Duquesne University Times

Economics Research Team to Focus on Family Business

Posted on January 11, 2012

Economics professors Drs. Antony Davies, Pavel Yakovlev and Matt Ryan have received a grant to research the effects of regulatory policies on small businesses. The $40,000 award is from the American Family Business Foundation (AFBF), the research arm of the American Family Business Institute, a Washington, D.C.-based organization founded to promote the repeal of the Federal Estate Tax.

According to Davies, the need for a research project to focus on family businesses arises from a blind spot in the public policy dialogue.

“There is a sense that large corporations are manipulative and guilty of funneling wealth into the hands of a few people,” he explained. “While that may or may not be true, the problem is that the belief about how corporations behave is applied to all businesses.”

Davies explained how corporations and family businesses are vastly different, not only in operations, assets and philosophy, but also in their relationship to communities. “There is a disconnect between what small businesses are and what people think they are, and that’s what we’ll be looking into,” he said.

The investigation, which Davies expects will take nine months to a year to complete, will delve into a database that combines and cross-references information from the Census Bureau and the Internal Revenue Service.

When the project is complete, Davies, Yakovlev and Ryan will have produced a series of four policy papers. The first will use the data set to establish a clearer definition of what a family business is; the second will examine how tax policies might encourage or discourage the growth of family businesses; the third will look at the question of whether small businesses are capable of performing roles currently filled by government agencies or other organizations; and the final paper will investigate whether corporations can act like small businesses and adopt operations and attitudes that benefit communities.

 

The primary audiences for these papers are legislators and the media. Davies explained that writing for those readers, rather than an academic audience, will allow the research team to place more emphasis on their conclusions and the implications those finding have in the policy debate.

Such was the case with an AFBF-funded study on estate tax policies, published in 2010 and authored by Davies and Yakovlev, which received a significant amount of press coverage.

The study disclosed, among other things, that estate taxes, in some cases, benefit corporations. Such taxes, Davies said, because they are levied only on heirs, often have the effect of decreasing the net worth of family businesses, while corporations are subject to no such levy and can quickly absorb market share when small companies falter from the effect of the tax.

The AFBF approached Davies and Yakovlev to see if there might be follow-up research projects to the estate tax study, and Davies floated the idea of a related series of studies that he named The Entrepreneur as Hero, of which the small business research project is one part.