Strategy, ownership, governance, and socio-psychological perspectives on family businesses from...

Journal of Family Business Strategy 3 (2012) 54ndash65

Strategy ownership governance and socio-psychological perspectives on familybusinesses from around the world

Sanjay Goel a1 Pietro Mazzola b2 Phillip H Phan c3 Torsten M Pieper d4 Ramona K Zachary ea Department of Management Studies Labovitz School of Business and Economics University of Minnesota Duluth 1318 Kirby Drive Duluth MN 55812-3002 USAb Economics and Marketing Department IULM University Via Carlo Bo 8 20143 Milan Italyc The Johns Hopkins Carey Business School Room 1319 100 International Drive Baltimore MD 21202 USAd Cox Family Enterprise Center Coles College of Business Kennesaw State University 1000 Chastain Road 4900 Kennesaw GA 30144-5591 USAe Baruch College Zicklin School of Business Management Department Box B9-240 One Bernard Baruch Way New York NY 10010 USA

A R T I C L E I N F O

Keywords

Strategy

Ownership

Governance

Socio-Psychological Perspectives

Family Business

A B S T R A C T

This prologue to the special issue documents and discusses the current family business research

literature on strategy ownership governance and the socio-psychological dimension The articles in

this special issue represent theoretical and empirical research using micro and macro databases with

various methodologies including case studies and multivariate analyses In particular the ownership

and governance literature relative to family businesses is critically reviewed and traditional

perspectives are challenged by leading scholars Each of five competitive research articles is

contextualised relative to the extant literature and the contributions of each article are duly noted

and discussed Possible future research directions are suggested 13 research propositions are

identified and future research needs are delineated Finally researchers are challenged to (a)

question the extant business research in general (b) broaden their research perspectives to both the

family system and the business system and (c) begin dialogue with scholars in related and relevant

disciplines

2012 Elsevier Ltd All rights reserved

Contents lists available at SciVerse ScienceDirect

Journal of Family Business Strategy

jou r nal h o mep ag e w ww e lsev ier co m loc ate j fb s

1 Introduction

Traditionally the overall scope of family firm strategy researchhas been narrow (Astrachan 2010) This special issue expands ontraditional approaches by exploring the heterogeneity of familyfirms relative to their strategies ownership governance andsocio-psychological dimensions The issue represents theoreticaland empirical research using micro and macro databases withvarious methodologies including case studies and multivariateanalyses

The diversity of countries spanning Europe the Americas andAsia represented in this volume is a testimony to the global scopeof family business research and to the impact of the InternationalFamily Enterprise Research Academy (IFERA) and its recent

Corresponding author Tel +1 646 312 3649 fax +1 646 312 3621

E-mail addresses sgoeldumnedu (S Goel) pietromazzolaiulmit

(P Mazzola) pphanjhuedu (PH Phan) tpieperkennesawedu (TM Pieper)

RamonaZacharybaruchcunyedu (RK Zachary)1 Tel +1 218 726 6574 fax +1 218 726 75782 Tel +39 02 891412636 fax +39 02 8914128143 Tel +1 410 234 94344 Tel +1 770 423 6724 fax +1 770 423 6721

1877-8585$ ndash see front matter 2012 Elsevier Ltd All rights reserved

httpdxdoiorg101016jjfbs201203005

conferences in Bogota Colombia in March 2011 and in Sicily inJune 20115

2 Current state of the literature

Family businesses are known to be the oldest form of businessthat pervades the world (IFERA 2003 Zachary Rogoff amp Phinisee2011) Previous family business research garnered little attentiondue to a lack of theoretical grounding and empirical rigor (HeckHoy Poutziouris amp Steier 2008 Zachary amp Mishra 2011)Currently family business research is gaining momentum and isthe fastest growing discipline in business research (Astrachan amp

5 IFERA is pleased to support this special issue of The Journal of Family Business

Strategy IFERA is the premier academic organisation that brings together scholarly

researchers from around the world and holds an annual family business research

conference that attracts approximately 250 family business researchers and

doctoral students from over 45 countries In addition to the academic conference

IFERArsquos doctoral and faculty consortia engage approximately 50 participants who

benefit from interactive sessions led by as many as 15 renowned and active scholars

from inside and outside the field on various cutting-edge topics relevant to family

business research IFERA aims to organise forums that offer an inspiring scholarly

environment foster exchanges on various interesting research questions and

contribute to the development of a research community and its knowledge about

family businesses More information is available at wwwiferaorg

S Goel et al Journal of Family Business Strategy 3 (2012) 54ndash65 55

Pieper 2010 Stewart amp Miner 2011) Family firms have often beenstudied through the lens of theories and conceptualisationsborrowed from other disciplines within and related to businessresearch such as psychology economics sociology and so forth(Pieper 2010 Zachary amp Mishra 2011 Zahra amp Sharma 2004)Early applications of the traditional theories have not alwaysconsidered the dynamics variety and nature of the socialrelationships in the family system and its economic enterpriseThe results have revealed overly simplistic and caricaturisedexplanations of the complexities (Pieper 2010) For exampleSteier (2003) illustrated how agency theory a popular frameworkin the field needs to be contextualised within family businessesbecause various contracts can be observed in family firms Thus forfamily-financed ventures he carefully delineated family-financialbusiness arrangements among family members and declared suchrelationships as variants of the classic agency contracts In otherwords family investments in their own firms encompass familialaltruistic exchanges that are often confounded by combined withor that compete with economic self-interest driven by the marketResearchers further explicated the importance of the familysystem relative to the family firm (Cramton 1993 Kepner1983 Olson et al 2003 Rosenblatt de Mik Anderson amp Johnson1985 Zachary Danes amp Stafford forthcoming Zachary 2011)suggesting that the study of family firm behaviours combines thefamily system and the business system and therefore requirescomprehensive and multidisciplinary perspectives to enable theexamination of various psychological and sociological aspects inboth systems (Zachary et al forthcoming Zachary amp Mishra2011) In fact the socio-psychological dimensions of the familyfirm may well influence all other business dimensions Addition-ally both the family system and the business system shouldcertainly be examined separately and relative to their interactionsbetween each system

Recent empirical research seems to support this notion Forinstance Basco and Perez Rodriguez (2009) found that family firmsthat simultaneously emphasise the objective of both systemsreport better family and business results when compared withfamily firms that limit their attention only to the business In afollow-up study the authors also found that family firms canachieve successful business results by combining both family andbusiness orientations in their strategic decision making (Basco ampPerez Rodriguez 2011)

To date only some researchers have accepted the challenge ofsimultaneously considering the dynamics of the family and thebusiness systems (Zachary amp Mishra 2011) Few extant theorieswith the exception of the Sustainable Family Business Theory(SFBT) enable the simultaneous modelling and testing of both thefamily and business system outputs (eg Olson et al 2003) TheSFBT critically examines the inputs throughputs and outputswithin each major system and the interface between each systemas well as the short-term viability and the long-term sustainabilityof the family business (Zachary et al forthcoming)

In the editorial Firm Family Firms Current Debates of

Corporate Governance in Family Firms Ruth Aguilera and RafelCrespi-Cladera (2012) critically review the extant research onownership and governance of the family firm Traditional viewsof ownership and governance as well as their dynamics andeffects on the family firm are delineated and critically reviewedBy including the contingencies that exist in different institu-tional environments the authors emphasise that in certaininstitutional environments family firms may actually providethe best lsquolsquorefugersquorsquo for other non-controlling owners Viewed inthis light in lsquolsquoweakrsquorsquo institutional environments the so-calledlsquolsquorent-expropriationrsquorsquo by family firms as summarily concluded byother researchers may actually be a lsquolsquopremium for stability andresponsible managementrsquorsquo

Simply stated nonfamily stakeholders may not experiencenegative effects from family ownership The authors use twospecific contingencies in which the relative benefits and costs mayfavour the family firm With regard to the succession contingencythe negative view of nepotism is questioned and lsquolsquoturned on itsheadrsquorsquo the net benefits (net of costs) of a qualified (in terms ofabilities and training) family successor may be higher than those ofa manager from outside the family The authors argue that theother contingency the existence of Family Business Groups (FBG)may actually be more efficient than the widely-held firms (egwhen the investor protection environment is weak or nonexistentin practical terms) Additionally the authors suggest that Morckand Yeungrsquos (2003) indictment of family firms may have beenunfair because it did not weigh the relative agency costs of familyfirms vis-a-vis for example the widely held firms or firms withdominant institutional or professional investors such as privateequity firms In other words the fact that family firms imposeagency costs on other investors may not be significant if there isevidence that the agency costs of other types of dominant orcontrolling owners are likely higher Little beyond a cursory glanceat the firms implicated in the events leading to the global financialcrisis of 2007ndash2009 certainly suggests this line of reasoning

Whereas strategy ownership governance and socio-psycho-logical areas of study are well established in business researchapplications of these areas to family business research are few Thispaucity is both a challenge and an opportunity because the samefundamental parameters that undergird businesses in general arealso relevant to family businesses

21 Strategy

Strategy research suggests that family firms must consider theirstrategic choices in the context of the owning familyrsquos complexities(Chrisman Chua amp Sharma 2005 Sharma Chrisman amp Chua1997 Ward 1988) Family firm strategies encompass the internaldynamics of the business and its external environment as well asthe familyrsquos interests goals succession issues culture and siblingrelationships Hence for example the involvement of familymembers in the business must be considered throughout thestrategic management process (Astrachan 2010) Generally therelationship of family dimensions to business strategies is notexamined relative to their origins dynamics and influences withinthe family system For example which dynamics within a familymight predetermine the designation of a successor Are successorschosen within families to promote certain strategies in thebusiness or not Could the adult children of the founder bestereotyped favoured or groomed within the family systembecause a particular business strategy is preferred The effects ofthe family system on strategy formation within the business areusually examined through the lens of the business with littleregard for the internal mechanisms of the family system

We know that the family must have a measurable influence onvarious strategic decisions such as those related to innovation(Bergfeld amp Weber 2011) Family firms exhibit better-to-marketstrategies even as they emphasise local community responsibilityin such strategies (Moog Mirabella amp Schlepphorst 2011) Thelsquofamily-as-a-bundle-of-resourcesrsquo perspective (Irava amp Moores2010 Frank Lueger Nose amp Suchy 2010 Zellweger Eddleston ampKellermanns 2010) conceptualises the family as a source of uniqueresources and competencies that may provide a competitiveadvantage (Memili Eddleston Kellermanns Zellweger amp Barnett2010 Webb Ketchen amp Ireland 2010) Family involvement andinfluence in strategies alter organisational goals such as theimportance of incorporating sustainability (Brewton DanesStafford amp Haynes 2010) and the relative importance of businessand family outcomes (Pieper 2010)

