Professor of Economics
In a panel across twenty-eight countries over 10 years, the authors show that family firms on average enjoy performance advantages over nonfamily firms only when labor markets are less regulated. They confirm this result in a matched firm sample using a survey-based instrument as a family control. Furthermore, family firms exhibit lower variation in employment levels in less-regulated labor markets, supporting the notion that labor relations drive family firms’ performance advantages. Their results are consistent with the notion that both family ownership and labor market reforms provide employment protection and thus partly substitute as governance mechanisms.