A factor model of family involvement in a business: familiness manifested in ownership, management and operation

Abstract

Family involvement in a business is usually conceptualised dichotomously, family business or not. This is overly simplistic in that involvement encompasses several kinds. To overcome this we pursue multi-dimensional modelling. Our questions are, first, can family involvement be conceptualised as a latent property indicated by ownership, management and operation; second, is operationalisation by a factor model similar across societies; and, third, can this model predict outcomes, perhaps better than the simplistic dichotomy? The research design is to factor analyse measures of kinds of family involvement in businesses randomly sampled in four countries. Findings are that family involvement can be modelled as a latent variable indicated by ownership, management and operation. Within each country, the factor loadings are all positive, but their magnitudes differ across countries. The latent variable predicts outcomes, like the dichotomy, and occasionally better. The originality of the article is a reconceptualisation of family involvement as a latent property with manifestations. The contribution is a model of involvement which is more realistic and revealing than the dichotomy.