We exist because we resist. Family and non family firms at the proof of financial crisis

A decade has passed since the beginning of the global economic and financial crisis and studies on family firms have contributed to understand the advantages and disadvantages of family involvement in ownership and management in face of turmoil. In particular, research has focused on the characteristics that might increase firm resilience, defined as “a unique blend of cognitive, behavioural, and contextual properties that increase a firm’s ability to understand its current situation and to develop customized responses that reflect that understanding” (Lengnick-Hall and Beck, 2005, p. 750). Resilience is important for any organization and especially for family firms (Chrisman et al., 2011), as long as it translates into longevity and guarantee to pass the ownership and management of the firm from one generation of family members to another, which is a priority for many family business owner (Steier, 2005). Sharma and Salvato (2011) argue that family firms’ intentions for transgenerational control and long-term orientation can, on the one side, facilitate long-term investments that lead to the identification of new growth opportunities but, on the other side, can also constrain their resilience if their multi-temporal perspectives prevent them from diminishing their involvement in declining product markets.Resilience appears to be a convenient concept for describing the peculiar behaviour of family firms compared to nonfamily firms especially during economic crisis, when firms struggle to manage their resources in the most efficient way. Despite its potential contribution, though, and up to our knowledge, the literature on family firms has offered no empirical evidence that identifies an association between resilience and firm governance.This paper addresses this topic and provides empirical evidence on the relative performance of family and nonfamily businesses in the context of Italian economy during the period 2001-2011, before and during the financial crisis that has affected the United States first and the rest of the world afterwards. In this paper, in line with Palia and Lichtenberg (1999) and Barth et al. (2005), corporate performance is measured by total factor productivity (TFP), which is a performance measure less exposed to manipulation errors than financial indicators such as accounting profit rates. In addition, productivity provides a reliable performance measure for non-listed firms, for which valuations based on market prices are not available. Since the paper aims at assessing firm performance in a mutable economic environment and at understanding firm reactions to changes in the external context, productivity is computed in terms of variations over time and measured by the Malmquist index.The choice of the Malmquist index as a performance measure is also motivated by its convenient decomposition into two factors, one reflecting technical change and the other changes in technical efficiency, which can be interpreted as “catch-up”. We argue that the “catching up” term, which captures the productivity improvements attained by using the economic inputs more efficiently, signals the firm ability to recover in adverse circumstances and thus resilience, and we operationalize the resilience construct as the efficiency change implemented by each firm over time. The technical change component of the Malmquist index represents the efficiency frontier shift, or the productivity improvements realized in the economic system thanks to technological progress. As such, the technical change index signals the innovation introduced in an industry over time.This paper contributes to several streams of literature. First, the paper provides an exploration of the sources of productivity growth that can play a crucial role for the economic survival and recovery of firms during and after the financial crisis. To this regard, the paper contributes to the growing number of empirical papers in the productivity literature (Liu et al., 2013). From a methodological point of view, the paper measures firm performance through Total Factor Productivity (TFP), analogously to Barth et al. (2005) but in reference to a different population of firms, namely privately held instead of listed companies. As such, the paper gives a contribution to the business management literature in the direction suggested by Herrero (2011), who measures firm efficiency of small family firms by applying the stochastic frontier analysis protocol. This study also complements an earlier study on efficiency in which Data Envelopment Analysis is used to analyze firm performance of a different sample of family and nonfamily non-listed Italian firms observed from 2001 to 2004 (Erbetta et al., 2013).The paper contributes to the literature on family businesses by investigating, in particular, how family firms invest in efficiency during stringent economic conditions and compared to nonfamily firms. By disentangling the sources of productivity related to efficiency improvements from those derived from technical progress, the analysis show where inefficiency are located. In particular, the emerging differences in family and nonfamily firms’ efficiency change helps understanding the characteristics that differentiate the two types of organization in their capacity to be resilient in difficult times. Moreover, the analysis of the productivity changes induced by technical progress or regress allows evaluating the innovative behaviour of family and nonfamily firms and, since innovation is a relevant driver for economic growth (Aghion and Howitt, 1998; Grossman and Helpman, 1991), allows appreciating their contribution to economic system’s recovery after the financial crisis. Finally, this paper contributes to the growing line of research that examines the effects of the recent financial crisis on corporate performance and, in particular, on family businesses compared to nonfamily ones (Lins et al., 2013; for Italy, Minichilli et al., 2016). To this regard, the paper provides fresh evidence on the consequences of the financial crisis in Italy, the Eurozone’s third-largest economy that has lagged behind its major European peers for much of the last few years.