S Goel et al Journal of Family Business Strategy 3 (2012) 54ndash6556

Lindow Stubner and Wulf (2010) bring the well-researchedarea of strategic fit to family business strategy research Althoughconfiguration has been an important aspect of fit in strategyresearch the concept of fit in family business is more complicatedThe idea of lsquolsquofitrsquorsquo in family business research must encompass adynamic equilibrium among the business the family and theenvironment of both these subsystems which may have slightlydifferent goals that change with leadership andor a leaderrsquos moralauthority and ownership over time

Related to the notion of fit the lsquolsquostrategy-as-practicersquorsquo approachused by Nordqvist and Melin (2010) examines the deep organisa-tional routines relating to strategy formation as it is implicated inthe family system The researchersrsquo work probes the idiosyncraticnature of competitive advantage and the causes of inertia anddecay that are buried in the processes consciously and uncon-sciously adopted by members of family firms

Other research has examined family influence in the context ofstrategy formation and implementation in internationalisation(Abdellatif Amann amp Jaussaud 2010 Kontinen amp Ojala 2010)diversification (Ducassy amp Prevot 2010) intergenerational collab-oration (Litz 2010) and post-merger integration of familybusinesses (Bjursell 2011) As a group these studies contextualisetraditional models of strategy research in dimensions of the familysystem such as values culture risk-taking attitudes and timehorizon

22 Ownership

Ownership suggests the distribution of power and control in afirm In the context of the family firm this construct becomes morecomplicated because of the attached familial ties and socialpositions (Aguilera amp Crespi-Cladera 2012) For a more completereview of the ownership literature we refer to Block Jaskiewiczand Miller (2011) and Mazzi (2011) Empirical evidence regardingthe impact of family ownership is mixed some researchers note anegative impact or lsquolsquodark sidersquorsquo (Wright amp Zahra 2011) manifestedthrough expropriation or tunnelling (eg Morck amp Yeung 2004)whereas other scholars indicate a positive impact in terms ofstewardship and long-term vision (eg Le Breton-Miller amp Miller2006 Miller amp Le Breton-Miller 2005) We believe that suchequivocal results exist because many aspects of the family firmsuch as ownership governance expropriation tunnelling andlong-term vision form a partial picture To properly understandthese phenomena one must examine them in relationship to theunderlying family system and its dynamics

Within family ownership lsquolsquoblocksrsquorsquo very diverse interests anddisparate motives are likely to exist We believe that the only wayto understand the different and often conflicting motives of familymembersowners is to look beyond the ownership and gover-nance structure of the firm and into the dynamics of the familysystem itself Coase and Wang (2011) strongly suggest thatbusinesses are a function of an ongoing social process thatinvolves many players including households and families asowners

The corollary is that we can only understand the familysystem in the context of its business system The owning familyhas its own governance structure and process internal to thefamily Family patterns and dynamics may manifest in thebusiness system (Rosenblatt et al 1985 Zachary et alforthcoming) Individual family members or coalitions oftenstruggle for power and control over the resources sharedgenerally by the family such that family control is derived fromthe power dynamics within the family system itself This findinghas led to simple yet fundamental questions such as lsquolsquowhy dosome family members enter the business and others do notrsquorsquo andlsquolsquodoes occupying a power position in the family confer the same

power in the businessrsquorsquo Additionally it is becoming increasinglyapparent that emotional dynamics within the family influencethe business and vice versa (Labaki Michael-Tsabari amp Zacharyforthcoming)

We know from the empirical evidence that family involvementprecedes family influence in the business enterprise (AstrachanKlein amp Smyonios 2002) Although many researchers intuitivelyassume that family members become involved in running andgoverning their businesses to seek desirable economic outcomesfor themselves anthropological evidence suggests that individualsparticipate in business activities for reasons other than economicself-interest (Oxfeld 1992) Heck and Trent (1999) found thatextended family members more often worked unpaid than paidSuch unpaid work by extended family members may suggestpursuit of possible future financial benefits and perhaps an equityandor ownership stake in the family business or it may resultfrom cultural expectations or even power dynamics The conclu-sion is that this research area remains relatively unexplored(Cramton 1993 Zachary 2011)

Researchers are beginning to recognise and identify the lesswell-known yet important underlying forces that affect thebusiness and its governance For example some scholars haveasked lsquolsquowhat does formal ownership by family members meanwithin the business system when the benefits of ownership areshared by family members who are not formally in the businessfor example marital partnersrsquorsquo Danes (2011) offers a way toconsider the influences of spouses on the emergence andoperations of businesses

For example to the extent that the population of familyenterprises displays high variation in the level of involvement inbusiness decisions the questions of why this variation exists andwhat it can lead to become pertinent to our understanding of thegovernance challenges facing extended or networked family firmsThe family succession issue is directly related to an importantquestion of agency theory (cf Jensen amp Meckling 1976) which isthe potential for suboptimal economic outcomes during thetransition and the resulting implications for the wealth of thefamily system The involvement of extended family members insuccession raises an even more critical issue related to theintroduction of competing objectives when such involvementresults in the merger of multiple family systems

In theory every family stakeholder can exert influence toprotect herhis self-interest However stakeholder theorysuggests that the more diverse the interests the less likely thatany particular group will hold sway over important decisionsunless effective coalitions are formed (Cleaver 1999 Spangler2003 Wester Merrey amp de Lange 2003) Furthermorestakeholders are more likely to achieve their collective interestsif they are represented by agents (Cleaver 1999) Howeveralthough an individual can represent homogenous stakeholderinterests it is practically impossible for a single agent torepresent a set of diverse stakeholder interests (Gray 1989 p68 Burton amp Dunn 1996) Instead multiple agents arenecessary Multi-agent representation forces stakeholder groupsto negotiate outcomes that are broadly acceptable to all interests(Burton amp Dunn 1996) Second when the interests of a multi-party stakeholder group are well represented in the decision-making process an aggregation mechanism such as a majorityvote can be used to balance the efficiency of quick decisionmaking with representative fairness (Windsor 1999) Howeverthe use of majority voting systems in governance can also lead tothe suppression of minority shareholder rights which are notalways well protected in all jurisdictions The essential point isthat we cannot truly understand the historical and futuredevelopment of a family enterprise without considering its coregovernance issues


23 Governance

Numerous studies have focused on how family involvementspecifically affects the structures and role of the governancesystem (Bammens Voordeckers amp Van Gils 2011 EddlestonChrisman Steier amp Chua 2010 Siebels amp zu Knyphausen-Aufseszlig2011) Although the prevalence of formal boards of directors inprivate family firms remains low the structure composition sizeand functions of boards in family firms have been studied bynumerous scholars Although this issue was already a topic ofinterest in the late 1980s this stream of research has flourished inthe new millennium (eg Lester amp Cannella 2006) Bammens et al(2011) recently published a review of this literature in which theysuggest that family business studies have examined two roles ofthe board of directors namely the exercise of control and theprovision of advice to the top management team (Blumentritt2006 Corbetta amp Salvato 2004b Ward 1988)

Research on the controlling function of the board of directors infamily firms is rooted in agency theory (Jensen amp Meckling 1976)According to this theoretical perspective the board of directorsfunctions as a control mechanism aimed at mitigating moral hazardproblems (Fama amp Jensen 1983) The scholars adopting thisperspective find that the traditional ownerndashmanager agency conflict(ie type I agency problem) in family firms is largely mitigatedbecause of the convergence of ownership and control Familyowners have stronger incentives than atomistic shareholders tomonitor managers because the former typically hold undiversifiedportfolios and invest primarily in their own companies In additionfamilies with private knowledge of their own family dynamics maymonitor their managers more effectively However scholars havesuggested that other types of problems (ie the type II agencyproblem) may be prevalent in family firms The power that familyowners have within their companies enables them to pursue theirown economic or noneconomic interests at the expense of othershareholders In this respect the boardrsquos ability to mitigate severalsources of moral hazard that characterise family firms is investigat-ed (eg Schulze Lubatkin Dino amp Buchholtz 2001) These sourcesinclude (1) the owning familyrsquos pursuit of its own economic andnoneconomic interests at the expense of the non-family stake-holders (2) the parental tendency to act upon altruistic motives (ieparental altruism) and (3) the intrafamily divergence of interests(eg the divergence of interests between active and non-activefamily members) (Bammens et al 2011)

Empirical research suggests that owning families assembleboards that are unlikely to reduce their discretion over decisionmaking (Anderson amp Reeb 2004 Chen amp Jaggi 2000 Yeh ampWoidtke 2005) and over earnings management (Prencipe and Bar-Yosef 2011) In privately held firms the reluctance to installindependent boards increases with the relative importance ofsocio-emotional family objectives (Fiegener Brown Dreux ampDennis 2000a 2000b Voordeckers Van Gils amp Van den Heuvel2007) and decreases in those families in which there is low goalalignment among family members (Jaskiewicz amp Klein 2007Pieper Klein amp Jaskiewicz 2008) Board independence is in factpositively associated with corporate transparency and may reduceagency threats for minority shareholders (Chen amp Jaggi 2000Haniffa amp Cooke 2002 Ho amp Wong 2001 Jaggi Leung amp Gul 2009Jaggi amp Leung 2007 Wang 2006)

Currently the relationship between board independence andfinancial performance remains an open issue some scholars foundthat board independence is positively associated with firmperformance (eg Anderson amp Reeb 2004 Yeh amp Woidtke 2005)whereas others found the opposite (eg Klein Shapiro amp Young2005) Results may be mixed even within the same research as inSchulze et al (2001) The latter authors found that outside boardrepresentation is negatively associated with sales growth but that

family firms that employ a set of lsquolsquogood governance practicesrsquorsquoincluding higher outside board representations among otherpractices outperformed other family firms However the presenceof independent board members could reduce a family leaderrsquosbehavioural tendencies that may favour the family but damagebusiness goals (Goel Voordeckers Van Gils amp Van den Heuvelforthcoming) Outside directors in family firms may also help toincrease group effort and motivation to be active (Bettinelli 2011)

