Socioemotional wealth and productivity differences between family and non-family firms: A distributional analysis

Abstract

This paper examines how the productivity effects of “family ownership” vary at different points of the unconditional productivity distribution, using the unconditional quantile regression method (UQR), introduced by Firpo, Fortin, and Lemieux (2009). In accordance with the literature on socio-emotional wealth, this framework allows us to move beyond the singular focus on the “average effect’ of family ownership and to explore the varying effects of family ownership on different points of the unconditional firm-level productivity distribution. Using a dataset containing 1802 firms located in the Netherlands over the period 2010-2013, we find that high productive family firms have lower productivity levels than high productive non-family firms, while low productive family firms have higher productivity levels than low productive non-family firms. These results are obtained by explicitly controlling for endogeneity by using the UQR with endogenous treatment using the instrumental variable (IV) approach, introduced by Frölich and Melly (2013), since endogeneity problems causes parameter estimators to become biased and inconsistent. We further discuss the IV validity when analyzing the productivity effects of family ownership.