Structure and Dynamics of Ownership, Governance and Strategy: Role of Family and Impact on Performance in Italian SMEs

This article is focused on relations between family business ownership, strategy, structure and functioning of governance systems and company performances in family business.
The article starts from two basic assumptions: 1) increases in both ownership and strategy complexity reduce the gap between formal and actual (i.e. functioning and effective) governance systems; 2) all things being equal, functioning and effective governance systems represent a condition for better company performances, both economic and competitive.
Both assumptions have been tested on a sample of 513 Italian family companies of small and medium size, representative of the manufacturing and non-manufacturing family business population.
Findings show that first, when ownership gets more complex, and particularly when it becomes more numerous and dispersed because of new shareholders' entry, family businesses somewhat respond to these changes by activating governance systems. What is more, ownership seems to be the main drive to such activation.
Secondly, but not less importantly, activation of governance systems does have positive effects: in fact, to make governance systems’ really functioning ones and improving their effectiveness contributes to better company profitability. This could help overcome many entrepreneurs’ concern that working governance bodies bring about the high cost of making decision-making process rigid with no corresponding benefits.