Do the Governance, Strategic and Organisational Practices Differ in Indian Family and Professionally Managed Firms?

Abstract

The professional firms suffer from exogenous problems whereas the private family firms suffer from endogenous problems. This latter category is more common in the family firms of emerging markets. Based on a sample of 157 firms we examine the key characteristic differences in the managerial practices of family firms and professional firms and relate them to the possible agency problems. We present the typology of the firms based on ownership and control and further divide the issues into strategy, organisation and governance issues. The family firms themselves definitionally vary depending upon the ownership and control-based classification. We classify all firms into four categories, but we compare only professional firms on one hand and all hues of family firms as one block on the other owning to a relatively smaller sample size and lack of clear distinctions made by the respondents. However, the conclusions distinguish only on a few dimensions. But owing to institutional and economic context both family and professional firms look alike in more respects than they look different. This highlights the major impact of institutional influence on the behaviours of the firms. The analysis indicates that family firms suffer from the size, age and transparency disadvantages as compared to professional firms, but the strategic, organisational and governance practices do not differ very widely from each other.