Although research has shown the ability to exit from both successful and unsuccessful ventures is important to founders, families, firms, industries, and overall economic health, exiting from a family firm can be especially challenging. In this paper, we examine exit strategies in the context of the family firm and the family firm portfolio. Drawing upon threshold theory and the socioemotional wealth perspective, we develop a model that provides guiding theoretical explanations for exit strategies. We address two questions: (1) why do family owners develop specific exit strategies, and (2) how do these strategies differ within family firms and family firm portfolios? In doing so, we contribute to family business, portfolio entrepreneurship, and exit literatures.
Get full access to this article
View all access options for this article.
References
1.
AlmeidaH.V. & WolfenzonD. (2006). A theory of pyramidal ownership and family business groups. Journal of Finance, 61(6), 2637–2680.
BerroneP., CruzC., Gómez–MejíaL.R., & Larraza–KintanaM. (2010). Socioemotional wealth and corporate responses to institutional pressures: Do family–controlled firms pollute less?Administrative Science Quarterly, 55(1), 82–113.
4.
BerroneP., CruzC.C., & Gómez–MejíaL.R. (2012). Socioemotional wealth in family firms: A review and agenda for future research. Family Business Review, 25(3), 258–279.
5.
BlumentrittT., KeytA., & AstrachanJ. (2007). Creating an environment for successful non–family CEOs: An exploratory study of good principals. Family Business Review, 20(4), 321–335.
6.
BrauerM. (2006). What have we acquired and what should we acquire in divestiture research? A review and research agenda. Journal of Management, 32(6), 751–785.
7.
BrüderlJ., PreisendörferP., & ZieglerR. (1992). Survival chances of newly founded business organizations. American Sociological Review, 57(2), 227–242.
8.
BurgelmanR.A. (1994). Fading memories: A process study of strategic business exit in dynamic environments. Administrative Science Quarterly, 39, 24–56.
9.
CarterS. & RamM. (2003). Reassessing portfolio entrepreneurship. Small Business Economics, 21(4), 371–380.
10.
CasillasJ.C., MorenoA.M., & BarberoJ.L. (2010). A configurational approach of the relationship between entrepreneurial orientation and growth of family firms. Family Business Review, 23, 27–44.
11.
ChiricoF., IrelandR.D., & SirmonD.G. (2011). Franchising and the family firm: Creating unique sources of advantage through “familiness.” Entrepreneurship Theory & Practice, 35(3), 483–501.
12.
ChiricoF. & SalvatoC. (2008). Knowledge integration and dynamic organizational adaptation in family firms. Family Business Review, 21, 169–181.
13.
ChiricoF., SirmonD., SciasciaS., & MazzolaP. (2011). Resource orchestration in family firms: Investigating how entrepreneurial orientation, generational involvement, and participative strategy affect performance. Strategic Entrepreneurship Journal, 5, 307–326.
14.
ChrismanJ.J., ChuaJ.H., & SteierL. (2005). Sources and consequences of distinctive familiness: An introduction. Entrepreneurship Theory & Practice, 29(3), 238–247.
15.
ChuaJ.H., ChrismanJ.J., & ChangE.P.C. (2004). Are family firms born or made? An exploratory investigation. Family Business Review, 17, 37–54.
16.
ChuaJ.H., ChrismanJ.J., & SharmaP. (1999). Defining the family business by behavior. Entrepreneurship Theory & Practice, 23(4), 19–39.
17.
ChuaJ.H., ChrismanJ.J., SteierL.P., & RauS.B. (2012). Sources of heterogeneity in family firms: An introduction. Entrepreneurship Theory & Practice, 36(6), 1103–1113.
18.
CoelhoP.R.P. & McClureJ.E. (2005). Learning from failure. Mid–American Journal of Business, 20(1), 13–20.
19.
CorbettaG. & SalvatoC. (2012). Strategies for longevity in family firms. A European perspective. New York: Palgrave–Macmillan.
20.
