Family and Lone Founder Ownership and Strategic Behaviour: Social Context, Identity, and Institutional Logics

Abstract

There is controversy in the literature about the effects of ownership on strategy and performance. Some scholars have taken agency explanations as definitive, arguing that closely held firms outperform. Empirical studies, however, show conflicting findings for firms with concentrated ownership: lone founder firms outperform, family firms do not. Such conflicts may be due to the failure of agency theory to distinguish between the social contexts of these different types of owners. We argue that explanations of performance must take into account not simply ownership, but who are the owners or executives and how their social contexts may influence their strategic priorities. Family owners and CEOs, influenced by family stakeholders in the business, are argued to assume the role identities and logics of family nurturers and thus strategies of conservation. By contrast, lone founders, influenced by a wider set of market-oriented stakeholders, are argued to embrace the identities and logics of entrepreneurs and strategies of growth. Family founders and founder-executives are held to blend both orientations. These notions are supported in a study of Fortune 1000 companies.