Should I sell part of my family firm? Exploring the drivers of a minority sale

Abstract

Purpose

This study aims to extend the research in the field of external investments in family firms. It contributes to the literature by analyzing the drivers of the family firm owner-managers selling a minority stake to a strategic investor. This type of external investment might be of great interest to family firms because the family firm owner-managers can secure control over the firm and preserve socioemotional wealth while simultaneously generating additional financing and gaining strategic and managerial know-how. Likewise, minority investments in family firms might also be of high interest to strategic investors, thus enabling close collaborations (e.g. in R&D, purchasing and sales) with minor equity investments.

Design/methodology/approach

This study tests the hypotheses using a vignette study leveraging 327 observations from family firm owner-managers.

Findings

Based on the socioemotional wealth perspective, this study hypothesizes that the degree of family prominence, the degree of employee orientation and pure family management influence the willingness to sell. In addition, this study hypothesizes that the moderating effect of a below-average financial performance weakens the abovementioned direct effects. This study finds support for most hypotheses.

Originality/value

This study extends the research in the field of external investments in family firms. It contributes to the literature by analyzing the drivers of the family firm owner-managers selling a minority stake to a strategic investor.

Citation

Kurta, E., Kammerlander, N.H. and Khoury, C. (2023), "Should I sell part of my family firm? Exploring the drivers of a minority sale", Journal of Family Business Management, Vol. 13 No. 4, pp. 1147-1173. https://doi.org/10.1108/JFBM-08-2022-0111