CruzC. & NordqvistM. (2012). Entrepreneurial orientation in family firms: A generational perspective. Small Business Economics, 38(1), 33–49.
21.
DeMassisA., ChuaJ.H., & ChrismanJ.J. (2008). Factors preventing intra–family succession. Family Business Review, 21, 183–199.
22.
DeTienneD.R. (2010). Entrepreneurial exit as a critical component of the entrepreneurial process: Theoretical development. Journal of Business Venturing, 25(2), 203–215.
23.
DeTienneD.R. & CardonM. (2012). Impact of founder experience on exit intentions. Small Business Economics, 38(4), 351–374.
24.
DeTienneD.R., McKelvieA., & ChandlerG.N. (2012). The impact of motivation, innovation, and causation and effectuation approaches on exit strategies, Academy of Management Annual Meeting, Boston, MA.
25.
DeTienneD.R., ShepherdD.A., & DeCastroJ.O. (2008). The fallacy of “only the strong survive”: The effects of extrinsic motivation on the persistence decisions for under–performing firms. Journal of Business Venturing, 23, 528–546.
26.
DoughtyK. & HillL. (2000). Francisco de Narváez at Tía: Selling the family business. Harvard Business School, 9–401–017.
27.
EnsleyM.D. & PearsonA.W. (2005). An exploratory comparison of the behavioral dynamics of top management teams in family and non–family new ventures: Cohesion, conflict, potency, and consensus. Entrepreneurship Theory & Practice, 29, 267–284.
28.
FrancisD.H. & SandbergW.R. (2000). Friendship within entrepreneurial teams and its association with team and venture performance. Entrepreneurship Theory & Practice, 25(2), 5–25.
29.
GersickK., DavisJ., HamptonM., & LansbergI. (1997). Generation to generation: Life cycles of the family business. Boston, MA: Harvard Business School Press.
30.
GimenoJ., FoltaT., CooperA., & WooC. (1997). Survival of the fittest? Entrepreneurial human capital and the persistence of underperforming firms. Administrative Science Quarterly, 42, 750–783.
31.
GiotP. & SchwienbacherA. (2007). IPOs, trade sales, and liquidations: Modeling venture capital exits using survival analysis. Journal of Banking & Finance, 31(3), 679–702.
32.
Gómez–MejíaL.R., HaynesK.T., Núñez–NickelM., JacobsonK.J.L., & Moyano–FuentesJ. (2007). Socioemotional wealth and business risks in family–controlled firms: Evidence from Spanish olive oil mills. Administrative Science Quarterly, 52(1), 106–137.
33.
Gómez–MejíaL.R., HoskissonR.E., MakriM., SirmonD.G., & CampbellJ. (2011). Innovation and the preservation of socioemotional wealth in family controlled high technology firms. Unpublished manuscript, Texas A&M University, College Station.
34.
Gómez–MejíaL.R., Nunez–NickelM., & GutiérrezI. (2001). The role of family ties in agency contracts. Academy of Management Journal, 44, 81–95.
35.
HaynesG.W., WalkerR., RoweB.R., & HongG.S. (1999). The intermingling of business and family finances in family–owned businesses. Family Business Review, 7, 225–239.
36.
HaywardM. & ShimizuK. (2006). De–commitment to losing strategic action: Evidence from the divestiture of poorly performing acquisitions. Strategic Management Journal, 27, 541–557.
37.
HernandezM. (2012). Toward an understanding of the psychology of stewardship. Academy of Management Review, 37(2), 172–193.
38.
HesselsJ., GriloI., ThurikR., & ZwanP. (2011). Entrepreneurial exit and entrepreneurial engagement. Journal of Evolutionary Economics, 21(3), 447–471.
39.
IacobucciD. & RosaP. (2010). The growth of business groups by habitual entrepreneurs: The role of entrepreneurial teams. Entrepreneurship Theory & Practice, 34(2), 351–377.
40.
