Are two heads better than one head in managing the family business?

Abstract

The return to operator’s labour and management in sole proprietorship firms and partnership firms is compared using matching samples to determine if multi-managed firms produce greater returns. Data were obtained from a farm business management program for the years 1998 through 2001. Managers in a parent–child partnership did not generate more returns than a sole proprietorship, but nonparent–child partnerships generated $36 442 more labour and management income per manager per year than the sole proprietorship.

Keywords:

• business partnerships
• economies of management
• family businesses
• matching samples
• return to management

JEL Classification:

• L25
• L26
• M10
• M21
• Q12

Acknowledgement

I thank Harry Kaiser and Todd Schmit for their comments.

Notes

¹ Although we will use the term partnership throughout this article, the data that will be analysed will be multiple operator farms which may be legally organized as a partnership or corporation. The legal form is a management decision.