Category Science Radar
08 February 2024

The Power of Ownership Competence in Steering German Businesses to Success

Tag Heilbronn
Tag Publications
Tag Entrepreneurship

A research article co-authored by PhD candidate Jannis von Nitzsch and Prof. Dr. Miriam Bird from TUM Campus Heilbronn, together with Prof. Dr. Ed Saiedi from the BI Norwegian Business School, has recently been accepted for publication in the prestigious Strategic Entrepreneurship Journal. The article entitled "The Strategic Role of Owners in Firm Growth: Contextualizing Ownership Competence in Private Firms" investigates the fundamental question why some owners are more successful than others in steering their firms toward success.


By combining insights from the evolving literature on the strategic role of business owners in value creation with Penrosean growth theory – that firm growth depends on the effective exploitation of unused resources and the extent to which entrepreneurs provide entrepreneurial services to their firms – it aims to explore how the owners' matching and governance competencies impact firm growth.

The comprehensive study

The study is based on an extensive dataset of more than 2,500 owner-managed German companies that were active between 2011 and 2018. The dataset not only provides an overview of the diverse landscape of private companies, but also contains information on the specific competencies of owner-managers. The aim of the study is to explore the conditions under which these competencies have a positive influence on the growth of the respective company.

Unraveling the strategic ingredients for growth

Owners, as the authoritative decision-makers steering the strategic direction of their firms, wield significant influence in shaping the pathway to success. However, the study illuminates the considerable variability in owners' strengths in this regard. Within the realm of owner competencies, two pivotal aspects come to the forefront: Matching competence and governance competence.


Matching competence refers to an owner's innate ability to "match tasks with the right people", match business ideas with customer needs, and to creatively rearrange the firm's operations, thereby generating additional value. It signifies the owner's skill in charting a course for the firm by comprehending and leveraging its unique strengths. Governance competence involves an owner's adeptness in creating an effective governance structure where their interests align harmoniously with those of other stakeholders and the firm's managers.


The study finds a positive association between both these types of competencies and firm growth, particularly in the nascent years when standardized processes are yet to be established. In older companies, both competencies play a comparatively less important role. The implications are obvious for business owners: In general, cultivating both matching and governance expertise is imperative. These skills not only help to identify the company's potential, but also play a decisive role in implementing the planned strategy.

Navigating the unique context of family firms

However, the study goes further. It deals with the special characteristics of family businesses and reveals the differentiated dynamics that distinguish them from other companies. In family firms, the positive relationship between owner-managers' governance competence and firm growth is notably weaker, in stark contrast to the unchanged relationship between owners’ matching competence and firm growth. This insight prompts reflection on the challenges associated with family businesses.


The researchers note that issues such as nepotism, where family members are favored in the selection of managers, can hinder the effective implementation of governance systems. This finding opens up an opportunity for family businesses to explore the implementation of family governance mechanisms that not only curb nepotism within the organizational structure.

A testament to the central role of owner-managers

In summary, this study demonstrates the central role of owner-managers in steering their companies towards growth. Their competencies prove to be the strategic advantage that can either lead a company to increased or decreased value creation. The findings shed light on the unique challenges faced by family businesses and provide a valuable roadmap for owners to help them put their businesses on the path to growth.

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