Family Ownership and the Decentralization of Decision Making

We examine decentralization -- that is, the use of more than one decision maker -- in small- to medium-sized organizations, with a particular focus on family firms. Our estimation results suggest that larger firms decentralize more often, as do firms with newer owners, organizations with a greater proportion of managers and firms in which non-directors have a significant ownership stake. On the other hand, centralization (using one key decision maker) is more likely in firms that use network communication technologies and benchmark firm performance. If a firm has a single decision maker, almost all are male with a average of 15 years managerial experience. With respect to family firms, the relationship between ownership and decision making is nuanced, although overall 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 firms have a greater tendency to be centralized than non-family businesses. These empirical findings are discussed in the light of existing economic theories of the allocation of decision-making rights and organizational structure