This, fascinating and interesting though it is, economic paper might well qualify as the most politically incorrect one of the day for they've looked at the effect of having female executives on the fortunes of companies. And we know, because many previous studies have told us this, that having more women increases the performance of the firm. But what this paper finds is that, by breaking down the numbers between family-owned firms and public, listed ones, we see a divergence. For family firms the effects of female executives is strongly positive. But for listed ones it is negative. And given that family and private firms are a very much larger portion of the number of companies than listed ones it seems to be this divergence that drives the overall result, that a female presence in the executive suite benefits a firm.
Quite why this is so we don't know as yet, all we've got is the evidence (to the extent that one paper is ever conclusive evidence of anything) that it is so.
The abstract of the paper:
Female leadership is an expanding area of research. It is a popular topic discussed frequently in both academia and in the popular press. Despite this, comparative studies of the impact of
female leadership on firm level performance between family and non-family firms are rare.The present study has the ambition to fill this gap. This paper investigates female leadership in family firms and how it affects firm profitability. A unique database of ownership and
leadership in private Swedish firms makes it possible to analyze difference in firm performance due to female leadership in family and non-family firms. Even though much has been written regarding the role of women in family firms we do not know so much about how female leadership in family firms affect the profitability of the firm. The analysis indicates that female leadership makes much more of a positive difference for performance in family firms. The effect is negative in non-family firms.
One line that stands out:
The regression analysis shows that female corporate executives in family firms generate
higher profitability than in non-family firms.
We might say that it's diversity causing this, firms with more diverse leadership doing better. But that wouldn't explain why the same diversity in listed or non-family firms has the opposite effect. We could speculate horribly about the way that women run families and thus anything that is family they'll run well--but even I'm not going to try and say that with a straight face. Given that most family firms are choosing their executives from within the family (the clue being in the name) it could be simply that those that are hiring the female members of the family are those making the most use of the talent available. Those who default to the son taking over are thus ignoring the fact that skill and drive are not things that move solely with the Y chromosome (my own experience of one substantial family business, no, not my family, is that the daughter definitely inherited the drive that had built the business, her brother ending up with rather the short end of the stick in business skills. But he got the company, patriarchal as it was, to the detriment of said firm).
The paper doesn't, because no one knows as yet, tell us why this is true:
Our study shows that female leadership is more common in family than non-family corporations. This female leadership has also a strong positive impact on performance in family firms while the performance impact is surprisingly strongly negative in non-family firms. Further research is needed to explain this difference. Possible explanations can be differences in idiosyncratic knowledge, discrimination, selection biases and principal agent conditions that contribute to a superior female performance in family firms.
My best guess, and I hasten to add that it is just a guess, or an opinion perhaps which given that we're in the opinion section is acceptable, is that this is simply a cohort effect. It really is only in the last 20 to 30 years that women have been getting the same sort of college educations, right across everyone, that men have more traditionally had. It takes a certain number of decades to climb the greasy pole into the executive suites. And I would postulate (this is a fancy word for "guess") that family firms have picked up on this source of talent rather more quickly than larger ones. I would thus expect the disparity in performance to even out over time as larger firms make full use of the female talent available to them.
Of course this isn't the only explanation possible for these findings and do have fun ruminating on what the other reasons might be. But that is my own suspicion, that it's simply to do with the fact that the upper echelons of the labor force (more so here in Europe than the U.S. perhaps) are still changing as a result of the changes in education decades ago.
