More Than Capital: How Family Business Groups Mobilize Executive Talent

Family controlled business groups have long been viewed as powerful—but potentially problematic—players in global capital market. These groups, which consist of a set of publicly listed firms under the control of a single family, are often criticized for entrenching dynasties, hoarding resources, and crowding out competition. However, having stood the test of time, including multiple rounds of government led reform, their persistence suggests that in addition to such perceived costs, they also have some important benefits associated with their existence.

Business groups may thrive not just because they can control the flow of large amounts of capital, but also because they generally know how to match people and corporate positions efficiently. Specifically, the ability to deploy talented employees across their affiliated firms quickly and effectively. In our new paper, we find that family business groups strategically operate internal labor markets (ILMs) for its executives just as they manage their capital. Senior executives aren’t just hired—they’re reallocated, redeployed, and rotated across firms within the group to meet the group’s changing needs. It’s less about control for its own sake and more about coordinated adaptability. And it could be one of the key reasons why family business groups remain dominant across so many economies.

Executive Talent: The Real Resource

Capital may be the most visible resource in business groups, but executive talent is often the most consequential. These individuals shape strategy, steer companies through crises, and set the tone for innovation and risk-taking. In standalone firms, executives are typically hired from the open market. In family groups, something quite different happens. They rotate. They redeploy. They are trained.

Imagine a high-growth affiliate struggling to scale fast enough relative to its competitors. Instead of hiring an outsider, the group sends in a seasoned executive from one of its top-performing firms. That kind of trusted redeployment of human capital is a luxury most standalone firms simply don’t have.

Do ILMs Really Make a Difference?

A core contribution of our study is to quantify just how much ILMs influence executive mobility within a group. We asked two key questions: 

• Is there more overall executive movement when ILMs exist—that is, within business groups?
• And what share of these movements comes from inside versus outside the group?

To answer these important questions, we compared three types of firms:

• Family business group (BG) firms, which can tap into ILMs
• Standalone firms, which rely exclusively on ELMs
• And “pseudo-group firms”: matched standalone firms that resemble actual business groups but lack centralized coordination

The findings are clear:

• Family BG firms hire 17% more executives overall than comparable standalone firms
• But they hire 10–14% fewer from the outside, meaning a greater share of hires come from within the group, which is strong evidence of ILM activity
• These internal movements spike when group firms underperform.
• What’s more telling is the comparison to pseudo-groups. These synthetic groups are similar in size, industry, and country, but don’t have ILMs. And yet, actual BGs show nearly twice the internal executive movement. That’s not about structure. That’s about strategy.

ILMs, in short, don’t just increase executive mobility — they reshape how talent flows through the corporate ecosystem.

ILMs in Action: Strategy Over Status Quo

These internal moves aren’t just about loyalty or convenience. They’re targeted responses to past performance and future potential.

We find that internal executive transfers are directed toward affiliates that are younger, underperforming, and located at the bottom of the ownership pyramid. These same firms often receive internal capital investments, suggesting a coordinated strategy to support and grow critically important young firms, and weaker parts of the group.

And it works. After internal executive transfers, we observe increases in capital expenditures and sales, even in the face of short-term profitability dips. This suggests family groups are willing to trade short-term returns for longer-term gains—aligning leadership and capital to drive sustainable growth. 

Not All Groups Are Created Equal

It’s worth noting: this pattern is largely absent in non-family business groups. Without the shared ownership and strategic incentives and vision of a controlling family, these other business groups show little evidence of internal executive mobility. Affiliates act more like neighbors than siblings. 

That distinction matters. It suggests that family control enables a rare kind of labor agility—and it may be one reason why family groups outperform in emerging markets where talent pipelines are thinner and external hiring is riskier.

Rethinking Business Group Power

Much of the policy and academic debate around business groups paints them in broad strokes: either entrenched dinosaurs or institutional stopgaps in emerging markets.

Our findings suggest a more dynamic picture. Yes, family groups control resources. But they also act like carefully calibrated systems, moving talent in ways that improve adaptability, absorb shocks, and support growth where it’s most needed.

This isn’t just about who owns what. It’s about how control is exercised—and whether it’s used to entrench or to evolve and innovate.

Final Thought

If you want to understand why family business groups endure, don’t just follow the money. Follow the people. Because behind every capital transfer, every group expansion, and every turnaround success, there’s often strategic executive moves, and a controlling family playing a long game that most outsiders never see.

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Jinzhao Du is a Ph.D. student in the School of Banking and Finance at the University of New South Wales. 

Ronald Masulis is the Scientia Professor of Finance at the University of New South Wales and an ECGI Research Member. 

Peter Pham is a Professor in the Finance Discipline at the University of Sydney Business School.

Jason Zein is a Professor of Finance at the University of New South Wales.

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