Building on property rights theory, we explore the relationship between property rights, owner-management and economic value creation in private firms. Professor Zellweger argues that property rights in the hands of owner-managers create strategic, incentive and commitment benefits that facilitate value creation. However, the self-incentivising nature of property rights also engenders three control hazards—reliability, egocentrism and succession hazards—that threaten stakeholder welfare. In order to mitigate these hazards, owner-managers must establish credible governance. This talk discusses four governance mechanisms often found in owner-managed firms: submission to social control, delegation of authority to managers, submission to the hierarchy of a board and partial transfer of ownership. While these mechanisms help mitigate control hazards, they also constrain, in differing ways, the value-generating benefits of owner-management. Owner-managers thus face a dilemma when determining how to best govern their firms. Our theory sheds new light on the governance of owner-managed firms and explains variance in their ability to create value.

Professor Thomas Zellweger holds the Chair in Family Business at the University of St.Gallen, Switzerland, where he is also the Director of the Swiss Research Institute of Small Business and Entrepreneurship (KMU-HSG) and the Academic Director of the Global Center for Entrepreneurship and Innovation (GCEI-HSG). After two years in investment banking at Derivative in Brussels, he completed his PhD at the University of St.Gallen. He was a research fellow at Babson College, the United States, a visiting professor at the University of British Columbia, Canada, and is a permanent visiting professor at the University of Witten/Herdecke, Germany. Thomas is an editor of Entrepreneurship Theory and Practice, and his research has been published in the leading academic journals, such as the Academy of Management Journal, Strategic Management Journal and Organisation Science, amongst others. Frankfurter Allgemeine Zeitung counts him with his research amongst the most influential economists in the German speaking world. His research also received several international awards and has been discussed in the international media such as in The Economist, Bloomberg, Forbes and the New York Times. Thomas is a member of supervisory boards of family firms and advises family firm owners on governance and strategic questions.