Market Opportunities and the Owner Identity: Are Family Firms Different?

We test the hypothesis that the identity of the owner affects firm ability to seize market opportunities differently according to the firm’s actual vs. “optimal” size (size gap). By grouping firms in size clusters having a similar probability of adopting a size-adjusting strategy (growth or downsizing), we measure how the sensitivity of firm sales to demand shocks changes in response to the difference in owner identity and the firm size gap. We use data from a panel of 7,459 continental western European firms over the period 1995-2004 and Eurostat 3-digit sectoral data on firm size distribution in Europe. Our findings show that family business sales are less sensitive to market demand than other firms, particularly when the actual firm size is larger than optimal size.