Research on family business governance also indicates the moresubtle uses of external directors in situations in which the familysubsystem may overlap with the business subsystem externaldirectors are regarded as providing objectivity and assistance inde-emotionalising emotionally charged situations Because thesedirectors also have a more permanent and personal relationshipwith the family firmrsquos management they can be expected to havestronger social capital and trust-based relationships within thefamily firm (Ng and Roberts 2007) In a fine-grained study ofexternal directors in family firms Ng and Roberts (2007) indicatethat even though the family may have power and control externaldirectors play a vital mediating role in a web of firm and familyrelationships by protecting the firm from the damaging intrusion ofasymmetric family altruism and managerial opportunism Thusexternal directors are likely to have a restraining influence on afamily CEOrsquos tendency to place higher importance on goals thatincrease socioemotional wealth This relationship with thelsquolsquoexternalrsquorsquo directors in family firms is rather nuanced and contrastswith the relative detachment that is assumed and indeed prised innon-family and widely held firms

The study of the advisory role of the board of directors in familyfirms is rooted in stewardship a resource-based view (RBV) orstakeholder theories Stewardship scholars emphasise that familyfirms are an ideal context for leading individuals to favour pro-organisational behaviours (Miller amp Le Breton-Miller 2006) andthat the exercise of control lowers individual intrinsic motivationto behave as stewards (Corbetta amp Salvato 2004a) thus thesescholars emphasise the value of board activities as advice provision(Davis Schoorman amp Donaldson 1997 Sundaramurthy amp Lewis2003) In contrast RBV scholars argue that boards may bring newknowledge and attract resources to the company In this respectboard advice is beneficial to the extent that the boardrsquos generalbusiness knowledge and capabilities complement the more firm-specific family members involved in the management team(Gabrielsson amp Huse 2005 Huse 2005) Stakeholder theoryscholars maintain that the board of directorrsquos advisory role mayfacilitate the firmrsquos functioning by reducing conflicts that plaguefamily firms (Corbetta amp Salvato 2004b) especially when theboard members are outsiders (Lester amp Cannella 2006)

However empirical research on the boardrsquos advisory role infamily firms is quite limited Bammens Voordeckers and Van Gils(2008) found that the need for board advice and for outsidedirectors decreases from the first to the second generation andthen increases Mustakallio Autio and Zahra (2002) found thatboard advice increases the quality of strategic decisions and thecommitment to their implementation Jaskiewicz and Klein (2007)argue that affiliate directors may provide better advice because oftheir closer connection to the firm and the family and theresearchers found that the presence of affiliate directors is relatedto the familyrsquos identification and commitment to the business

In addition to the board of directors other structures andmechanisms may play a central role in the governance of familyfirms For example family councils a governance element uniqueto family firms have been investigated as a relevant nexusbetween the family and the business dimension (Gallo Kenyon-Rouvinez 2005 Ward 2004) Although scholars argue that familycouncils may help to align diverging interests and to counteractdecreasing emotional attachment of shareholders to the firm little


research has been conducted on this structure and empiricalevidence of its real impact is still scant (Siebels amp zu Knyphausen-Aufseszlig 2011)

Recently scholars have observed that an area that deservesfurther investigation is represented by the still under-investigatedinterplay between trust and governance in family firms (Eddlestonet al 2010) Some researchers consider governance within a familyfirm as often synonymous with trust among family membersparticularly those family members involved in the business(Eddleston et al 2010 Steier 2001 Sundaramurthy 2008)Furthermore some researchers designate familial trust as opposedto market forces as the regulating mechanism of businesstransactions among family members on the one hand somefamily firm characteristics (ie long-term orientation and familyrelationships) breed a level of trust that in turn reduces the needfor monitoring through formal structures (Chrisman ChuaKellermanns amp Chang 2007) on the other hand the dark sideof trust in family relationships (eg Cruz Gomez-Mejia amp Becerra2010 Sundaramurthy 2008) may urge the creation of othergovernance mechanisms to limit detrimental behaviours

24 Socio-psychological dimensions

The socio-psychological dimensions within family businessesand their owning families have largely been neglected Howeverculture and emotions can play important roles and have dramaticand fundamental effects on the dynamics of the family businessand its owning family (Labaki Michael-Tsabari amp Zachary Inpress) The role of emotions in organisations and in individual worklives has been explored for over 20 years by researchers pursuingorganisational behaviour studies (Rafaeli Semmer amp Tschan inpress Rafaeli amp Sutton 1987 1989) Additionally recent integra-tions of the role of emotions in disciplines such as finance havesignificantly influenced the scholarly discourse including oneNobel Prize in economics for studies in behavioural finance (egKahneman 2003a 2003b) Furthermore variations in strategyownership and governance patterns can be found within andamong family firms and each of these parameters is laced withemotions (Brundin amp Melin 2006 Brundin amp Nordqvist 2008)

Several researchers have recently explored the notion of familysocial capital within the owning family and its role in the familyfirm (eg Danes Stafford Haynes amp Amarapurkar 2009Rodriguez Tuggle amp Hackett 2009 Sorenson 2011) Such researchis beginning to recognise and document the vital importance ofemotional support among family members as they create emergeoperate and grow businesses as well as exit and transition theirroles to subsequent generations However some researchers areuncertain about the effects of emotions on individual and familialbehaviours and actions (Brundin amp Sharma 2010)

Other researchers have confused socio-emotional wealth(Gomez-Mejia Haynes Nunez-Nickel Jacobson amp Moyano-Fuentes 2007) with the socio-psychological dimensions anddynamics of the family firm and its owning family lsquolsquoSocio-emotional wealthrsquorsquo or the nonfinancial aspects of the firm thatmeet the familyrsquos affective needs (eg identity the ability toexercise family influence and the perpetuation of the familydynasty) does have credence (Stockmans Lybaert amp Voordeckers2010 Zellweger amp Astrachan 2008) However this notion of socio-emotional wealth is merely a manifestation of the family systemand its dynamics and remains devoid of the emotional dynamicsgenerated by or within the family firm

3 The research in this volume

Using a resource-based view and the extant understanding ofknowledge acquisition and integration as key aspects of a firmrsquos

absorptive capacity as it is related to strategy Britta Boyd andSvend Hollensen (2012) present an in-depth case study that offersa nuanced view of absorptive capacity in a family-owned firm Thiscontribution enriches our understanding both of unique resourcesand of resource combinations that can potentially be provided bythe family subsystem contingent on its integration with thebusiness subsystem via active boundary management (Sundar-amurthy amp Kreiner 2008) As the authors specify the personalnetworks of the family were leveraged into corporate levelresources which constituted the absorptive capacity of the firmThis leveraging in turn helped the firm to be ambitious and toparlay its corporate competency into international competitive-ness By including the familyrsquos influence into the construction ofthe firmrsquos absorptive capacity Boyd and Hollensen (2012) alsopotentially compel us to rethink and reconceptualise theconstituents of firm level absorptive capacity (see Table 1)Therefore organisational slack in family firms could be qualita-tively richer and quantitatively different than in non-family firmsBoth these conditions call for refinements in defining andmeasuring organisational slack and absorptive capacity in familyfirms because traditional measures of these constructs if directlyimported from more general contexts could be construct deficientin the context of family firms (see Table 1)

The next two competitive research articles in this volume relateto ownership issues and focus on the role of ownership regardingcontrol and the growth of the family business The early literaturetends to view ownership as a form of control More recentliterature views ownership and control as related and co-evolvingconcepts However in a family business ownership and control arenot necessarily related in part because of the family systemrsquosinfluence (in addition to the common use of nonstandard equitystructures such as super majority voting shares and non-votingshares) For example although the Ford Motor Company is a widelyheld global corporation with a relatively small fraction of equityremaining in family ownership the control exerted by the familybecause of its history management and tradition far exceeds theamount of stock the family owns Therefore the notion of theseparation of ownership and control (Jensen amp Meckling 1976) isparticularly salient in the case of the family firm which is thereforewell suited for modelling under agency theory principles

Although there are exceptions (eg Le Breton-Miller and Miller2009) most studies on the role of ownership in family businessestend to treat ownership as a monolithic construct distinguishingmerely between family and non-family The article by Ann-KristinAchleitner Christoph Kaserer and Tobias Kauf (2012) adopts anuanced approach by identifying three types of family owners andarguing that ownership identity is often a proxy for strategicintent Strategic intent in a family enterprise is of course tightlylinked to the economic and social goals of the family systemHence it is not possible to fully understand the relationshipbetween ownership and control (Jensen amp Meckling 1976) withouta deeper view of the ownerrsquos identity (see Table 1)

The main contribution of this article to the family business andcorporate governance literature is to demonstrate how change inthe identity of the firmrsquos ownership is linked to change in itscontrol structure The article extends Jensen and Mecklingrsquos (1976)hypotheses to family business and provides an empirical verifica-tion Panel data from the German stock market suggest thatdeclines in family ownership far outweigh increases in ownershipby a factor of 4 The studyrsquos findings that those firms with lessdirect family involvement (ie lone founder firms) are more likelyto seek a liquidity event and worry less about maintaining controlare not surprising Overall this article exemplifies well the types ofquestions of ownership that should be posed and answered (seeTable 1) Family ownership is not a single construct and treating itas such would limit the applicability of agency theory More critical

Table 1Selected family business future research areas concepts propositions and future research suggestions

Future research areasconceptspropositions Future research suggestions

(1) Strategy (Boyd amp Hollensen 2012)Proposition 1a Higher absorptive capacity (ACAP) in family businesses results from flexible

management and supportive employees

Proposition 1b A change in family firm management may have a negative effect on competitiveness

Proposition 1c The gap between potential and realised ACAP is reduced by family involvement and

family identity

Possible measures of ACAP antecedents derived

from family systems

Empirical generalisation to larger samples and

longitudinal data

Improved measures for differences between two

measures of ACAP

(2) Ownership (Achleitner et al 2012 Zhang et al 2012)Proposition 2a Changes in owner identity may be related to shifts in family system characteristics

such as family size composition and family membersrsquo power or degree of control over time

