Family ownership and the decentralization of decision making

Abstract

We examine decentralization { the use of more than one decision maker - in small- to medium-sized organizations, with a particular focus on family rms. If a rm has a single decision maker, almost all are male with a average of 15 years managerial experience. Our estimation results suggest that larger rms decentralize more often, as do rms with newer owners, organizations with a greater proportion of managers and rms in which non-directors have a signicant ownership stake. On the other hand, centralization (using one key decision maker) is more likely in rms that use network communication technologies and benchmark rm performance. In regards to family rms, the relationship between ownership and decision making is nuanced. Overall, however, family-owned businesses are more likely to centralize, and this is particularly true when a family member is the director or proprietor. Furthermore, both first- and second-generation family rms have a greater tendency to be centralized than non-family businesses.