JaffeD. & LaneS. (2004). Sustaining a family dynasty: Key issues facing complex multigenerational business–and investment–owning families. Family Business Review, 17, 7–28.
41.
JamesH. (2006). Family capitalism. Wendels, Daniels, Falcks, and the continental European model. Cambridge, MA: The Belknap Press of Harvard University Press.
42.
KayeK. (1996). When the family business is a sickness. Family Business Review, 9, 347–368.
43.
KellermannsF.W., EddlestonK.H., & ZellwegerT. (2012). Extending the socioemotional wealth perspective: A look at the dark side. Entrepreneurship Theory and Practice, 36(2), 1175–1182.
44.
Kets de VriesM.F.R. (1993). The dynamics of family controlled firms: The good and the bad news. Organizational Dynamics, 21(3), 59–71.
45.
LansbergI. (1988). The succession conspiracy. Family Business Review, 1, 119–143.
46.
La PortaR., Lopez–de–SilanesF., & ShleiferA. (1999). Corporate ownership around the world. Journal of Finance, 54, 471–517.
47.
Le Breton–MillerI., MillerD., & SteierL.P. (2004). Toward an integrated model of effective FOB succession. Entrepreneurship Theory & Practice, 28(4), 305–328.
48.
LingY. & KellermannsF.W. (2010). The effects of family firm specific diversity: The moderating role of information exchange frequency. Journal of Management Studies, 47, 332–344.
MillerD., Le Breton–MillerI., & ScholnickB. (2008). Stewardship vs. stagnation: An empirical comparison of small family and non–family businesses. Journal of Management Studies, 45(1), 51–78.
51.
MillerD. & ShamsieJ. (2001). Learning across the life cycle: Experimentation and performance among the Hollywood studio heads. Strategic Management Journal, 22, 725–745.
52.
MillerD., SteierL., & Le Breton–MillerI. (2003). Lost in time: Intergenerational succession, change, and failure in family business. Journal of Business Venturing, 18, 513–531.
53.
MulhollandK. (1997). The family enterprise and business strategies. Work, Employment and Society, 11(4), 685–711.
54.
NeubauerF. & LankA.G. (1998). The family business: Its governance for sustainability. New York: Routledge.
55.
NordqvistM., WennbergK., BauM., & HellerstedtK. (2013). An entrepreneurial process perspective on succession in family firms. Small Business Economics: An Entrepreneurship Journal, 40(4), 1087–1122.
56.
PathakS., ChiricoF., HoskissonR., & MakriM. (2012). Portfolio restructuring in family– and founder–controlled firms. Paper presented at the Strategic Management Society Conference, Prague.
RamM. (1994). Managing to survive: Working lives in small firms. Oxford, U.K.: Blackwell.
59.
RosaP. (1998). Entrepreneurial processes of business cluster formation and growth by “habitual” entrepreneurs. Entrepreneurship Theory & Practice, 4, 43–61.
60.
RyanG. & PowerB. (2012). Small business transfer decisions: What really matters? Evidence from Ireland and Scotland. Irish Journal of Management, 31(2), 99–125.
61.
SalvatoC. (2004). Predictors of entrepreneurship in family firms. The Journal of Private Equity, 7(3), 68–76.
62.
SalvatoC., ChiricoF., & SharmaP. (2010). A farewell to the business: Championing exit and continuity in entrepreneurial family firms. Entrepreneurship & Regional Development, 22(3/4), 321–348.
63.
SciasciaS., MazzolaP., & ChiricoF. (2013). Generational involvement in the top management team of family firms: Exploring non–linear effects on entrepreneurial orientation. Entrepreneurship Theory and Practice, 37(1), 69–85.
64.
SharmaP. (2004). An overview of the field of family business studies: Current status and directions for the future. Family Business Review, 17(1), 1–36.
65.
SharmaP., ChrismanJ.J., & ChuaJ.H. (2003). Predictors of satisfaction with the succession process in family firms. Journal of Business Venturing, 18(5), 667–687.
66.
