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The Cultural Origins of Family Firms

Song Yuan () and Jian Xie

MPRA Paper from University Library of Munich, Germany

Abstract: What determines the prevalence of family firms? In this project, we investigate the role of historical family culture in the spatial distribution of family firms. Using detailed firm-level data from China, we find that there is a larger share of family firms in regions with a stronger historical family culture, as measured by genealogy density. The results are further confirmed by an instrumental variable approach and the nearest neighbor matching method. Examining the mechanisms, we find that entrepreneurs in regions with a stronger historical family culture: i) tend to have family members engage more in firms; ii) are more likely to raise initial capital from family members; iii) are more willing to pass on the firms to their children. Historical family culture predicts better firm performance due to a lower leverage ratio.

Keywords: Family Culture; Family Firms; Genealogy; Cultural Origins; Firm Performance (search for similar items in EconPapers)
JEL-codes: D02 D2 G3 L2 M1 Z1 (search for similar items in EconPapers)
Date: 2021-12
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-cna, nep-evo, nep-gro, nep-his, nep-sbm and nep-soc
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