Bifurcation bias and family compensation: The case of Dawu Group

Abstract

The bifurcation bias refers to the asymmetric treatment between two groups. In the context of family firms, the bifurcation bias often refers to a behavioral pattern to the family and non-family employees (Verbeke and Kano, 2012; Daspit, Madison, Barnett, Long, 2018). The presence of bifurcation bias motivates non-family employees to seek opportunistic behaviors against the owners of the family firms therefore creates principal-agent problems in these organizations (Verbeke and Kano, 2012). A common approach to achieve this objective is to reduce or to de-emphasize the family influence of the business by promoting professionalism. While this approach addressed the negative effect of agency problems, it dilutes the role of family in the family firms. In this research we proposed balanced perspective in which the bifurcation bias and professionalism are able to coexist. Based on an extensive case analysis, we argue that the family firms are able to minimize bifurcation bias thus de-motivating opportunistic behaviors while keeping the family relevant in business operations and decision-making.