Corporate governance effectiveness along the entrepreneurial process of a family firm: the role of private equity

This paper was motivated by the increasing interest in the corporate governance debate on how effective structure and processes may influence entre- preneurial transitions. Along the entrepreneurial process, little research to date has investigated the exit in the context of entrepreneurial family firms. Previous liter- ature has considered the exit mainly as a failure for entrepreneurial families, but when uncertainties arise this choice may enable ownership transitions, thus facili- tating survival and long term strategies. Among the exit options, a private equity buyout may balance the family’s wealth protection and the firm’s future growth. However, which family specific characteristics and strategic needs may affect the exit option still remains a neglected topic. Drawing on corporate governance lit- erature and recent research addressing entrepreneurship in family firms, this paper investigates, by a single case study, the bridging role of private equity buyout for going through entrepreneurial transitions. Findings suggest that a private equity buyout is a governance mechanism that may sustain an entrepreneurial transition by realigning family interests and goals. It may also allow the family commitment for improving organizational capabilities required by an entrepreneurial transition.