We demonstrate how latent profile analysis (LPA) can be applied to generate profiles (i.e., homogenous subgroups) in a sample of family firms. In doing so, we highlight how LPA can provide additional insight into family firm phenomena when used in conjunction with other methodological approaches (i.e., regression). We compare LPA with other techniques (i.e., cluster analysis and qualitative comparative analysis) and show LPA’s superior ability to capture complex patterns of important family firm characteristics. We demonstrate how profiles can be linked to differences in dependent variables, providing family firm scholars with a tool to assess heterogeneity and its consequences among family firms.
The extent to which assessments are shared across family members and generations has been questioned, suggesting that the variability in the family members’ perceptions may convey important family-level information. With this in mind, we theoretically and methodologically introduce dispersion modeling which is designed to use this variance as an important explanatory variable, presenting a framework that can guide scholars in its application. Using field data to apply the framework, we illustrate how this modeling approach helps us understand the dynamic interactions within family firms, and then we offer future research ideas that are best suited to dispersion composition modeling.
While stewardship theory is often used to explain family business outcomes, no prior empirical study has used a validated measure of stewardship. We, therefore, surveyed 846 managers and subordinates from 221 family and nonfamily firms in the United States and Australia to develop a reliable and valid Stewardship Climate Scale. We found family firms have a stronger stewardship climate and the relationship between stewardship climate and performance is mediated by innovativeness, and the effects of stewardship are stronger in family firms, confirming the value of stewardship theory, and our scale, when explaining family business outcomes.
Environmental jolts are dramatic unexpected events that can seriously affect firm outcomes, yet little is known about how family firms may respond. Research indicates that they will seek to preserve their socioemotional wealth endowments when these are threatened; less clear is how or why they may differ in this process. Drawing on the same environmental jolt this study investigates their behavioral response. It finds they engage to different extents in behavior labeled as engagement intensification, which engenders increasing risk for their business. While there are differences in family firms’ socioemotional wealth these do not sufficiently explain differences in their behavioral response.
This study explores the question of whether—and under which circumstances—family involvement helps avoid business failure. We hypothesize that it is family involvement in management, rather than ownership, which reduces the risk of failure during economic downturns; however, this effect is negatively affected by the firm’s entrepreneurial orientation (EO). We argue that EO hinders reaching consensuses on and commitment to family-centered goals, which are focused on long-term survival. We analyze 369 manufacturing firms in Spain from 2007 to 2013, and find that family involvement in management reduces the risk of business failure, but this effect decreases as EO increases.
Drawing from a framework highlighting how family influence is reflected in organizational identity, we present archival and content analytic adaptations for three key factors signifying alignment between family and organizational identities: family visibility, transgenerational sustainability, and family self-enhancement. We validate these measures using archival data sources, "About Us" pages, and shareholder letters from S&P 500 firms. Random coefficients modeling indicates our measures are largely shaped by temporal and firm, followed by industry, differences. Our work paves the way for further investigation exploring the relationships between family involvement and organizational identity while simultaneously addressing lingering methodological challenges in family business research.
This study extends the family firm performance literature by focusing on birth order differences among descendant CEOs. Data collected from a sample of Korean family firms yield three insights. First, descendant birth order is directly associated with differences in the distribution of control through ownership, leadership (i.e., CEO), and the incorporation of outside board participation and governance. Second, descendant birth order also moderates the relationship between outside block holdings and firm performance. Third, we find evidence suggesting that because of firm performance differences, first-son descendant CEOs may find themselves more often replaced over time.
In a qualitative study of 19 family businesses, we examine the dynamics of successor teams, using insights from the family dynamics and succession literature and teams and conflict theory in family business. In-depth interviews with family firm leaders identified two major successor team performance outcomes, a positive track leading to team commitment and a negative track resulting in dissolution of the team and potentially the family firm. Our findings are encapsulated by 10 propositions and a model of successor team dynamics.
Incumbents’ attitude toward intrafamily succession (IFS) is a critical individual-level determinant of family firms’ IFS intention, which is, in turn, an important component of family business essence. Knowledge about its antecedents, however, is fragmented and very limited. Drawing on the theory of planned behavior and general attitude literature, hypotheses about the situational and individual antecedents of family firm incumbents’ attitude toward IFS were developed and tested with a sample of 274 Italian family firm incumbents. Results show that incumbents’ attitude toward IFS is indeed influenced by both situational and individual antecedents as well as by their interactions.
