Cutting Agency Cost and Initiating Entrepreneurship in Family Business: The Roles of FC and LTO

Abstract

Corporate entrepreneurship (CE) is designed to revitalize a firm’s business by changing its competitive prfile. Using agency cost perspective, we suggest that the initiation of CE in family firms is largely depended on the reduction of agency cost due to (1) conflicts between dominant and minority family shareholders; (2) the separation of family ownership and nonfamily management. We theorize that both of family commitment and a firm’s long-term orientation (LTO) can initiate CE as a result of the reduction of agency cost among family shareholders and between family shareholders and nonfamily managers. This study further extends the literature by hypothesizing that the firm’s long-term orientation partially mediates the relationship between family commitment and CE. We test these hypotheses in a sample of 956 family firms, verifying a complete picture of the family and business antecedents on corporate entrepreneurship.