Abstract

The main aim of this research is to investigate the influence the institutional environment has on the difference in performance between Italian family firms run by a family member and firms run by a professional manager. By using total factor productivity (TFP) as a measure of performance, we find that family-run firms are less productive than firms run by outside managers when institutional quality is high, but that the results are less obvious when institutional quality is low. The difference in performance is not significant, but by using the level of corruption as a measure of institutional quality, older family firms are found to be more productive than firms run by outside managers.

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