The aim of this research is to study the moderating role of family management in the relationships between the intensity of research and development and the occurrence of continuous technological innovation and between the existence of technological innovation outcomes and long-term firm performance. The results show that family management reduces efficiency in the conversion of research and development expenses into technological innovation outcomes over time. Our findings also suggest that the influence of family management significantly contributes to improving the effect of the achievement of technological innovation on long-term performance.
This article examines the early succession stage of a public family firm through a single longitudinal real-time case study conducted over a period of 10 years. We found that, at this stage, the regulation of interdependent conflicts of interest (between family and nonfamily shareholders, and between majority and minority family shareholders) is a prominent objective of the incumbent generation in the purpose of preparing both the firm and the family to facilitate succession. Moreover, we suggest that stewardship, through reciprocal altruism at the family branch level, combined with a permanent collaborative process between generations and a flexible succession "plan" explains at least partially the observed outcomes (shared vision on future ownership and control, and new family firm governance and interfamily branch relationships).
Based on a social capital approach, we analyze how structural and cognitive family social capital (FSC) influences the establishment of corporate goals related to nonfamily stakeholders (EGNFS) in family firms. Data were obtained from 374 family and nonfamily members of top management teams (TMTs) in 173 Spanish family firms. Results show that structural FSC directly influences the establishment of corporate goals related to nonfamily stakeholders. Also there is an indirect influence through the effect FSC has on the relational social capital (trust) in the TMT. When data are split based on familial and nonfamilial TMTs (depending on the percentage of family members), results show important differences between the two groups.
Adapting the theory of planned behavior to the area of financial choices in family firms, we argue that these choices in family firms are largely affected by family norms, attitude, perceived behavioral control, and behavioral intentions. A time-lagged sample, estimated via structural equation modeling of 118 German family firms, supports a behavioral approach to the study of financing decisions. Specifically, we show that family norms and attitude toward external debt and external equity affect behavioral intention to use the respective financing choices, which in turn affects financing behavior. Perceived behavioral control, however, was shown to negatively affect behavioral intentions to use external equity and was positively related to the use of internal funds. Implications of these capital structure decisions and ideas for future research are discussed.
This study builds on the idea that family businesses perform particularly well in the domain of exploitative innovations and explores a possible source of this strength, namely their employees’ spontaneous involvement in informal innovation activity. Specifically, we develop a mediation model on the interrelationship between family business employment and employees’ innovative work involvement. Analyses are based on a sample of 893 Belgian employees using structural equation modeling. Results suggest that family business employment is positively associated with employees’ innovative work involvement, and that part of this relationship can be attributed to their heightened perceptions of organizational support and work motivation.
This article examines the effect of organizational characteristics (firm innovativeness, firm internationalization, firm size) on the appointment of nonfamily managers in private family firms while taking into account the moderating role of socioemotional wealth (SEW). While these organizational characteristics increase the need for expertise, family firms cope with a limited pool of family managers. Therefore, new creative knowledge from nonfamily managers is needed. However, results from a sample of 145 Belgian family firms indicate that the positive effect of organizational characteristics on the integration of nonfamily managers decreases when family-related objectives reflected by SEW become more important for the firm.
We engaged in a multicase comparative study exploring how family farm businesses continue when economic returns are minimal. We analyzed strategic approaches used by 20 family dairy farms operating in the United Kingdom and identified four different strategic behaviors chosen by the family farm businesses—diversifying the business, maximizing debt, sacrificing family needs, and compromising. Each strategy allows the firm to survive, but has consequences for the family, the business, or both. Our study contributes to the socioemotional wealth literature by showing how emotional attachment to the business can influence firm decision making.
Nearly three decades of research on mentoring has offered empirically supported processes in developing a mentoring relationship. Yet the application of mentoring within family businesses has received little exploration. Since much of the current mentoring literature is focused on general workplace mentoring, it is not clear how the multidimensional and interdependent systems within family businesses might complicate the translation of the existing literature to family business populations. This study examines interorganizational family business mentoring relationships to determine whether there are any issues which differentiate it from the existing mentoring research findings.
This article describes a qualitative study exploring how a leadership intervention in a group context developed positivity in leaders of family businesses. Ideas are drawn from positivity in organizational scholarship and group social capital. The article makes two contributions: the first is in conceptualizing positivity in family business studies while the second is to contribute to management thought by describing how the leadership intervention developed positivity to lead and manage in leaders of family business. To the best of our knowledge, there is little research that applies these ideas in family business studies.