Proposition 2b Changes in the proportion of ownership by external equity holders is likely to result in

organisational conflict resulting from the competing demands of family owners

Proposition 2c Family ownership may limit the rate of business growth

Proposition 2d The evolution of industry structure may be driven by changes in ownership structure

and voting patterns of significant family firms

Theoretically valid measures of owner identity

Studies of the evolution of ownership in family

business-dominated industries such as Germanyrsquos

machine tools industry and Pakistanrsquos textile

weaving industry

Empirical generalisation to geographic cultural

and historical contexts


longitudinal data

(3) Governance (San Martin Reyna amp Duran-Enclada 2012)Proposition 3a Compared with industrialised countries family ownership also affects the performance

of firms in emerging markets

Proposition 3b Family ownership in emerging markets mediates the relationship between ownership

concentration and firm performance

Proposition 3c Family ownership in emerging markets mediates the relationship between governance

mechanisms and firm performance

Investigate with international comparisons

particularly for various emerging markets

Test the relationship over longer time periods

and for non-listed firms

Use a contingency perspective or a non-linear

approach integrate a demographic approach with

adoption of a process approach

(4) Social-psychological (Hirigoyen amp Labaki 2012)Proposition 4a (a) In the family business the extent of expected regret will influence the owner-managerrsquos

decision

Proposition 4b (a1) In the family business the extent of expected family-based regret will influence the

owner-managerrsquos decision

Proposition 4c (a2) In the family business the extent of expected business-based regret will influence the


Simultaneous modelling of family system and

business system

Operationalisation of regret variables

Development of empirical measures for

emotion-defined variables


is that using a difference-on-difference approach may allow suchmodels to provide empirically valid causal inferences

The article by Xian Zhang Jill Venus and Yong Wang (2012)revisits the unresolved question of whether family-owned firmsare more or less likely than their non-family counterparts to growThe source of this controversy is that growth often accompanies adilution of control so that families whose social and familialinterests are closely tied to the control of their firmsrsquo economicfuture would have less incentive to grow quickly because to do sorequires external sources of capital which may imply a loss ofcontrol However the article cites empirical evidence to suggestthat family businesses tend to grow faster than non-familybusinesses because of the need to provide employment andsources of income for rapidly growing family systems (see Table 1)

The contribution of this article is its characterisation offinancing sources as a form of social capital Using data fromChina and drawing from Confucian ethics the authors hypothesisethat choices of financing sources are interpreted as a commitmentto family values In Confucian ethics the family is the primary unitof social organisation so that the protection of the family impliesthe protection of the individual and the nation at large (outsidersare viewed with suspicion) Hence internal sources of financing(eg retaining earnings or family funds) for growth are interpretedas pro-family choices However because such funds tend to belimited family firms relying on such sources of financing may growrelatively slower The authors find that controlling for age therelationship between family ownership and annual growth isnonlinear such that only family firms with moderate concentra-tions of family ownership report the highest annual growth ratesThe authors also find that firms with high concentrations of familyownership are more likely to prefer internal sources of financingand such types of financing lead to lower growth rates In sum thestudy reports several nuanced relationships that complicate theownership-growth picture These results have been foundindependently in previous studies This study synthesises previous

research by offering a more complete picture of the phenomenonand by providing ample opportunities for future research (seeTable 1)

Juan Manuel San Martin Reyna and Jorge A Duran-Enclada(2012) empirically investigate some interesting and still open issuesrelated to the influence of both family ownership and governance onfirm performance In the literature many studies have attempted tocompare the performance of family and nonfamily firms tounderstand whether there are significant differences between thetwo types of firms (for a concise overview see Mazzi 2011)However further investigation of this relationship is requiredbecause the literature reflects no unanimous arguments andfindings on the effects of family ownership and governance onthe functioning and ultimately the performance of the firm Inaddition most studies on family ownership governance andperformance were conducted using US and European marketswhereas the evidence related to emerging markets is still scant(Filatotchev Lien amp Piesse 2005 Martınez Stohr amp Quiroga 2007)

Analysing the relationship between family ownership gover-nance and firm performance for companies listed on the MexicanStock Exchange the authors further investigate the extent to whichthe above-mentioned relationships hold in markets characterisedby different institutional factors In addition their study examinesthe mediating role of family ownership on the relationshipsbetween ownership concentration and governance mechanisms(ie board composition and financial leverage) on the one handand firm performance on the other hand

The authors find that whereas the relationship betweenownership concentration and firm performance is positive infamily firms it is negative in nonfamily firms this results adds newempirical evidence to the previous literature that suggests that it isnot the ownership concentration per se but rather the identity ofthe owners and their priorities and preferences that primarilyinfluence corporate conduct (Miller Le Breton-Miller amp Lester2010)


The authors also find that the relationships between thegovernance mechanisms considered (ie board composition andfinancial leverage) and firm performance depend on the nature ofthe owners Hence family ownership negatively mediates theindependent directorsrsquo and the financial leveragersquos influence onfirm performance whereas the opposite is true for affiliate andinside directors These findings contribute to the extant literatureon differences in corporate governance structures and in theeffectiveness of family and nonfamily firms (Prencipe and Bar-Yosef 2011 Schulze et al 2001 Ward amp Handy 1988) andindicate several avenues for future research on this intriguingsubject (see Table 1)

The socio-psychological dimensions of family business strategyare revealed by the study of emotions within the family businessUtilising broad-based research from business and psychologyscholars Gerard Hirigoyen and Rania Labaki (2012) embark on aconceptual exploration of emotions specifically regret relative toowner-manager decision-making in the family business Theseresearchers are among the first to distinctively conceptualiseemotions within the family business and to enable further studyThe authors seek to delineate the importance of emotions forexplaining family business behaviour specifically regret relative todecision-making

Hirigoyen and Labakirsquos (2012) conceptualisation suggests thatregret experienced both within the family and within the businessaffects decision making aimed at both expected emotional valueand expected financial value which results in expected family-based regret and expected business-based regret The elements oftheir conceptualisation are fully defined and extensively docu-mented with previous research from psychology economics andsociology as well as from family business studies This conceptua-lisation culminates in a conceptual model with 18 propositionsthat future research can employ validate and possibly expandupon (note that 3 selected propositions are also listed in Table 1)

The authorsrsquo simultaneous modelling of the emotional andfinancial values operative within and among both the family andthe business system is an important step in the discourse Suchsimultaneous modelling is rare among family business researchers(Zachary et al forthcoming) In contrast to much previousresearch Hirigoyen and Labaki (2012) declare that an emotionaldimension exists within both the family system and the businesssystem as well as there are interactions therein The authors offervarious future research directions to explore emotions anddecision-making in family businesses and they indicate inherentoperational challenges related to the development of empiricalmeasures for emotion-defined variables (see Table 1) The authorsrsquoapproach can also be used to study other emotions that mayoperate in the family business dynamic

4 Future research directions in family business

The study of family firms has reached an exciting junctureScholars from around the world are contributing multipledisciplinary views and methodologies to the study of thisphenomenon Based on the research in this volume and ourliterature review we offer 13 propositions that suggest howstrategy ownership governance and socio-psychological dimen-sions represent major thrusts for future family business research asresearchers explore further the unique dynamics of the businessand the owning family

41 Future strategy research

Some researchers strongly suggest that the simultaneousexploration of the family system and the business is crucial toincrease our understanding of family firms and their strategies

ownership governance and socio-psychological dimensions andthat such exploration yields consistent and sound researchfindings (Zachary et al forthcoming) Specifically researchersmust acknowledge that family system structures processes anddynamics do not merely exist but are present with businessdynamics that many study with limited perspectives and cross-sectional approaches

In addition the two systems need to be studied in the context ofa co-evolutionary framework (Kepner 1983 Martinez Yang ampAldrich 2011) Therefore isolating mechanisms such as cultureand family identity that create in- and out-group dynamics infamily systems are also responsible for creating stable businessnetworks and practices that either defy change or serve to hedge abusiness against external threats Especially in environments thatlack formal institutional frameworks (such as laws and capitalmarkets) families (and family businesses) can provide significantties and networks that may help to overcome these gaps andthereby provide a foundation for economies and societies todevelop and thrive (Miller Lee Chang amp Le Breton-Miller 2009)Moreover the co-evolution of family systems and businessesimplies that family systems may have a role to play in the evolutionof an industryrsquos structure (Aldrich amp Cliff 2003) As we discuss laterin this article in industries around the world in which familybusinesses dominate the resulting family business networks arelikely first-order mechanisms that determine industry structure Insum we exhort researchers to focus on the dynamic relationshipsbetween family enterprises and networks family systems and thevalues expressed by those systems and industry structure

From Boyd and Hollensenrsquos (2012) case study three interestingpropositions arise that address the general construct of absorptivecapacity in family businesses These constructs might even besalient to those businesses that wish to adopt the lsquofamilyrsquo approachas a metaphor for their operations As shown in Table 1 lsquolsquoflexiblemanagementrsquorsquo and lsquolsquosupportive employeesrsquorsquo can be proffered aspossible explanations for higher absorptive capacity Otherconstructs similarly borrowed from the family system couldpossibly be deployed in this relationship Because these features oforganisations can be adopted by non-family firms howeverimperfectly these constructs may represent contributions bythe family business field to improve the overall functioningsurvival and growth of all organisations

The second proposition is almost a corollary of the first (seeTable 1) If family management produces absorptive capacity andif absorptive capacity is related to competitiveness then a negativechange in family management may lead to a decline incompetitiveness To further explore this proposition futureresearch could explore longitudinal models with feedback loopsto model changes in absorptive capacity and competitiveness

Finally the last proposition is a within-group proposition thatexplains the gap between the potential and realised absorptivecapacity within family businesses as a group as a function of familyinvolvement and family identity (see Table 1) Future work couldattempt to refine the measures of potential and realised absorptivecapacity to measure the various dimensions of these constructs asconceptualised within a family business Again this approachprovides a rational functional argument for family involvement infamily business and for the intertwining of family identity with thebusiness identity although the latter has been covered elsewherein the marketing and branding literature the relationship toabsorptive capacity grants the topic a more lsquolsquotangiblersquorsquo meaning

Whereas Boyd and Hollensenrsquos (2012) study is related to firm-level effects future studies in family firm research also need toaddress the broader institutional or societal effects of family firmbehaviour individually or as a collective For instance using a moremacro-level performance construct Lester and Cannella (2006)describe how family firms use interlocking directorates to develop


what they call lsquolsquointerorganisational familinessrsquorsquo Thus while mostresearchers (eg Aguilera amp Crespi-Cladera 2012 Morck amp Yeung2004) primarily explore the effect of family firms as a function ofthe institutional context Lester and Cannella (2006) explain howfamily firms may change the institutional contexts in which theyoperate Macro-level studies like these are rare in the field ofmanagement but important for understanding the ecologicaleffects of the existence and behaviour of family firms

