Family Owned Business Institute

Research Scholar's Abstracts 2003 - Jim Lee

Family Businesses and Employment Stability: An Empirical Examination
Jim Lee
2003
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This proposed project aims at evaluating the possible effect of family ownership or control of a firm on employment stability over time, particularly during a cyclical market downturn.Conventional economic theory, which underlies research in such business disciplines as finance, accounting and management, does not differentiate between employment policies of family businesses and other businesses owned by diverse shareholders.A recent survey by Astrachan and Allen (2003) highlights family businesses' tendencies to keep employment levels stable and to avoid downsizing during a recession.

This behavior is attributable to some characteristics of a family business, particularly the founding family's altruism and commitment to firm continuity and stability, which may lead to its efforts to keep a stable relationship with other employees.In this light, this study employs firm-level data to empirically test the null hypothesis that family ownership makes no difference to firm employment stability against the alternative hypothesis that family ownership does make a difference.The findings will provide a better understanding of firm behavior as well as changes in overall employment during the business cycle.