Situación religiosa

A firm is said to be owned by an entity that holds its controlling shares. The entity could be an individual, group of people, holding company or state (Chakrabarty, 2009). Ownership is one of the key mechanisms required to control a firm internally (Jensen and Meckling, 1976). However, ownership is sometimes confused with control or governance, especially in the family business literature. Thus, it is important to point out their differences. Ownership is represented through either of these two definitions: the number of shares an individual or a family owns in a firm; or the percentage of shareholding or voting rights held by a group in a firm. Governance on the other hand, indicates control and authority over a firm by a board of directors or family council which does not

83 necessarily signify ownership.

In this thesis, the ownership dimension is viewed as one of the fundamental components of family involvement because of the significant role it plays in shaping the direction of a firm. For instance, the ownership structure of a company would guide its goals and direction; determine the level of financial and personal commitment invested in that firm; and determine the organisation’s overall economic behaviour (Martinez et al., 2007; Schleifer and Vishny, 1997). A concentrated ownership structure would lead to a more co-ordinated strategic posture which is mostly responsible for the superior performance of a firm (Zahra, 2005).

Family business owners are usually very committed to their businesses and most times, would place the interest of the business above that of the family. Therefore, having an overall significant ownership interest in a venture is believed to be strategic in shaping its performance outcome across different generations (Anderson and Reeb 2003a). This view is shared by most family business researchers and has also been empirically confirmed by many. For example, Zahra (2005) in his study also empirically linked family ownership with higher performance through the owner’s ability to understand the need to take certain risks which might improve the overall performance of the firm.

However, the varied views presented in the literature have presented this fundamental component of family involvement as very complex (Sciascia and Mazzolla, 2008; Martinez et al., 2007; Danes et al., 2007; Silva and Majluf, 2008; Westhead and Howorth, 2006; Zahra, 2003; 2005; Lee, 2004.). This is because different countries are guided by distinct policies and rules for owning a business (Poutziouris et al., 2006). In a straightforward ownership situation, whereby the family holds majority shares, for example, family A owns 60% of company z, then, the measure of ownership of family A in company Z is easy to determine. However, in indirect ownership structure, in which the

family has registered a parent company independently, and most of their interests in different firms are acquired through this parent company, ownership in this case might not be of a direct measurement. Nevertheless, if the family owns majority of the parent company, then, the business automatically qualifies as a family business.

The two most common ownership structures available in literature are concentrated ownership and shared ownership.

Concentrated Ownership

Concentrated ownership is the most popular ownership structure found in business enterprises globally. It is therefore also the most researched in extant literature (Miller et al., 2007; Maury, 2006; Bennedsen et al., 2007; Villalonga and Amit, 2006; Demsetz and Villalonga, 2001). Concentrated ownership is when an individual or family holds the controlling shares in a business (Demesetz and Villalonga, 2001). Research findings indicate that globally, businesses with high concentrated ownership are mostly owned by families (Ehrhardt et al., 2005). Some researchers suggest that family businesses with concentrated ownership have the following advantages: reduced agency cost (Schleifer and Vishny, 1997); enhanced performance through a faster decision-making process (Anderson et al., 2005); reduced bureaucracy in operations (Barth et al., 2005); improved access to human capital, social capital and other connected network resources; and promotion of positive altruism and stewardship which can enhance firm performance (Davis et al., 1997a; Fama and Jensen, 1983). On the contrary, Miller et al., (2007) and La Port et al., (1999) argue that concentrated ownership can lead to exploitation of minority shareholders through abusive use of controlling rights. On a general scale however, this type of ownership structure is viewed more positively than negatively in literature on family business (Demsetz and Villalonga, 2001).

Shared Ownership

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measured by percentage of shareholding, represents joint (mostly equal) controlling rights over a firm. Studies on this form of ownership structure are very scarce in literature and this may be unrelated with the complexities associated with joint ownership. One good example of family business with shared ownership is PZ. PZ was established in 1879 by George Paterson and George Zochonis as Paterson Zochonis (PZ). They are now called PZ Cussons, after the company acquired Cussons Group, founded by Thomas Cussons (adapted from PZ Cussons webpage on June 12, 2012). The lack of research on this form of ownership is a gap in literature on family business and it is still outside the scope of this thesis.

The two ownership structures reviewed above should be considered when defining the ownership dimension. Based on the foregoing arguments, ownership dimension is present when the highest percentage of shareholding is held (directly or indirectly) by a dominant family related by blood or marriage (Astrachan et al., 2002; Demesetz and Villalonga, 2001; Westhead and Cowling, 1998). The access of a single family to majority voting right gives them a platform to govern the business in line with their vision and goals for the same. This right of ownership also guides the family’s commitment, decision making and other strategic behaviour in the firm (Barth et al., 2005). Therefore, in this thesis, ownership dimension is proposed as the most fundamental dimensions of family involvement that is required to define family business.