Relating this finding to Boyd and Hollensenrsquos (2012) study wesuggest that it may be fruitful to explore how the presence of bothfamily and nonfamily firms in the environment (eg in a specificindustry) affects their distribution If family firms have acompetitive advantage and different goals (eg increased concernfor sustainability) then one would expect family businesses todominate a particular environment over time subject to someinstitutional imperfections and the environment to adopt thefamily firmsrsquo goals as a collective This idea should certainly beresearched further

42 Future ownership research

Aguilera and Crespi-Cladera (2012) explore and question therelationship between ownership and governance within familyfirms The authors challenge researchers to rethink and re-examinethe often negative views of family ownership and involvement aswell as the relative efficiencies of family ownership in certaininstitutional environments Interestingly in this special issueReyna and Duran-Encalada confirm the positive relationshipbetween ownership concentration and family firm performancein an emerging market (Mexico) in which the effects of governancemechanisms on firm performance depend on the nature of theowners

In Table 1 we also offer four propositions for future ownershipresearch derived from the articles by Achleitner et al (2012) andZhang Venus and Wang (2012) Embedded in Proposition 2a is thesuggestion that owner identity matters but not in the traditionalsense of which values (eg social economic or family) aremaximised or of the resulting strategic choices Instead we suggestthat future studies of family ownership must account for thechanges in ownership composition over time Such ownershipchanges are driven by shifts in the composition of family systemsresulting from marriages in which new family systems are mergedinto the focal family system with a potential dilution of ownershipdivorces and the increased concentration or dilution of ownershipdeaths and changes in the identity of certain owner groupsmanagerial successions births and the pressures for organisa-tional growth that can emerge The implication of these changes isthat ownership as a construct bears a dynamic dimension thatmust be recognised in its measurement Therefore an importantfuture research project is to operationalise a valid measure offamily ownership and ownership composition The first step mayentail linking types of ownership to positions in the family system(eg nuclear versus extended family status) and then developing aweighted index of ownership that encompasses the strength of theclaims by each category of family owners in the overall measure offamily ownership The changes in the index of composition overtime will allow researchers to better reflect the changes ingovernance of the enterprise

Proposition 2b recognises the strategic conflicts (eg wherecash flow should be invested in the family firm at which hurdlerate of return and at which stage of growth) that will occur as afirmrsquos family ownership is diluted by the rise of external equityowners who do not possess the values of the family system as aninvestment objective This proposition also recognises that suchstrategic conflicts inevitably result in organisational upheavalsthat can either place the family business on a new path of growth

or leave it to decline The latter scenario is related to Proposition 2cand can occur in two ways Family owners are likely to reject theparticipation of external equity holders if such participation leadsto the dilution of control (for example if the enterprise does nothave a two-tiered or golden share share structure) or if suchparticipation results in a shift in the direction of the enterprise forexample away from investments in its local community tooverseas growth The rejection of external capital will limit theproduction capacity of the business in the short term and henceaccess to new markets and growth opportunities in the short andlong term if entry into such markets brings first-mover advantagesThe second way in which growth can be limited by theparticipation of external equity holders stems from the resultingboardroom battles that can distract management from the coretasks of running the business Such battles for control createconfusion divided loyalty and a diversion of organisationalattention to business activities More critically these battlescreate a hostile environment making the hiring of professionalmanagers a challenge and further impeding the firmrsquos develop-ment and growth

Precisely because the introduction of external equity holdersbrings the possibility of organisational change such introductionscan serve to dislodge a firm from stagnation For example ifexternal equity holders have majority control they can introducenew management and managerial systems that can re-energise abusiness and place it on a path of new growth Private equityholders whose specialty is the restructuring of poorly performingbusinesses can create new economic value by forcing the release ofdormant corporate assets (private jets country club membershipscorporate buildings and so forth) held to secure a family systemrsquossocial status The strategic reviews performed by new manage-ment can identify opportunities for new revenue streams ororganisational efficiencies that entrenched family managers mayfind difficult to embrace Therefore a future research questionmight be to ask whether a change in ownership is accompanied bya change in control and whether the type of external equity holderis responsible for value creation or destruction

Finally Proposition 2d suggests a novel approach to the firmindustry structure dynamic In traditional conceptions of industrialstudies industry structure drives the opportunity set faced byfirms However we know that in certain industries dominated byfamily businesses especially when the businesses are networkedthe strategic intent of the businesses which is heavily influencedby the social and religious values embedded in the family systemcan have an important impact on the evolution of an industryrsquosstructure For example the US New England fishing industry andthe Mid-Atlantic Chesapeake crabbing industry largely comprisefamily-owned businesses that operate as a network to manage fishstocks and to lobby for regulations favourable to the industriesrsquodevelopment In Germany the precision machine tool industry isdominated by family-owned enterprises in the Ruhr Valley Duringthe European economic crisis of 2010ndash2012 the machine toolindustry was a bulwark of exports and GDP growth protectingGermany from the effects of the crisis that befell many of its largerneighbours The traditional family values of financial conservatismmay have accounted for this strength but may have also limited theindustryrsquos growth during the rise of the global economy in the early2000s In Pakistan the textile weaving industry is dominated byfamily firms that have formed tight networks employing amajority of the working population in the country The structureof the industry its relationship to the government and its place inthe economic structure of Pakistan is likely related to the familysystems that underlie this industry Therefore an avenue of futuretheory development and empirical research is the use ofanthropological studies (see Stewart 2003) to trace the co-evolution of industry structure and the arc of family systems and


network developments in a country or region Such research wouldreveal the dynamics of co-evolution but more importantly wouldimplicate the role of family values and the family system inindustry structure

43 Future governance research

Building on the research and results of San Martin Reyna andDuran-Enclada (2012) we suggest several lines of future researchin the family firm governance area First using a cross sectionalapproach the authors suggest that family ownership affects firmperformance in emerging markets (see Table 1) To fully explorethis relationship it is important to extend the research using alongitudinal approach (eg Mazzola et al forthcoming) and togeneralise the model to an international sample This approach isimportant partly because as other studies in this volume showfamily firm ownership evolves over time thus firm performance isexpected to change endogenously as well because it results fromstrategic choices driven by ownership and control

Second the authors suggest that family ownership mediatesthe relationship between ownership concentration and firmperformance (see Table 1) The article supports the findings ofrecent studies showing that the nature of the dominantshareholder ndash and not merely ownership concentration or othermeasures of control power ndash plays a pivotal role in the firmrsquosdecision-making processes (Arosa Iturralde amp Maseda 2010Miller et al 2010 Prencipe Bar-Yosef Mazzola Pozza 2011)According to the results of San Martin Reyna and Duran-Enclada(2012) in family controlled companies the effects of ownershipconcentration and insider ownership on performance seem to bepositive whereas they are negative for non-family companiesTherefore the conclusions of previous studies on ownershipconcentration and firm performance cannot be generalisedwithout further specification of the main shareholderrsquos natureIn sum the identity of the main shareholder should not beoverlooked in future studies assessing the influence of ownershipstructure on decision-making or accounting policies

Finally the authors suggest that family ownership mediatesthe relationship between governance mechanisms and firmperformance (Table 1) This finding calls for further research onthe governance of family firms which may develop along thefollowing lines

In general scholars may address the open issue of the effects ofboard independence on firm performance Whether boardindependence increases the efficacy of the boardsrsquo roles ofproviding control and advice is not yet clear This issue may alsobe addressed by applying a contingency perspective according towhich the effects of board independence are influenced by otherfeatures Alternatively these inconsistent results may be explainedby adopting a non-linear approach (eg Sciascia et al forthcom-ing) according to which the effects of board independence maychange according to the degree of independence itself

The process aspects surrounding the board of directorsrepresent another promising area of future research As innonfamily firms it is important to explore what occurs in theboardroom regardless of how the board is structured (Daily Daltonamp Cannella 2003 Forbes amp Milliken 1999) Researching thepsychological and behavioural dimensions of the board of directorsmay complement the analysis of its structural attributes andenhance our understanding of the functioning of these criticalgroups (Finkelstein amp Mooney 2003)

From a theoretical point of view it is important to integrate theabove perspectives which have thus far been treated separatelywith a few exceptions (eg Le Breton-Miller Miller amp Lester2011) The value of integration or a contingent view of differenttheoretical perspectives is especially useful in family businesses in

which human beings may show elements of agency altruismstewardship and more generally the entire gamut of motivationsfrom selfishness to selflessness within a single day all of whichmay be deeply important to the strategy goals resourceacquisition and use and eventual performance of the businessas well as to the values and knowledge parenting and education ofthe familyrsquos next generation In particular agency-based argu-ments need to be complemented with reflections based on theRBV the stakeholder theory or the stewardship perspective

44 Future socio-psychological research

Given the conceptual nature of Hirigoyen and Labakirsquos (2012)article one can easily identify propositions that can drivehypotheses testing and empirical operationalisation The authorsrsquofirst set of propositions addresses the levels of lsquolsquoexpected regretrsquorsquoboth within the family system and the business system regardingdecision making (see Table 1) Such future research could identifyareas or types of decisions often occurring in both systems Thenthe researcher would need to operationalise measures for family-based regret and business-based regret relative to a chosen type ofdecision within each system (see Table 1)

As mentioned strategy ownership and governance all involvevarious decisions that involve emotions and thus possibly regretFor example researchers might examine succession decisionsrelative to lsquolsquoexpected regretrsquorsquo What is the role of regret in foundersrsquoor current ownersrsquo decisions about their possible successors Aresome possible successors preferred because of the lsquolsquoexpectedregretrsquorsquo that such decisions might provoke for the founder orcurrent owners Might potential succession decisions be rooted inpossible regret If so such future research would shed significantnew light on the earlier notions of a lsquolsquosuccession conspiracyrsquorsquo aspresented by Lansberg (1988) nearly 25 years ago In fact the cruxof the so-called lsquolsquoconspiracyrsquorsquo might be such lsquolsquoexpected regretrsquorsquoemotions both within the family system and within the businesssystem as well as the possible interactions between the twosystems No succession research to date has attempted to embracefully the emotional dimensions of the succession decisionHowever family businesses continually witness and experiencefirst-hand the emotional realms of their families and businesses asthey embark on the crucial decision of choosing a successor

