Family Ownership Stake: Does the Amount Matter?

Often we treat family firms as a monolithic group. In particular, we do not make any differences between firms in which a family holds the majority of shares versus a firm in which the family is a blockholder with as few as 5 or 10% ownership shares. But is this simplification correct?

To answer those questions my former student Nemo Rime, who now works as an investment banking analyst in London, and I sat together in 2013 to design a study that answers how pure family firms (ownership >25%; FF), family-influenced firms (ownership between 5 and 25%; FIF), and non-family firms (NFF) differ in terms of various performance measures and investment behavior.

That‘s the outcome, as summarized in Nemo‘s excellent thesis:

  • In Germany, the pure family firms clearly outperformed the other types of organizations with respect to profit margins. In Switzerland, however, the non-family firms outperformed. Overall, we observed an outperformance of family firms with respect to several performance indicators.
  • Family-influenced firms, however, play a more volatile role, sometimes being top performers and sometimes underperformers
  • The outperformance of family-firms was observed in most years between 2000 and 2014 but seems to be stronger in times of economic crises as compared to boosting economies.
  • Pure family firms spend most money on CAPEX investments and family-influenced firms spend least money on CAPEX.
  • Family-influenced companies had the highest R&D investment, whereas pure family firms had the lowest R&D investments.

More analyses are now required. For instance, some of the findigs above might be due to industry or size differences. But what do we learn so far? Clearly, it is not a good idea to treat all family firms the same, but our anaylses need to become much more advanced!

Rime (2016): EBITDA margin of pure family firms (FF), family-influenced firms (FIF), and non-family firms (NFF)

The findings of this study are based on 365 publically listed German and Swiss firms that were observed from 2000 to 2014.

CEO characteristics and family firm performance

Many researchers aimed to find out how CEO characteristics affect the performance of large, publicly listed non-family firms. But how about family firms, in which the CEO often has a specific role and long tenure? Is there any specific relationship between CEO age or education and family firm performance? HSG-student Tobias Schori aimed to answer this research question in his master thesis. He collected data on 142 listed family firms from Germany, Austria, Switzerland, and France in 2013 and finds the following:

  • Functional diversity of the CEO – meaning that the CEO had worked in several different functional areas of the company – has a significant, positive effect on family firm performance (measured as profitability)
  • There is slight evidence that the higher the education of the CEO, the better the family firm performance (measured as Tobin’s Q).
  • Interestingly, the positive effect of CEO education and CEO functional diversity exists for family firms with more than 25% family ownership – but disappears when considering family firms with 5-25% family ownership
  • Contrarily to what we expected, the age of the CEO and the tenure of the CEO did not significantly affect firm performance

The following table illustrates some of the key variables and in particular differences between family and non-family CEOs.

In case of questions or if interested in the full text, please contact nadine.kammerlander[at]

Descriptive data (source: T. Schori)
Descriptive data (source: T. Schori)

Patenting behavior of family firms

In his thesis, Dario Flückiger examined the patenting behavior of 69 automotive companies with European headquarters over the course of 3 years. Here is what he found:

  • There is no significant difference in the number of patents between family and non-family firms
  • However, patents of family firms are significantly less cited than that of non-family firms. This could be a sign of family firms innovating less radically with their innovations having less impact for the entire industry development
  • In terms of sales growth and profitability, family firms were outperforming non-family firms
  • Number of patents and patent citations both had a positive and significant effect on sales growth (measured with a 3-year time lag).
  • However, interestingly, number of patents and patent citations had a negative and significant effect on profitability (measured with a 3-year time lag)

If you are interested in the full results, please send an email to nadine.kammerlander [at]

How can family firms motivate their employees to be innovative?

Employees are a key success factor for innovation – but how to motivate them?

