Family and non-family business resilience in an economic downturn

Abstract

As widely documented in academic literature, family businesses perform better and enjoy a sounder financial structure than non-family businesses, a trend that applies to Japan as well, which is the context of this paper. Therefore, conventional wisdom suggests that family businesses should recover better or more easily from an economic downturn and persist in their stronger performance. This study tests this hypothesis, especially in reference to the current global economic crisis, by drawing lessons from the Asian crisis of 1997, for which relevant data are available. The study pertains specifically to the case of Japanese family and non-family companies. The empirical investigation uses a matched pair methodology, which allows for strong controls of size and industry variables. The sample consists of 98 carefully selected pairs (one family and one non-family) of firms that are of the same size and from the same industry. According to the results, family businesses achieve stronger resilience both during and after an economic crisis, compared with non-family businesses. They resist the downturn better, recover faster, and continue exhibiting higher performance and stronger financial structures over time.

Keywords:

• Asia
• downturn
• family business
• Japan
• organizational resilience

Acknowledgements

This research has benefitted from funding from the French National Agency for Research (ANR), under the auspices of the MNC Control program (2009–2011).

Notes

1. According to Chrisman et al., (2003), ‘the family firm exists because of the reciprocal economic and non-economic value created through the combination of family and business systems. In other words, the confluence of the two systems leads to hard-to-duplicate capabilities of “familiness” that make family business particularly suited to survive and grow’ p. 444.