SharmaP. & IrvingP.G. (2005). Four bases of family business successor commitment: Antecedents and consequences. Entrepreneurship Theory & Practice, 29, 13–33.
67.
SharmaP. & ManikuttyS. (2005). Strategic divestments in family firms: Role of family structure and community culture. Entrepreneurship Theory & Practice, 29(3), 293–311.
68.
SiegerP., ZellwegerT., NasonR., & ClintonE. (2011). Portfolio entrepreneurship in family firms: A resource–based perspective. Strategic Entrepreneurship Journal, 5, 327–351.
69.
SirmonD.G. & HittM.A. (2003). Managing resources: Linking unique resources, management and wealth creation in family firms. Entrepreneurship Theory & Practice, 27, 339–358.
70.
SonfieldM. & LussierR. (2009). Family–member and non–family member managers in family business. Journal of Small Business and Enterprise Development, 16(2), 196–209.
71.
SteierL.P., ChrismanJ.J., & ChuaJ.H. (2004). Entrepreneurial management and governance in family firms: An introduction. Entrepreneurship Theory & Practice, 28(4), 295–303.
72.
StewartA. & HittM.A. (2012). Why can't a family business be more like a non–family business? Modes of professionalization in family firms. Family Business Review, 25(1), 58–86.
73.
ThomasJ. (2002). Freeing the shackles of family business ownership. Family Business Review, 15(4), 321–336.
74.
WardJ.L. (1987). Keeping the family business healthy: How to plan for continuing, growth, profitability, and family leadership. San Francisco, CA: Jossey–Bass.
75.
WennbergK., WiklundJ., DeTienneD.R., & CardonM. (2010). Reconceptualizing entrepreneurial exit: Divergent exit routes and their drivers. Journal of Business Venturing, 25(4), 361–375.
76.
WennbergK., WiklundJ., HellerstedtK., & NordqvistM. (2011). Implications of intra–family and external ownership transfer of family firms: Short–term and long–term performance differences. Strategic Entrepreneurship Journal, 5(4), 352–372.
77.
WestheadP., UcbasaranD., & WrightM. (2005). Decisions, actions, and performance: Do novice, serial, and portfolio entrepreneurs differ?Journal of Small Business Management, 43(4), 393–417.
78.
WestheadP. & WrightM. (1999). Contributions of novice, portfolio and serial founders located in rural and urban areas. Regional Studies, 33(2), 157–173.
79.
WiklundJ. & ShepherdD.A. (2008). Portfolio entrepreneurship: Habitual and novice founders, new entry, and mode of organizing. Entrepreneurship Theory & Practice, 32(4), 701–725.
80.
WisemanR.M. & Gómez–MejíaL.R. (1998). A behavioral agency model of managerial risk taking. Academy of Management Review, 23, 133–153.
81.
WoodsJ.A., DalzielT., & BartonS.L. (2012). Escalation of commitment in private family businesses: The effect of outside board members. Journal of Family Business Strategy, 3(1), 18–27.
82.
ZellwegerT. & AstrachanJ.H. (2008). On the emotional value of owning a firm. Family Business Review, 21, 347–363.
83.
ZellwegerT., KellermannsF.W., ChrismanJ.J., & ChuaJ. (2012). Family control and family firm valuation by family CEOs: The importance of intentions for transgenerational control. Organization Science, 23, 851–868.
84.
ZellwegerT., NasonR., & NordqvistM. (2012). From longevity of firms to transgenerational entrepreneurship of families: Introducing family entrepreneurial orientation. Family Business Review, 25(2), 136–155.
85.
ZellwegerT., NasonR.S., NordqvistM., & BrushC.G. (2013). Why do family firms strive for nonfinancial goals? An organizational identity perspective. Entrepreneurship Theory & Practice, 37(2), 229–248.
86.
ZellwegerT. & SiegerP. (2012). Entrepreneurial orientation in long–lived family firms. Small Business Economics, 38(1), 67–84.
