This chapter first argues that family businesses (FBs) are more apt than non-FBs to form close relationships with employees and external stakeholders that enable them to outperform in the most turbulent sectors of emerging markets. It suggests that such ties may be especially useful in such economies because they fill what Khanna and Palepu (1997) have termed an ‘institutional void’ in capital, product and labor markets. The chapter then develops hypotheses about the relative prevalence and performance implications of these relationships in family versus non-family firms, and tests them on a sample of Korean high-technology firms. It concludes with a discussion of results. Family firms account for about half of the US gross national product, employ over half of the workforce, and create more than 85 percent of all new jobs (Shanker and Astrachan, 1996). Although many are small, they make up about one-third of Fortune 500 companies (Anderson and Reeb, 2003). Their presence in Asia is greater still, accounting for over 60 percent of the mid-cap public firms in Hong Kong, Singapore and South Korea (LaPorta et al., 1999). Yet family firms remain negatively portrayed and poorly understood (Miller and Le Breton-Miller, 2005).
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