Working Papers Series 1402, Einaudi Institute for Economics and Finance (EIEF), revised Sep 2017.
    3. Matteo Luciani & Libero Monteforte, 2012. "Uncertainty and Heterogeneity in factor models forecasting," Working Papers 5, Department of the Treasury, Ministry of the Economy and of Finance.
    4. Andrea Bassanini & Thomas Breda & Eve Caroli & Antoine Rebérioux, 2010. "Working in family firms: less paid but more secure? Evidence from French matched employer-employee data," PSE Working Papers halshs-00564972, HAL.
    5. Bjuggren, Carl Magnus, 2015. "Sensitivity to shocks and implicit employment protection in family firms," Journal of Economic Behavior & Organization, Elsevier, vol. 119(C), pages 18-31.
    6. Kölling, Arnd, 2016. "Family Firms and Labor Demand: Size Matters – But Only the Small Ones are Different," Annual Conference 2016 (Augsburg): Demographic Change 145471, Verein für Socialpolitik / German Economic Association.
    7. Francesco Bripi, 2016. "The Role of Regulation on Entry: Evidence from the Italian Provinces," World Bank Economic Review, World Bank Group, vol. 30(2), pages 383-411.
    8. Andrea Bassanini & Giorgio Brunello & Eve Caroli, 2017. "Not in My Community: Social Pressure and the Geography of Dismissals," Journal of Labor Economics, University of Chicago Press, vol. 35(2), pages 429-483.
    9. D'Aurizio, Leandro & Oliviero, Tommaso & Romano, Livio, 2015. "Family firms, soft information and bank lending in a financial crisis," Journal of Corporate Finance, Elsevier, vol. 33(C), pages 279-292.
    10. Backman, Mikaela & Palmberg, Johanna, 2015. "Contextualizing small family firms: How does the urban–rural context affect firm employment growth?," Journal of Family Business Strategy, Elsevier, vol. 6(4), pages 247-258.
    11. Colussi, Tommaso & Romano, Livio, 2016. "Is There a Preferential Treatment for Locals in the Labor Market? Evidence from Takeovers," IZA Discussion Papers 10418, Institute for the Study of Labor (IZA).
    12. Basco, Rodrigo, 2015. "Family business and regional development—A theoretical model of regional familiness," Journal of Family Business Strategy, Elsevier, vol. 6(4), pages 259-271.
    13. repec:zbw:imbwps:90 is not listed on IDEAS
    14. Affinito, Massimiliano, 2013. "Central bank refinancing, interbank markets and the hypothesis of liquidity hoarding: evidence from a euro-area banking system," Working Paper Series 1607, European Central Bank.
    15. repec:dau:papers:123456789/13579 is not listed on IDEAS
    16. Kölling, Arnd, 2017. "Employment in family firms: Less but safe? Analyzing labor demand of German family firms with a treatment model for panel data," Working Papers 92, Berlin School of Economics and Law, Institute of Management Berlin (IMB).

    More about this item

    Keywords

    Family Firms; Great Recession; Employment; Social Pressure;

    JEL classification:

    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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