The emotional dynamics and processes of family firms and theirowning families are vastly understudied For example we knowvery little about the emotions of the founder and how they mightlead to the inclusion or exclusion of certain family members fromownership The same processes may hold true for governanceWhether some family members are first regarded as leaders maybe linked to the emotions of both the founder and the familymember under consideration Moreover strategies result fromknowledge and perceptions which are naturally influenced byonersquos emotions Simply stated our minds and psyches dwelltogether within us and are inextricably linked The recognitionunderstanding and management of such socio-psychologicalaspects and linkages afford the researcher an enhanced view ofboth the business and the family

5 Research challenges

In this review we have acknowledged that family businessresearch has advanced tremendously since its inception and thearticles in this issue are a clear testimony of the fieldrsquos geographicscope theoretical soundness and methodological rigour Howevermuch research remains to be conducted in the field To this end weoffer some challenges for family business scholars to considerFirst researchers should question the prior general businessresearch as it most often has completely ignored the complex and


dynamic nature of the family business and its worldwideprevalence In most cases the owning family has remainedunexplored by researchers

Second as researchers consider their own efforts they shouldfocus on what why and how they cast their research lsquolsquonetrsquorsquo orperspective Specifically are researchers capturing the institutionalsocial and economic complexities and dynamics of the familybusinesses under investigation The extant research has focused onstudying business systems but has given scant attention to thefamily system This limitation may partly be explained by the simpleconstraint of access to data However we believe that without aconcerted effort to overcome this barrier the research will remainstagnant Hence research on family businesses should begin with anunderstanding of the family system and its socio-cultural contextThe business system can then be studied using for instance anembeddedness approach so that the family system constructs aretheoretically connected to the business system constructs and viceversa The third suggestion which is related to the previous point isthat researchers should attempt to operationalise some familysystem variables in their family business models We state lsquosomersquobecause we recognise the difficulty of obtaining reliable data on suchmeasures However we do not intend to imply that because of thisdifficulty family system constructs are less important In factbecause the two systems are dynamic and co-evolve as we havesuggested elsewhere we believe that a full and simultaneousspecification of their dimensions should be the platinum standard towhich we aspire For example a potential direction is for familybusiness researchers to identify as many ways as possible to includescholars from the sciences such as anthropology neurobiologysociology family studies gender studies psychology communityhealth public policy and religious studies to partner with ourresearch and to create forums for such scholars to engage in dialoguewith family business researchers

References

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Achleitner A-K Kaserer C amp Kauf T (2012) The dynamics of voting ownership inlone-founder family-founder and heir firms Journal of Family Business Strategy3(2) 79ndash96

Aguilera R V amp Crespi-Cladera R (2012) Firm family firms Current debatesof corporate governance in family firms Journal of Family Business Strategy 3(2)66ndash69

Aldrich H E amp Cliff J E (2003) The pervasive effects of family on entrepreneurshipToward a family embeddedness perspective Journal of Business Venturing 18(5)573ndash596

Anderson R C amp Reeb D M (2004) Board composition Balancing family influence inSandP 500 firms Administrative Science Quarterly 49 209ndash237

Arosa B Iturralde T amp Maseda A (2010) Ownership structure and firm performancein non-listed firms Evidence from Spain Journal of Family Business Strategy 1(2)88ndash96

Astrachan J H (2010) Strategy in family business Toward a multidimensionalresearch agenda Journal of Family Business Strategy 1(1) 6ndash14

Astrachan J H amp Pieper T M (2010) Introduction to volume I Journal of FamilyBusiness Strategy 1(1) 1ndash5

Astrachan J H Klein S B amp Smyonios K X (2002) The F-PEC scale of familyinfluence A proposal for solving the family enterprise definition problem Familyenterprise Review 15(1) 45ndash58

Bammens Y Voordeckers W amp Van Gils A (2008) Boards of directors in family firmsA generational perspective Small Business Economics 31 163ndash180

Bammens Y Voordeckers W amp Van Gils A (2011) Boards of directors in familybusinesses A literature review and research agenda International Journal ofManagement Reviews 13 134ndash152

Basco R amp Perez Rodriguez M J (2009) Studying the family enterprise holisticallyFamily Business Review 22(1) 82ndash95

Basco R amp Perez Rodriguez M J (2011) Ideal types of family business managementHorizontal fit between family and business decisions and the relationship withfamily business performance Journal of Family Business Strategy 2(3) 151ndash216

Bergfeld M-MH amp Weber F-M (2011) Dynasties of innovation Highly performingGerman family firms and the owners role for innovation International Journal ofEntrepreneurship and Innovation Management 13(1) 80ndash94

Bettinelli C (2011) Boards of directors in family firms An exploratory study ofstructure and group process Family Business Review 24(2) 151ndash169

Bjursell C (2011) Cultural divergence in merging family businesses Journal of FamilyBusiness Strategy 2(2) 69ndash77

Block J H Jaskiewicz P amp Miller D (2011) Ownership versus management effects onperformance in family and founder companies A Bayesian reconciliation Journalof Family Business Strategy 2(4) 232ndash245

Blumentritt T (2006) The relationship between boards and planning in familybusiness Family Business Review 19(1) 65ndash72

Boyd B amp Hollensen S (2012) Strategic management of a family-owned airlineAnalyzing the absorptive capacity of Cimber Sterling Group AS Journal of FamilyBusiness Strategy 3(2) 70ndash78

Brewton K E Danes S M Stafford K amp Haynes G W (2010) Determinants of ruraland urban family firm resilience Journal of Family Business Strategy 1(3) 155ndash166

Brundin E amp Melin L (2006) Unfolding the dynamics of emotions How emotiondrives or counteracts strategizing International Journal of Work Organization andEmotion 1(3) 277ndash298

Brundin E amp Nordqvist M (2008) Beyond facts and figures The role of emotions inboardroom dynamics Corporate Governance 16(4) 326ndash341

Brundin E amp Sharma P (2010) Love hate and desire The role of emotional messinessin the business family Conference paper presented at the 2010 international familyenterprise research academy (IFERA) annual conference Lancaster England July 7ndash92010

Burton B K amp Dunn C P (1996) Feminist ethics as moral grounding for stakeholdertheory Business Ethics Quarterly 6(2) 133ndash145

Chen C J amp Jaggi B (2000) Association between independent non-executive direc-tors family control and financial disclosures in Hong Kong Journal of Accountingand Public Policy 19 285ndash310

Chrisman J J Chua J H amp Sharma P (2005) Trends and directions in the develop-ment of a strategic management theory of the theory of the family firm Entre-preneurship Theory and Practice 29(5) 555ndash575

Chrisman J J Chua J H Kellermanns F W amp Chang E P C (2007) Are familymanagers agents or stewards An exploratory study in privately held family firmsJournal of Business Research 60 1030ndash1038

Cleaver F (1999) Paradoxes of participation Questioning participatory approaches todevelopment Journal of International Development 11 597ndash612

Coase R H amp Wang N (2011) The industrial structure of production A researchagenda for innovation in an entrepreneurial economy Entrepreneurship ResearchJournal 1(2) 1ndash11

Corbetta G amp Salvato C (2004a) Self-serving or self-actualizing Models of man andagency costs in different types of family firms A commentary on lsquoComparing theagency costs of family and non-family firms Conceptual issues and exploratoryevidencersquo Entrepreneurship Theory and Practice 28 355ndash362

Corbetta G amp Salvato C A (2004b) The board of directors in family firms One size fitsall Family Business Review 17(2) 119ndash134

Cramton C D (1993) Is rugged individualism the whole story Public and privateaccounts of a firmrsquos founding Family Business Review 6(3) 233ndash261

Cruz C C Gomez-Mejia L R amp Becerra M (2010) Perceptions of benevolence and thedesign of agency contracts CEO-TMT relationships in family firms Academy ofManagement Journal 53 69ndash89

Daily C M Dalton D R amp Cannella A A (2003) Corporate governance Decades ofdialogue and data Academy of Management Review 28 371ndash382

Danes S M (2011) Pillow talk leaks Integrating couple interactions into entre-preneurship research Entrepreneurship Research Journal 1(3) 1ndash5

Danes S M Stafford K Haynes G W amp Amarapurkar S S (2009) Family capital offamily firms Bridging human social and financial capital Family Business Review22(3) 199ndash215

Davis J H Schoorman D F amp Donaldson L (1997) Toward a stewardship theory ofmanagement Academy of Management Review 22 20ndash47

Ducassy I amp Prevot F (2010) The effects of family dynamics on diversificationstrategy Empirical evidence from French companies Journal of Family BusinessStrategy 1(4) 224ndash235

Eddleston K A Chrisman J J Steier L P amp Chua J H (2010) Governance andtrust in family firms An introduction Entrepreneurship Theory and Practice 34(6)1043ndash1056

Fama E F amp Jensen M C (1983) Separation of ownership and control Journal of Lawand Economics 26 301ndash325

Fiegener M K Brown B M Dreux D R amp Dennis W J (2000a) The adoption ofoutside boards by small private US firms Entrepreneurship and Regional Develop-ment 12 291ndash309

Fiegener M K Brown B M Dreux D R amp Dennis W J (2000b) CEO stakes and boardcomposition in small private firms Entrepreneurship Theory and Practice 24 5ndash24

Filatotchev I Lien Y amp Piesse J (2005) Corporate governance and performance inpublicly listed family-controlled firms Evidence from Taiwan Asia Pacific Journalof Management 22 257ndash283

Finkelstein S amp Mooney A C (2003) Not the usual suspects How to use boardprocess to make boards better Academy of Management Executive 17 101ndash113

Forbes D P amp Milliken F J (1999) Cognition and corporate governance Understand-ing boards of directors as strategic decision-making groups Academy of Manage-ment Review 24 489ndash505

Frank H Lueger M Nose L amp Suchy D (2010) The concept of lsquolsquofamilinessrsquorsquoLiterature review and systems theory-based reflections Journal of Family BusinessStrategy 1(3) 119ndash130

Gabrielsson J amp Huse M (2005) lsquolsquoOutsidersquorsquo directors in SME boards A call fortheoretical reflections Corporate Board Role Duties and Composition 1 28ndash37

Gallo M amp Kenyon-Rouvinez D (2005) The importance of family and businessgovernance In D Kenyon-Rouvinez amp J L Ward (Eds) Family business Key issues(pp 45ndash57) Basingstoke PalgraveMacmillan


Goel S Voordeckers W Van Gils A amp Van den Heuvel J Family business asemotional arenas The family CEOrsquos empathy the board of directors and fami-ly-oriented goals Entrepreneurship and Regional Development forthcoming

