• Define family firms and explain how these firms differ from other business structures
• Assess the attractiveness of different financing options available for family firms
• Identify different defensive mechanisms that allow family members to keep control over the firm
• Understand the different emotional and cognitive biases (e.g. attachment, identification, psychological ownership, risk aversion) of family management
• Understand how family control impacts strategic management decisions.
• Identify agency costs specific to family firms
• Understand important challenges related to intergenerational wealth transfer
• Identify when, how and why family firm outperform/underperform other business structures

This course takes a multidisciplinary approach to introduce students to challenges of growing, financing and managing family firms. Family firms represent at least 80 percent of companies around the world. Their unique ownership, control and management structures create specific challenges over the different stages of firms’ life cycle. This course examines these challenges by addressing the following questions:

• How do family firms differ from other business structures (i.e., ownership, corporate governance, leadership, investment and profit horizons)?

• How to finance family firm’s growth without loosing control over the firm (i.e., anti-takeover provisions, use of defensive mechanisms such dual class shares, pyramid structures, voting pacts)?

• What are the effects of family emotional and cognitive biases on strategic management decisions (i.e., diversification, internationalization, mergers and acquisitions, dividend policy)?

• How to deal with misalignment of interests between family and non-family shareholders?

• How to prepare and execute successions in family firms?

• Under what conditions do family firms outperform other business structures?

   

This course aims to make students aware about above-mentioned issues. In addition, it provides students with tools for developing alternatives to address these issues and to anticipate short-term and long-term consequences of the different ways to deal with them.

Distinctive Features

One of the distinctive features of this course is the emphasis on family firms. Most entrepreneurship courses offered at CBS focus on individual entrepreneurs as the drivers of venture creation and growth. However, the great majority of start-ups are created and developed within a family context that is characterized by unique emotional and cognitive biases as well as specific ownership, control, governance and leadership structures. This course examines the impact of this specific setting on firm strategy over the different stages of life cycle. It draws upon a rich academic literature on family business, corporate governance and corporate finance.

Textbook

Poza, E. J., & Daugherty, M.S. (2013). Family Business. Cincinnati: South Western Educational Publishing, 4^th edition.

Articles

Bennedsen, M., & Nielsen, K. M. (2010). Incentive and entrenchment effects in European ownership. Journal of Banking & Finance, 34(9), 2212–2229.

Chua, J. H., Chrisman, J. J., & Sharma, P. (1999). Defining the family business by behavior. Entrepreneurship: Theory & Practice, 23(4), 19–39.

Gomez-Mejia, L. R., Makri, M., & Kintana, M. L. (2010). Diversification decisions in family-controlled firms. Journal of Management Studies, 47(2), 223.

La Porta, R., Lopez-de-Silanes, F., & Shleifer, A. (1999). Corporate ownership around the world. Journal of Finance, 54(2), 471–517.

Miller, D., Steier, L., & Le Breton-Miller, I. (2003). Lost in time: Intergenerational succession, change, and failure in family business. Journal of Business Venturing, 18(4), 513–531.

Sharma, P., Chrisman, J. J., & Chua, J. H. (2003). Predictors of satisfaction with the succession process in family firms. Journal of Business Venturing, 18(5), 667–687.

Villalonga, B., & Amit, R. (2006). How do family ownership, control and management affect firm value? Journal of Financial Economics, 80(2), 385–417.

Villalonga, B., & Amit, R. (2010). Family control of firms and industries. Financial Management, 39(3), 863–904.