The persistence of family firms: How does performance threshold affect family firm exit?

Noni Symeonidou, Dawn R. DeTienne, Francesco Chirico

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)

Abstract

Research on family firms provides mixed evidence of the effect of family ownership on firm performance and exit outcomes. Drawing on threshold theory and the socioemotional wealth perspective, we argue that family firms have lower performance thresholds than non-family firms, reducing the likelihood of firm exit. Using a longitudinal dataset of 1191 firms over the period 2008–2011, we find support for this contention, suggesting that performance threshold is an important, yet poorly studied, construct for understanding exits of family versus non-family firms. Plain English Summary Why firms with similar economic performance make different exit decisions? We find evidence that family firms have lower “performance thresholds” than non-family firms, reducing family firms’ likelihood of exit. Using a longitudinal dataset, we examine differences in performance threshold between family and non-family firms and help clarify why some firms persist with their ventures even though their performance may indicate they should exit the market. Our theory and related findings suggest that nonfinancial attributes such as identity, the ability to exercise family influence, and to hand the business down to future generations may affect family firms’ attitudes toward exit decisions. Our study contributes to sharpening our understanding of exit in family firms while motivating future work on exit strategies in family firms and other contexts.

Original languageEnglish
Number of pages13
JournalSmall Business Economics
Early online date10 May 2021
DOIs
Publication statusE-pub ahead of print - 10 May 2021

Keywords

  • Family firm
  • Firm Persistence
  • Firm exit
  • Performance threshold

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