Family Management and Historical Origins: The Italian Experience

ABSTRACT Research Question/Issue The purpose of this paper is to analyze the long‐run determinants of the corporate structure of Italian firms to explain the persistent role of a long‐run tradition of civic capital that has favored interpersonal trust, fostered cooperation outside of the narrow ties of family members and limited the diffusion of family businesses managed predominantly by family members. Research Findings/Insights We examined a large sample of Italian listed and not listed firms and identified those that operate in current municipalities that in the past used to be independent communes. Such firms featuring experiences of civic engagement are today less likely to be owned by a family and run by family management. Theoretical/Academic Implications Our findings highlight the role of institutions as drivers of corporate governance and signal that long forgotten institutions, by modifying local social capital, may interact with family social capital and have important persistent effects on current corporate governance arrangements. Therefore, significant elements of path dependency may explain current patterns of unbundling of ownership and management. Practitioner/Policy Implications Persistent corporate governance structures are difficult even for policymakers to modify. Our findings suggest that political measures should favor the accumulation of social capital at the local level when aiming to change ownership and management arrangements and limit the misallocation of resources due to family management.