Knowledge that Transforms

We survey 153 empirical studies of family firms and document 192 operational definitions representing 25 distinct definition types. These definitions can be decomposed into five recurring, codable dimensions: ownership, management, board representation, embeddedness, and succession. We relate these dimensions to economic mechanisms including agency conflicts, residual control rights, transaction costs, and dynastic control. Alternative definitions select systematically different populations and yield materially different estimates of firm performance and innovation. Definition choice is largely unrelated to the research question, except in succession studies. Ownership thresholds track private enforcement of self-dealing rules, but not statutory shareholder rights or rule of law. We conclude that the family firm is a family of related constructs rather than a single latent construct. Definitions should therefore match the family-firm construct implied by the research question, and results should be reported across alternative classification rules.

We examine how corporate financial constraints shape firms’ employment responses to minimum wage policies. Exploiting the federal minimum wage increase during the financial crisis and variation in firms’ debt maturity structures at the crisis onset, we find that financially constrained firms significantly reduce employment. To assess external validity, we analyze staggered state-level minimum wage increases over time. Consistent with the crisis evidence, employment declines in establishments of constrained firms, whereas unconstrained firms expand in areas with a larger supply of minimum-wage workers and higher turnover. Our results highlight the central role of financial constraints in mediating labor policy effects.

We propose a novel identification strategy to estimate the long-term imprinting effects of being born in the Great Recession on innovative startups. After purging ubiquitous selection biases and sorting effects, we find that recession startups experience substantially better long-term outcomes in terms of survival and growth in employment and sales, despite being born when funding is scarce and demand is declining. In contrast to prior work, we find that the recession does not encourage entry into entrepreneurship as job prospects dim; instead, it discourages exit by critical R&D workers who help recession startups out-innovate and out-perform expansion startups.

Startups face a trade-off between short-term profitability and long-term growth. Their cash flows are said to follow a so-called J-curve. The shape of the curve depends on investors’ financing capacity: their ability to sustain prolonged periods of negative cash flow. US venture capitalists are often believed to have greater financing capacity. We examine a large Swedish dataset with detailed cash flow information. Swedish startups backed by US venture capitalists experience deeper J-curves, with larger short-term losses and higher long-term sales, relative to those backed by non-US venture capitalists. These results are consistent with US venture capitalists having greater financing capacity: they can provide more funding directly and have better access to later-stage investors.

In credit markets where borrower types are observable, is it welfare-maximizing for a rate-setting institution to offer different rates to different borrower types, or to pool them at a common rate? Moral hazard favours separation; deadweight default costs favour pooling, since compressing rates reduces aggregate defaults through hazard rate heterogeneity. We derive the condition determining which force dominates: the ratio of default cost intensity to moral hazard intensity. We show that there is a single threshold value of this ratio such that separation strictly dominates below it, complete pooling strictly dominates above it, and the two are welfare-equivalent exactly at it, for every possible value of the ratio. The result does not depend on information being scarce: even though borrower types are observable throughout, pooling can still dominate separation when default costs are sufficiently large, provided the maintained compression and effort conditions we state precisely continue to hold; we conjecture, but do not formally establish, that the same logic extends to imperfect information if the threshold, recomputed for that weaker information structure, continues to be exceeded. The welfare criterion is utilitarian surplus; the efficiency claim is surplus maximisation, not Pareto improvement.

Mandatory audits of internal controls over financial reporting (ICFR), intended to strengthen financial reporting processes, may also have implications for broader organizational compliance systems. Increased scrutiny of financial controls could either enhance overall control quality, yielding benefits for nonfinancial controls, or induce firms to reallocate resources away from those areas. We exploit quasi‐exogenous variation in financial control scrutiny arising from (1) the initial implementation of ICFR audits, (2) the subsequent relaxation of ICFR auditing standards, and (3) the introduction of management assessments of financial controls absent concurrent ICFR audits, to examine how changes in external scrutiny affect Food and Drug Administration (FDA) inspection findings, an important form of regulatory noncompliance with direct public health implications. Our results show that the introduction of ICFR audits is associated with a reduction in FDA inspection findings; however, these benefits reverse when ICFR audit scrutiny declines. Mechanism analyses suggest that remediation of control deficiencies, investments in information systems, and expanded internal audit functions facilitate spillovers to compliance controls. Importantly, we find limited evidence that management assessments alone, without concurrent ICFR audits, generate similar spillover effects. Overall, our findings suggest that internal control systems operate as integrated organizational processes rather than isolated financial reporting mechanisms and that external scrutiny plays a critical role in enabling spillovers across control domains. These insights have implications for audit committees, auditors, regulators, and other stakeholders.

This paper provides the first comprehensive global evidence on people’s fairness and efficiency preferences, beliefs about the sources of inequality and the efficiency cost of redistribution, and policy attitudes toward redistribution. Using a globally harmonized consequential experiment with more than 65,000 individuals across 60 countries, we show that the source of inequality plays a substantially larger role for inequality acceptance than the efficiency cost of redistribution. At the global level, implemented inequality increases by 85 percent when inequality is caused by merit rather than luck, compared to a 14 percent increase when redistribution entails a 50 percent efficiency cost. We document substantial heterogeneity in fairness views and beliefs both within and across societies. The meritocratic fairness view is most prominent in many richer Western societies, while libertarian and egalitarian fairness views are widespread in many other parts of the world. Globally, people are more likely to believe that inequality reflects luck rather than merit, while beliefs in large efficiency costs of redistribution are relatively weak. Fairness preferences and beliefs are strongly associated with redistribution attitudes and actual redistribution through taxes and transfers across countries. Our findings illustrate how the interaction between fairness views and beliefs may shape redistribution across societies, highlighting the importance of jointly understanding preferences and beliefs in the political economy of redistribution.