Gomez-Mejia L R Haynes K T Nunez-Nickel M Jacobson K J L amp Moyano-Fuentes J (2007) Socioemotional wealth and business risks in family controlledfirms Evidence from Spanish olive oil mills Administrative Science Quarterly 52106ndash137

Gray B (1989) Collaborating Finding common ground for multiparty problems SanFrancisco Jossey-Bass Publishers

Haniffa R M amp Cooke T E (2002) Culture corporate governance and disclosure inMalaysian corporations Abacus 38 317ndash349

Heck R K Z amp Trent E S (1999) The prevalence of family business from a householdsample Family Business Review 12(3) 209ndash224

Heck R K Z Hoy F Poutziouris P Z amp Steier L P (2008) Emerging paths of familyentrepreneurship research Journal of Small Business Management 46(3) 317ndash330

Hirigoyen G amp Labaki R (2012) The role of regret in the owner-manager decision-making in the family business A conceptual approach Journal of Family BusinessStrategy 3(2) 118ndash126

Ho S S amp Wong K S (2001) A study of the relationship between corporategovernance structures and the extent of voluntary disclosure Journal of Interna-tional Accounting Auditing and Taxation 10 139ndash156

Huse M (2005) Accountability and creating accountability A framework for explor-ing behavioural perspectives of corporate governance British Journal of Manage-ment 16 65ndash80

International Family Enterprise Research Academy (IFERA) (2003) Family businessesdominate Family Business Review 16(4) 235ndash240

Irava W J amp Moores K (2010) Clarifying the strategic advantage of familinessUnbundling its dimensions and highlighting its paradoxes Journal of FamilyBusiness Strategy 1(3) 131ndash144

Jaggi B amp Leung S (2007) Impact of family dominance on monitoring of earningsmanagement by audit committees Evidence from Hong Kong Journal of Interna-tional Accounting Auditing and Taxation 16 27ndash50

Jaggi B Leung S amp Gul F (2009) Family control board independence and earningsmanagement Evidence based on Hong Kong firms Journal of Accounting and PublicPolicy 28 281ndash300

Jaskiewicz P amp Klein S (2007) The impact of goal alignment on board compositionand board size in family businesses Journal of Business Research 60 1080ndash1089

Jensen M C amp Meckling W H (1976) Theory of the firm Managerial behavioragency costs and ownership structure Journal of Financial Economics 3 305ndash360

Kahneman D (2003a) A psychological perspective on economics American EconomicReview 93 162ndash168

Kahneman D (2003b) Maps of bounded rationality Psychology for behavioral eco-nomics American Economic Review 93 1449ndash1475

Kepner E (1983) The family and the firm A coevolutionary perspective Organiza-tional Dynamics 12(1) 57ndash70

Klein P Shapiro D amp Young J (2005) Corporate governance family ownership andfirm value The Canadian evidence Corporate Governance An International Review13 769ndash784

Kontinen T amp Ojala A (2010) The internationalization of family businesses A reviewof extant research Journal of Family Business Strategy 1(2) 97ndash107

Labaki R Michael-Tsabari N amp Zachary R K Emotional dimensions within the familybusinessmdashToward a conceptualization In K Smyrnios P Z Poutziouris amp S Goel(Eds) Handbook of research on family business (2nd ed) Cheltenham UKEdward Elgar Publishing in association with International Family EnterpriseResearch Academy (IFERA) forthcoming

Lansberg I (1988) The succession conspiracy Family Business Review 1(2) 119ndash143Le Breton-Miller I amp Miller D (2006) Why do some family businesses out-compete

Governance long-term orientations and sustainable capability EntrepreneurshipTheory amp Practice 30(6) 731ndash746

Le Breton-Miller I amp Miller D (2009) Agency vs stewardship in public family firms Asocial embeddedness reconciliation Entrepreneurship Theory amp Practice 33(6)1169ndash1191

Le Breton-Miller I Miller D amp Lester R H (2011) Stewardship or agency A socialembeddedness reconciliation of conduct and performance in public family busi-nesses Organization Science 22 704ndash721

Lester R H amp Cannella A A (2006) Interorganizational familiness How family firmsuse interlocking directorates to build community-level social capital Entre-preneurship Theory and Practice 30 755ndash775

Lindow C M Stubner S amp Wulf T (2010) Strategic fit within family firms The role offamily influence and the effect on performance Journal of Family Business Strategy1(3) 167ndash178

Litz R A (2010) Jamming across the generations Creative intergenerational collabo-ration in the Marsalis family Journal of Family Business Strategy 1(4) 185ndash199

Martınez J I Stohr B S amp Quiroga B F (2007) Family ownership and firm perfor-mance Evidence from public companies in Chile Family Business Review 20(2)83ndash94

Martinez M A Yang T amp Aldrich H E (2011) Entrepreneurship as an evolutionaryprocess Research progress and challenges Entrepreneurship Research Journal 1(1)1ndash26

Mazzi C (2011) Family business and financial performance Current state of knowledgeand future research challenges Journal of Family Business Strategy 2(3) 166ndash181

Mazzola P Sciascia S amp Kellermanns Non-linear effects of family sources of power onperformance Journal of Business Research forthcoming

Memili E Eddleston K A Kellermanns F W Zellweger T M amp Barnett T (2010)The critical path to family firm success through entrepreneurial risk taking andimage Journal of Family Business Strategy 1(4) 200ndash209

Miller D amp Le Breton-Miller I (2006) Family governance and firm performanceAgency stewardship and capabilities Family Business Review 19 73ndash87

Miller D amp Le Breton-Miller I (2005) Managing for the long run Lessons in competitiveadvantage from great family businesses Boston MA Harvard Business School Press

Miller D Le Breton-Miller I amp Lester R H (2010) Family ownership and acquisitionbehavior in publicly-traded companies Strategic management Journal 31 201ndash223

Miller D Lee J Chang S amp Le Breton-Miller I (2009) Filling the institutional voidThe social behavior and performance of family vs non-family technology firms inemerging markets Journal of International Business Studies 40(5) 802ndash817

Moog P Mirabella D amp Schlepphorst S (2011) Owner orientations and strategiesand their impact on family business International Journal of Entrepreneurship andInnovation Management 13(1) 95ndash112

Morck R amp Yeung B (2003) Agency Problems in Large Family Business GroupsEntrepreneurship Theory amp Practice 27(4) 367ndash382

Morck R amp Yeung B (2004) Family control and the rent-seeking society Entre-preneurship Theory amp Practice 28 391ndash409

Mustakallio M Autio E amp Zahra S A (2002) Relational and contractual governancein family firms Effects on strategic decision making Family Business Review 15205ndash222

Ng W amp Roberts J (2007) lsquoHelping the familyrsquo The mediating role of outside directorsin ethnic Chinese family firms Human Relations 60(no 2) 285ndash314

Nordqvist M amp Melin L (2010) The promise of the strategy as practice perspective forfamily business strategy research Journal of Family Business Strategy 1(1) 15ndash25

Olson P D Zuiker V S Danes S M Stafford K Heck R K Z amp Duncan K A (2003)The impact of the family and the business on family business sustainability Journalof Business Venturing 18(5) 639ndash666

Oxfeld E (1992) Individualism holism and the market mentality Notes on therecollections of a Chinese entrepreneur Cultural Anthropology 7(2) 267ndash300

Pieper T M (2010) Non solus Toward a psychology of family business Journal ofFamily Business Strategy 1(1) 26ndash39

Pieper T M Klein S B amp Jaskiewicz P (2008) The impact of goal alignment on boardexistence and top management team composition Evidence from family influ-enced businesses Journal of Small Business Management 46 372ndash394

Prencipe A amp Bar-Yosef S (2011) Corporate governance and earnings management infamily-controlled companies Journal of Accounting Auditing amp Finance 26 199ndash227

Prencipe A Bar-Yosef S Mazzola P amp Pozza L (2011) Income smoothing in family-controlled companies Evidence from Italy Corporate Governance An InternationalReview 19 529ndash546

Rafaeli A amp Sutton R (1989) The expression of emotion in organizational life InCummings L L amp Staw B M (Eds) Research in organizational behavior (Vol 11 pp1ndash42) Greenwich JAI Press

Rafaeli A amp Sutton R I (1987) Expression of emotion as part of the work role TheAcademy of Management Review 13(1) 23ndash37

Rafaeli A Semmer N amp Tschan F Emotion on work settings In K Scherer amp D Sander(Eds) Oxford companion to the affective sciences Oxford Oxford University Press inpress

Rodriguez P Tuggle C S amp Hackett S M (2009) An exploratory study of howpotential lsquofamily and household capitalrsquo impacts new ventures start-up ratesFamily Business Review 22(3) 259ndash272

Rosenblatt P C de Mik L Anderson R M amp Johnson P A (1985) The family inbusiness Understanding and dealing with the challenges entrepreneurial families faceSan Francisco Jossey-Bass

San Martin Reyna J M amp Duran-Enclada J A (2012) The relationship among familybusiness corporate governance and firm performance Evidence from the Mexicanstock exchange Journal of Family Business Strategy 3(2) 106ndash117

Schulze W S Lubatkin M H Dino R N amp Buchholtz A K (2001) Agency relation-ships in family firms Theory and evidence Organization Science 12 99ndash116

Sciascia S Mazzola P Astrachan J H Pieper T M Family involvement in the board ofdirectors Effects on sales internationalization Journal of Small Business Manage-ment forthcoming

Sharma P Chrisman J J amp Chua J H (1997) Strategic management of the familybusiness Past research and future challenges Family Business Review 10(1)1ndash35

Siebels J amp zu Knyphausen-Aufseszlig D (2011) A review of theory in family businessresearch The implications for corporate governance International Journal ofManagement Review forthcoming

Sorenson R L (2011) Family business and social capital Cheltenham UK Edward ElgarSpangler B (2003) Stakeholder representatives In G Burgess amp H Burgess (Eds)

Conflict research consortium Boulder University of ColoradoSteier L P (2001) Family firms plural forms of governance and the evolving role of

trust Family Business Review 14(4) 353ndash367Steier L P (2003) Variants of agency contracts in family-financed ventures as a

continuum of familial altruistic and market rationalities Journal of Business Ven-turing 18(5) 597ndash618

Stewart A (2003) Help one another use one another Toward an anthropology offamily business Entrepreneurship Theory and Practice 27(4) 383ndash396

Stewart A amp Miner A S (2011) The prospects for family business in researchuniversities Journal of Family Business Strategy 2(1) 3ndash14

