Family Business in Spain: towards an empirical definition and classification

1. Family Business in Spain: towards an empirical definition and classification RojoRamírez, Alfonso. University of Almeria (arojo@ual.es) Diéguez Soto, Julio. University of Málaga (jdieguez@uma.es) López Delgado, Pilar. University of Málaga (dlp@uma.es)

2. Motivation (Why?) One of the main issues in FB research have consisted in knowing if FB perform better than NFB. To do this, researchers choose a specific definition of FB and then, they test if companies behave differently according to different approaches or theories. The results are mix (regardless of the theory it is applied): some suggest that FBs behaves better than NFBs. Others suggest the opposite.

3. Whyresults are contradictory? • Dealing with data: • The volatility of the financial information which have been used, (Dyer, 2006) or to the existence of a great number of outliers, which distort the results in parametric test. • The variables selected: there are no differences among considered variables, although they can be found in other ones. • FB definition itself, do not permit a good classification of FBs (Chrisman et al., 2003).

4. Our view and objective The main problem is the selected definition used by researchers Authors point out the importance to define adequately FB (Westhead & Cowling, 1997;Villalonga & Amit, 2006) because it is difficult to have knowledge about them without identifying (Chrisman, Chua, & Sharma, 2005). ¿It is possible to improve FB definition?

5. Theoreticalbacground (I-1) • It’s difficult to find consensus on the exact definition of FB (Miller et al., 2007). • They found more than 28 definitions in previous studies worldwide; • In the EU, up to 90 definitions have been suggested (Mandl, 2008). • Different criteria have been used: • Objective: % of family ownership; managers family members or board positions (Dyer, 2006) • Subjective: respondent believed the firm is a FB (Smith, 2007) or intention to transfer the firm (Litz, 1995)

6. Theoreticalbackground (I-2) Literature review shows us that many questions remain unsolved related to defining the FB. Methods for distinguish FBs from NFBs is still in its infancy (Chrisman et al.,2003). Our view: if FBs are different from the NFBs, it must be possible to form a cluster of companies that enjoy similar characteristics based on different economic and financial variables, which behave different from NFBs

7. Researchquestions and hipothesis RQ: Should be possible to form a cluster of companies with similar characteristics according to different economic and financial variables which can be call FBs?. H 1. FBs have to show a similar behavior regarding performance, and different from NFBs. H 2. FBs have to a show similar behavior regarding debt, and different from NFBs

8. Research method-1 (How?) DefiningFamily Business Previousresearch Observingdifferences in perfomance and debt Thisstudy

9. Research Method-2 (How?) Theorical & empiriral Family firms Spanish SABI dat. 4,958 companies Period: 2006-2007 Clasif: size & industr. Differences in performance and debt between groups, in order to obtain a superior cluster of firms with family ties

10. Type 5 Coprenurialfirm CFB Type 4 Entrepreneurialfirm EF Type 3 NFB Type 1-2 NFB Yes Yes Yes Does the internal group** consist of two people with different gender? Does the internal group consist of just one person? No No No ¿Is the firm a general or limited partnership or is a company the last and main owner? Is there coincidence among surnames of internal group? no Is there surnames coincidence with CEO? Has it A* independence indicator? Yes Yes No No Yes Type 6 Independentrun FB Type 8 Solelyrun FB Type 7 Professional run FB • Firmclasificationscheme • research. taking advantage of the Spanish’ two-surnames

11. Results:K-W t-test (outliersincluded) Include entreprenurship

12. Descriptive Data (2007)(n=4.460)

13. Results:TwoUnivariatetests

14. Results:Logistic Regression (1: FB, 0: NFB). Outliers omitted.

15. Conclusions (1) • H1 is accepted. • Almost all variables used to measure performance (Size, Age and Assets utilization) show significant differences between a group, identified as FBs, and the rest of firms, classified as NFBs • Profitability are not as significant as in the rest of the variables used

16. Conclusions (2) • H2 is accepted. • Debt ratio confirms significant differences between FBs and NFBs: FBs are less indebted than NFBs. • FBs have a different financial behavior than NFBs • FBs show aversion to debt, since it is considered a loss of control (Allouche et al, 2008)

17. Conclusions (3) • Main H (RQ) is accepted. • Copreneur, Independent, Professionally and Solely FBs (types 5-8), are an homogeneous group of firms in relation to performance and debt and different from NFBs (types 1-4). • Entrepreneurial Firm (solely proprietor) are excluded (Miller et al, 2007) • Copreneur FB are included (Barnett& Barnett, 1988)

18. Contributions A new empirical approach to research that can help to a more in-depth comprehension of the FB and its dynamic. It is identified 4 types of FBs: Partner, Independent, Professional and Run FB, all of then with homogeneous behavior. A FB, whatever its form or structure, should have older, smaller, with a smaller utilization of assets and low leverage in order to set up a database for research.

19. Limitations • Typology have been made according with SABI database • The two-Spanish surname • Nevertheless, there are an important number of Spanish-speaking countries • The conclusion can help as a benchmark in another countries

20. Futureresearch Inductive methodology could be applied in other contexts or countries. Analyze if different cluster of FBs perform differently Try to understand what are differences between FBs and Entrepreneurial firms

21. That’sall Thanks