Recent research showed that family firms are, on average, very innovative. But why is that? One reason provided by scholars is that employees in family firms feel especially encouraged to share their innovative ideas and implement them because of the particular “family firm culture.” So far, so good. But some of the readers might  wonder how exactly family firm owner-managers can motivate their employees to contribute to innovation. HSG-student, Johannes Netzhammer aimed to answer this question by integrating literature on family firms, innovation, and motivation. Here comes the summary of his excellent conceptual bachelor thesis (for references to original literature, please request the full text of the thesis):

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Why family firms do or do not use controlling tools

You ever wondered whether family firms differ in their use of controlling tools? And how and why? Mateja Andric, one of our excellent bachelor students, found some answers to those questions.

In her work, she surveyed 101 Swiss family SMEs on their firm characteristics, goals, and their use of controlling tools. Using a mediation-analysis, she finds that:

  • Less than 20% of the surveyed firms actually have employees dedicated to planning and controlling.
  • In those cases that have staff dedicated to planning and controlling, on average 1.25 employees work on this topic.
  • Planning and controlling is seen as matter for the boss, as also the graphic shows: In most cases, the CEO or advisory board takes care of planning and controlling tasks.
  • The more the family influences the company (in terms of voting rights and family members in management positions), the less the firm uses strategic planning and controlling because of (a) lack of controlling knowledge and (b) lack of general appreciation of controlling.
  • The more the family influences the company, the less the firm uses operative planning and controlling because of (a) an increased focus on non-financial goals and (b) a focus on informal instead of formal structures.


Controlling responsibilities (from Andric, 2015)
Controlling responsibilities (from Andric, 2015)
Model of controlling in family firms (Andric, 2015)
Model of controlling in family firms (Andric, 2015)

Open innovation in Family Firms

Open innovation” is sometimes said to be the approach for effective innovation in the 21st century, as it allows firms to become more innovative as compared to the “traditional” approach of closed innovation. But does open innovation only work for high-tech companies and startups? Are family firms and open innovation antagonisms? No, not at all, HSG student Nathalie Lädrach and HSG assistant professor Nadine Kammerlander suggest. Based on an extensive literature review, they propose the following:


  • Typical family firm characteristics make family firms well prepared for outside-in open innovation. Outside-in open innovation means that the family firm uses external ideas and knowledge to fasten and smoothen the innovation process. This knowledge comes for instance from customers (user innovation) or suppliers, which freely share their improvement ideas with the family firm (i.e. nonpecuniary inbound open innovation). Family firms have the following advantages as compared to other firms:
    • Trust-based, long term relationships to members of their network, e.g., customers, suppliers, but also university centers. This allows them to quickly (and efficiently) access relevant external knowledge. While the breadth of their network might be limited, the depth of family firms’ ties to their network is quite huge, allowing for accessing reliable information.
    • Flexible organizational structures allow for efficient usage of external structures.
    • Implicit, tacit knowledge within the organization. This knowledge helps to assess the quality of the external knowledge and to use it in the organization.
    • Fewer inefficiencies in the knowledge absorption process if owners and managers are aligned in their goals that is when the CEO is a family member.


  • Typical family firm characteristics, however, impede inside-out (or: outbound) open innovation. Inside-out open innovation means that knowledge that family firms have created is commercialized by externals. The most important problem that family firms face with outbound open innovation is that successful outbound innovation requires substantial financial investments in R&D. However, past research has shown that family firms typically underinvest in R&D as compared to non-family firms.


  • Advice for family firms that want to build on open innovation
    • Get rid of the “not invented here” syndrome! Open innovation requires giving up some control!
    • Install useful knowledge management systems (including systems for patent management and other necessary platforms to share, assess and document ideas)! They help to effectively “absorb” and assess the external knowledge.
    • If the aim is to go for outside-in (inbound) open innovation: Also consider buying external knowledge (e.g., by licensing or by acquiring startups; labeled as pecuniary inbound innovation)
    • If the aim is to go for inside-out (outbound) open innovation: Make sure that enough resources are dedicated to research and innovation! (Typically family firms invest less in R&D than non-family firms do)

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