The purpose of this research note is to illustrate the usefulness of the qualitative method of visual ethnography in producing new insights into family business research by investigating the "lived narrative" of a family business in Scotland. The overarching objective is to provide clarity on the use of the method and its potential value for family business researchers as well as to provide an account of the benefits of the approach.
Personnel data from a small French construction firm’s archives were followed up for 1946-1985 to examine family firm employment practices in historical perspective. The firm had limited scope to favor national origin, seniority, or kinship; kin of management were not paid more than nonkin. Event history analysis reveals macroeconomic context and individual qualification as the main variables explaining wage-level changes. The need to respond to market conditions and maintain good labor relations favored skill over seniority and kinship. Ultimately, however, family-style managerial practices failed to link wages to performance, compromising financial stability and contributing to the firm’s demise.
This study seeks to understand the governance of post–initial public offering (IPO) family firms and its impact on performance. Using an analysis of a balanced panel data set of 205 publicly listed firms in Taiwan spanning 10 years (2,050 firm-years), we found that extensive family control has a negative impact on the post-IPO performance and that nonfamily block shareholders may divest their stockholdings in these firms to protect their investments. To sustain equity support from their block shareholders, post-IPO family firms should combine the use of family control with professional management in their corporate governance structure.
Using game theory to expand our understanding of the interaction between a founder and a successor in a family business, we explore the impact of poor interpersonal communication on family harmony during the succession process. Results show how deficient communication leads to disagreements and clashes between the founder and the successor and systematically reduces family harmony during the succession process. We term these situations communication traps. The findings demonstrate how inadequate communication hampers a transition process above and beyond psychological effects, even when the involved individuals share the same priorities, attitude, and interests.
The literature on advising family firms has primarily focused on providing practical advice through offering explicit intervention phases and advising models to family firm advisors. Yet the underlying implicit processes behind advising are not well understood. This study examines nine most trusted advisors in six family firms to develop a grounded theory model of how advisors capture attention, how they become attuned to family firm members to influence attention, and how they aid family members to collaboratively interrelate and mindfully govern the firm in order to facilitate an environment of collective attention.
Organizational ambidexterity refers to a firm’s ability to pursue both exploitation and exploration orientations. Despite research that suggests ambidexterity is a critical phenomenon in family firms, few studies directly examine the role of ambidexterity over time in family business. This study examines how family firm ambidexterity changes over time as a result of temporal-, firm-, and industry-level factors. We find that family firm ambidexterity is stable over time, punctuated by dramatic changes. We also find that the level of innovation required to compete in an industry is a predictor of changes in exploration versus exploitation over time among family firms.
This study examined how, from the family business advisor’s perspective, knowledge sharing among external individual advisors can affect the quality of services provided to the family business client. Using qualitative research methods, we found that knowledge sharing improved the quality of advising services through four mechanisms: (a) by improving the accuracy of issue identification, (b) by achieving a systematic analysis of the issue, (c) by arriving at an integrated total solution, and (d) by increasing the credibility of the provided solution. This study has important implications for literature in the field of family business advising, as it explains the underlying mechanisms through which knowledge sharing among individual external advisors enhances the quality of advising services.
The purpose of this study is to compare the performance of unlisted family and nonfamily small and medium-sized enterprises (SMFEs and non-SMFEs) and the effect of internationalization on their relative performance. Results of the regression analysis of 4,217 firms with 11,821 observations over a 3-year period found that SMFEs achieved a higher return on assets as a result of having a superior return on sales. Also, although the results indicate that internationalization had a significant negative effect on the return on assets of SMEs overall, this was not the case for SMFEs, and the results suggest that SMFEs perform better in the international marketplace. These results were consistent across different definitions of family business employed. Implications for future research are explored.
This article systematically reviews and critically examines 72 journal articles published (from 1980 to 2012) on the internationalization of family firms. Stemming from existing literature, core aspects and main gaps are identified. We aim to overcome the inconclusiveness of findings of previous research by offering an integrative theoretical model integrating the concept of socioemotional wealth with the revised Uppsala model. Our framework helps understand behaviors of internationalizing family firms by focusing on when and how they internationalize, especially related to risk attitudes, the role of knowledge and networks. Ultimately, we provide future research themes flowing from our suggested model.
Succession literature addressed factors affecting the development of successors’ leadership skills. Yet the role professional advisors play in this process is not well understood. This study contrasts the detailed descriptions of four advisor-directed leadership development processes, to suggest a grounded theory of how advisors can facilitate the construction of successors’ leadership. Adopting an insider–outsider approach to the collection and analysis of ethnographic data, the study revealed that the assumption of a transitional leadership role by advisors—an interim leadership held by the advisor while supporting the successor’s leadership development—was critical to moving the succession process forward.