Stockmans A Lybaert N amp Voordeckers W (2010) Socioemotional wealth andearnings management in private family firms Family Business Review 23(3)280ndash294

Sundaramurthy C (2008) Sustaining trust within family businesses Family BusinessReview 21 89ndash102

Sundaramurthy C amp Kreiner G E (2008) Governing by managing identity bound-aries The case of family businesses Entrepreneurship Theory and Practice 32(3)415ndash436


Sundaramurthy C amp Lewis M (2003) Control and collaboration paradoxes ofgovernance Academy of Management Review 28 397ndash415

Voordeckers W Van Gils A amp Van den Heuvel J (2007) Board composition in smalland medium-sized family firms Journal of Small Business Management 45 137ndash156

Wang D (2006) Founding family ownership and earnings quality Journal of Account-ing Research 44(3) 619ndash656

Ward J (2004) How governing family businesses is different In Mastering globalcorporate governance (pp 135ndash167) Chichester Wiley

Ward J L (1988) The special role of strategic planning for family business FamilyBusiness Review 1(2) 105ndash117

Ward J L amp Handy J L (1988) A survey of board practices Family Business Review1(3) 298ndash308

Webb J W Ketchen D J amp Ireland R D (2010) Strategic entrepreneurship withinfamily-controlled firms Opportunities and challenges Journal of Family BusinessStrategy 1(2) 67ndash77

Wester P Merrey D J amp De Lange M (2003) Boundaries of consent Stakeholderrepresentation in River Basin Management in Mexico and South Africa WorldDevelopment 31(5) 797ndash812

Windsor D (1999) Can stakeholder interests be balanced IABS 1999 proceedings tenthannual conference (pp 476ndash481)

Wright M amp Zahra S (2011) The other side of paradise Examining the dark side ofentrepreneurship Entrepreneurship Research Journal 1(3) 1ndash5

Yeh Y amp Woidtke T (2005) Commitment or entrenchment Controlling shareholdersand board composition Journal of Banking and Finance 29 1857ndash1885

Zachary R K amp Mishra C S (2011) The future of entrepreneurship research Callingall researchers Entrepreneurship Research Journal 1(1) 1ndash13

Zachary R K (2011) The importance of the family system in family business Journal ofFamily Business Management 1(1) 26ndash36

Zachary R K Danes S M amp Stafford K Extensions of the sustainable family businesstheory (SFBT) Operationalization and application In K Smyrnios P Z Poutziourisamp S Goel (Eds) Handbook of research on family business (2nd ed) Cheltenham UKEdward Elgar Publishing in association with International Family EnterpriseResearch Academy (IFERA) forthcoming

Zachary R K Rogoff E G amp Phinisee I (2011) Defining and identifying familyentrepreneurship worldwide A new view of entrepreneurs In M Minniti (Ed) Thedynamics of entrepreneurship Evidence form global entrepreneurship monitor data(pp 57ndash76) Oxford UKNew York USA Oxford University Press

Zahra S A amp Sharma P (2004) Family business research A strategic reflection FamilyBusiness Review 17(4) 331ndash346

Zhang X Venus J amp Wang Y (2012) Family ownership and business expansion ofsmall- and medium-sized Chinese family businesses The mediating role offinancing preference Journal of Family Business Strategy 3(2) 97ndash105

Zellweger T M amp Astrachan J H (2008) On the emotional value of owning a firmFamily Business Review 2008(4) 347ndash363

Zellweger T M Eddleston K A amp Kellermanns F W (2010) Exploring the concept offamiliness Introducing family firm identity Journal of Family Business Strategy1(1) 54ndash63


Pieper 2010 Stewart amp Miner 2011) Family firms have often beenstudied through the lens of theories and conceptualisationsborrowed from other disciplines within and related to businessresearch such as psychology economics sociology and so forth(Pieper 2010 Zachary amp Mishra 2011 Zahra amp Sharma 2004)Early applications of the traditional theories have not alwaysconsidered the dynamics variety and nature of the socialrelationships in the family system and its economic enterpriseThe results have revealed overly simplistic and caricaturisedexplanations of the complexities (Pieper 2010) For exampleSteier (2003) illustrated how agency theory a popular frameworkin the field needs to be contextualised within family businessesbecause various contracts can be observed in family firms Thus forfamily-financed ventures he carefully delineated family-financialbusiness arrangements among family members and declared suchrelationships as variants of the classic agency contracts In otherwords family investments in their own firms encompass familialaltruistic exchanges that are often confounded by combined withor that compete with economic self-interest driven by the marketResearchers further explicated the importance of the familysystem relative to the family firm (Cramton 1993 Kepner1983 Olson et al 2003 Rosenblatt de Mik Anderson amp Johnson1985 Zachary Danes amp Stafford forthcoming Zachary 2011)suggesting that the study of family firm behaviours combines thefamily system and the business system and therefore requirescomprehensive and multidisciplinary perspectives to enable theexamination of various psychological and sociological aspects inboth systems (Zachary et al forthcoming Zachary amp Mishra2011) In fact the socio-psychological dimensions of the familyfirm may well influence all other business dimensions Addition-ally both the family system and the business system shouldcertainly be examined separately and relative to their interactionsbetween each system

Recent empirical research seems to support this notion Forinstance Basco and Perez Rodriguez (2009) found that family firmsthat simultaneously emphasise the objective of both systemsreport better family and business results when compared withfamily firms that limit their attention only to the business In afollow-up study the authors also found that family firms canachieve successful business results by combining both family andbusiness orientations in their strategic decision making (Basco ampPerez Rodriguez 2011)

To date only some researchers have accepted the challenge ofsimultaneously considering the dynamics of the family and thebusiness systems (Zachary amp Mishra 2011) Few extant theorieswith the exception of the Sustainable Family Business Theory(SFBT) enable the simultaneous modelling and testing of both thefamily and business system outputs (eg Olson et al 2003) TheSFBT critically examines the inputs throughputs and outputswithin each major system and the interface between each systemas well as the short-term viability and the long-term sustainabilityof the family business (Zachary et al forthcoming)

In the editorial Firm Family Firms Current Debates of

Corporate Governance in Family Firms Ruth Aguilera and RafelCrespi-Cladera (2012) critically review the extant research onownership and governance of the family firm Traditional viewsof ownership and governance as well as their dynamics andeffects on the family firm are delineated and critically reviewedBy including the contingencies that exist in different institu-tional environments the authors emphasise that in certaininstitutional environments family firms may actually providethe best lsquolsquorefugersquorsquo for other non-controlling owners Viewed inthis light in lsquolsquoweakrsquorsquo institutional environments the so-calledlsquolsquorent-expropriationrsquorsquo by family firms as summarily concluded byother researchers may actually be a lsquolsquopremium for stability andresponsible managementrsquorsquo

Simply stated nonfamily stakeholders may not experiencenegative effects from family ownership The authors use twospecific contingencies in which the relative benefits and costs mayfavour the family firm With regard to the succession contingencythe negative view of nepotism is questioned and lsquolsquoturned on itsheadrsquorsquo the net benefits (net of costs) of a qualified (in terms ofabilities and training) family successor may be higher than those ofa manager from outside the family The authors argue that theother contingency the existence of Family Business Groups (FBG)may actually be more efficient than the widely-held firms (egwhen the investor protection environment is weak or nonexistentin practical terms) Additionally the authors suggest that Morckand Yeungrsquos (2003) indictment of family firms may have beenunfair because it did not weigh the relative agency costs of familyfirms vis-a-vis for example the widely held firms or firms withdominant institutional or professional investors such as privateequity firms In other words the fact that family firms imposeagency costs on other investors may not be significant if there isevidence that the agency costs of other types of dominant orcontrolling owners are likely higher Little beyond a cursory glanceat the firms implicated in the events leading to the global financialcrisis of 2007ndash2009 certainly suggests this line of reasoning

Whereas strategy ownership governance and socio-psycho-logical areas of study are well established in business researchapplications of these areas to family business research are few Thispaucity is both a challenge and an opportunity because the samefundamental parameters that undergird businesses in general arealso relevant to family businesses

21 Strategy

Strategy research suggests that family firms must consider theirstrategic choices in the context of the owning familyrsquos complexities(Chrisman Chua amp Sharma 2005 Sharma Chrisman amp Chua1997 Ward 1988) Family firm strategies encompass the internaldynamics of the business and its external environment as well asthe familyrsquos interests goals succession issues culture and siblingrelationships Hence for example the involvement of familymembers in the business must be considered throughout thestrategic management process (Astrachan 2010) Generally therelationship of family dimensions to business strategies is notexamined relative to their origins dynamics and influences withinthe family system For example which dynamics within a familymight predetermine the designation of a successor Are successorschosen within families to promote certain strategies in thebusiness or not Could the adult children of the founder bestereotyped favoured or groomed within the family systembecause a particular business strategy is preferred The effects ofthe family system on strategy formation within the business areusually examined through the lens of the business with littleregard for the internal mechanisms of the family system

We know that the family must have a measurable influence onvarious strategic decisions such as those related to innovation(Bergfeld amp Weber 2011) Family firms exhibit better-to-marketstrategies even as they emphasise local community responsibilityin such strategies (Moog Mirabella amp Schlepphorst 2011) Thelsquofamily-as-a-bundle-of-resourcesrsquo perspective (Irava amp Moores2010 Frank Lueger Nose amp Suchy 2010 Zellweger Eddleston ampKellermanns 2010) conceptualises the family as a source of uniqueresources and competencies that may provide a competitiveadvantage (Memili Eddleston Kellermanns Zellweger amp Barnett2010 Webb Ketchen amp Ireland 2010) Family involvement andinfluence in strategies alter organisational goals such as theimportance of incorporating sustainability (Brewton DanesStafford amp Haynes 2010) and the relative importance of businessand family outcomes (Pieper 2010)





22 Ownership










23 Governance





























family identity


from family systems


longitudinal data


measures of ACAP












weaving industry




longitudinal data















decision






business system
























































References














































































































































22 Ownership










23 Governance





























family identity


from family systems


longitudinal data


measures of ACAP












weaving industry




longitudinal data















decision






business system
























































References











































































































































23 Governance





























family identity


from family systems


longitudinal data


measures of ACAP












weaving industry




longitudinal data















decision






business system
























































References





























































































































































family identity


from family systems


longitudinal data


measures of ACAP












weaving industry




longitudinal data















decision






business system
























































References






















































































































































































References










































































































































Strategy, ownership, governance, and socio-psychological perspectives on family businesses from...

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