Should family businesses always keep it in the family?

April 1, 2014

From the Murdochs to the Hiltons, families have long sought to keep their businesses in the bloodline. But new research from Concordia University's John Molson School of Business shows that's not necessarily the best method of management.

The recent study, published in the journal Entrepreneurship Theory and Practice, shows that if the is part of a traditional built on quality and reputation, a family member would make a good CEO. But if it operates in an industry that values innovation, and the firm has to stay on the cutting edge, it's best to look elsewhere for leadership.

The study's lead author, CIBC Distinguished Professor of Family Business Peter Jaskiewicz, says that in industries that prioritize pushing boundaries over preserving tradition, an aggressive attitude in the marketplace is necessary to lead.

"Because family CEOs tend to focus more on , while non-family CEOs seek to innovate, that means a CEO from outside the family circle might be a better choice," says Jaskiewicz.

"In traditional industries, it's all about preserving tradition," he says. "But that doesn't work in newer industries where it's all about constant innovation in rapidly changing environments."

That's not to say that family CEOs can't succeed in more innovative industries. "But families that promote from within need to hold their CEOs to a standard that's at least as high as the industry average," says Jaskiewicz. "They also have to make sure the CEOs are competent enough to handle industry pressures and to balance family advice with outsider feedback and industry savvy."

Traditional family businesses, then, like food producers, service providers or wine makers—businesses in which quality and reputation are core values—can benefit from keeping things in the family. By contrast, innovative businesses, such as those in the information technology sector, cellular communications or pharmaceuticals, would be better off hiring from outside the inner circle.

However, according to Jaskiewicz, the role of culture in business decisions also merits closer investigation.

"In collectivistic cultures such as those found in Asia, South America and Southern Europe, where a high value is placed on , outsider appointments might not go down well with stakeholders like customers or employees. But in North America, where success, wealth and independence are the priority, the origins of the CEO shouldn't be as significant."

Explore further: Family-based brand identity influences customers' purchasing decisions

Related Stories

Illuminating 'The Fredo Effect'

October 15, 2009

( -- Kimberly Eddleston wants to know how the “family” in family-run businesses either serves to constrict or promote a firm’s success.

Recommended for you

Chimpanzees shed light on origins of human walking

October 6, 2015

A research team led by Stony Brook University investigating human and chimpanzee locomotion have uncovered unexpected similarities in the way the two species use their upper body during two-legged walking. The results, reported ...

How much for that Nobel prize in the window?

October 3, 2015

No need to make peace in the Middle East, resolve one of science's great mysteries or pen a masterpiece: the easiest way to get yourself a Nobel prize may be to buy one.

The dark side of Nobel prizewinning research

October 4, 2015

Think of the Nobel prizes and you think of groundbreaking research bettering mankind, but the awards have also honoured some quite unhumanitarian inventions such as chemical weapons, DDT and lobotomies.

Who you gonna trust? How power affects our faith in others

October 6, 2015

One of the ongoing themes of the current presidential campaign is that Americans are becoming increasingly distrustful of those who walk the corridors of power – Exhibit A being the Republican presidential primary, in which ...


Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.