This article explores the relationship between the usage of an external accountant and family firm sales growth and survival. Using a longitudinal panel of Australian small and medium sized family enterprises, we find that external accountants have a positive impact on sales growth and survival. We also find that the degree to which the accountant is acquainted with the family and the firm’s needs, which we term as embeddedness, moderates these positive outcomes. Furthermore, we find that appropriate strategic planning processes are necessary to maximize the sales growth benefit; however, these processes are not necessary to gain the survival benefit.
We develop a socioemotional wealth explanation for the differences in earnings quality between family firms. We argue that the process by which families obtain ownership of firms is a key contingency affecting earnings quality. Specifically, firms acquired by families through market transactions display lower earnings quality due to lower identification of family owners relative to firms still owned by the families that created them. Acquired family firms benefit with respect to their earnings quality from having a nonfamily CEO while nonacquired family firms benefit from having a family CEO.
Family enterprise advisors work on complex and unique problems for their family enterprise clients. Little attention has been given to these professionals and their abilities to provide innovative solutions. In this study, our aim is to understand more about family enterprise advisors (N = 231). To achieve this objective, we hypothesize that the effects of advisor goal orientation (i.e., learning orientation, proving orientation, and avoidance orientation) on adaptive behaviors (i.e., personal bricolage and individual innovative behavior) are mediated by the quality of feedback received from clients. The results indicate that quality of feedback partially mediates the relationships between goal orientation and these behaviors. We conclude by providing a practitioner model explaining how advisors may adapt to different family enterprise client role environments.
It is generally assumed that family firms emphasize socioemotional wealth, which exacerbates wealth expropriation from noncontrolling shareholders. We examine this issue in the context of nonfamily shareholders, specifically institutional investors, and find that institutional investors avoid investments in family firms. Furthermore, integrating institutional theory with a socioemotional wealth approach, we find that financial regulation can mitigate external investors’ concerns. These two results are important theoretically because they provide insight into the effect of agency problems specific to family firms and are important for management practice because they can provide guidance for family firms interested in new sources of capital.
Applying the socioemotional wealth perspective of family businesses, this study examines how family control affects whether firms tend to go international. Departing from prior research that has treated family involvement in management and family ownership as interchangeable and inseparable, we suggest that they are two different aspects of family control, which independently and differently affect firms’ internationalization strategies. A sample of private Chinese firms supports our predictions that family involvement in management has an inverted-U-shaped relationship with the likelihood of internationalization and that the percentage of family ownership has a U-shaped relationship with the likelihood of internationalization.
This article discusses the challenges of knowledge management within intrafamily succession against the background of the knowledge-based view. As a knowledge transfer is crucial for a successful business continuation, factors that promote the interpersonal knowledge transfer are identified. Since the quality of the relationship between successor and predecessor is considered a key determinant of knowledge transfer, the role of relational competence in the knowledge transfer process is analyzed. A laboratory experiment (N = 107) was conducted to test the derived hypotheses. In its conclusion, the article presents the empirically confirmed strong relationship between relational competence and knowledge transfer within intrafamily succession.
Drawing on boundary and identity theories, we examine how individuals manage boundaries in family businesses. Using an inductive, qualitative approach based on interviews of 44 individuals in four family businesses, we find organizational members use 13 identity work tactics, collectively labeled social boundary management, to create and manage boundaries for both individual and organizational identities. We illustrate how individuals use identity work tactics to integrate and segment themselves and others between the domains of family and business. Our findings have implications for family business research, boundary theory, and identity theory.
This article proposes a model explaining how family control/influence in an organization affects individual stakeholders’ perceptions of benevolence. The model suggests two effects. First, based on socioemotional wealth research, we propose that family control/influence positively affects stakeholders’ perceptions of benevolence through the benevolent behavior that the organization shows toward its stakeholders. However, this effect can be negatively influenced if the family’s socioemotional wealth goals in terms of "Family control and influence" and/or "Renewal of family bonds to the firm through dynastic succession" are at risk. Second, we argue that family control/influence, to the extent that it is perceivable to the stakeholder, influences stakeholders’ perceptions of benevolence through categorization processes. However, the impact of perceivable family control/influence on stakeholders’ perceptions of benevolence is not straightforward but instead hinges on a set of individual-level contingency factors of the stakeholder, such as stakeholders’ family business in-group membership, stakeholders’ secondhand category information, and stakeholders’ firsthand category information.