Family Firms In Terms Research Articles

The state of family business research in the Visegrád countries

PurposeThe institutional context in which family firms operate influences their behaviour and performance, yet literature reviews seldom analyse family firms on a regional basis. To fill this gap, this review aims to present research on family entrepreneurship in the transition economies of the Visegrád countries (V4). In this particular group of European economies, the current formal institutions have largely evolved along Western European lines. However, the transformation of informal institutions appears to be still in its infancy.Design/methodology/approachIn order to identify the most representative authors, the methodologies used, the main research topics and to establish a future research agenda, the authors selected, through a systematic process, 112 papers from the Web of Science up to the year 2022. The authors performed a bibliographic analysis using clustering algorithms, complemented by a traditional literature review.FindingsThe performance of family firms in transition economies has been the subject of very little research. The results allowed the authors to identify four main areas of research: governance, innovation, sustainability, competitive advantage and considering the influence of the region's characteristics on family business behaviour.Originality/valueStudies from transition economies can contribute to a broader understanding of family firms in terms of the impact of the institutional environment (especially the influence of sociological changes and specific historical experiences of family members) on their long-term planning, socioemotional wealth (SEW) protection and ethics. In light of recent events, research from the region may also contribute to the understanding of how and to what extent “familiness” influences crisis management or socially responsible behaviour in family firms.

Shareholder activism in listed family firms: Exploring the effectiveness of say‐on‐pay on CEO compensation

AbstractThe widespread critical evidence surrounding executive compensation of listed corporations has boosted shareholder activism in recent decades. The say‐on‐pay (SOP) mechanism—a vote in which shareholders express their (dis)agreement with executive pay designs—is one of the corporate governance mechanisms that has led to this activism among listed firms. Merging agency and socioemotional wealth (SEW) arguments, this paper analyzes how effective SOP voting results are among listed family firms in terms of CEO compensation efficiency and equity. Using a sample of UK listed firms from 2011 to 2018, our results show that SOP effectiveness is positively influenced by family ownership and is strongly moderated by family involvement in management and in governance as well as by family generation. Our findings stress the strong family effect and the ethical perceptions of family shareholders on SOP voting, showing how family participation in the firm encourages fairer and more aligned CEO compensation packages. SOP institutional and practical implications oriented to preserve shareholder value and family wealth are finally outlined.

Family firm performance in times of crisis—new evidence from Germany

AbstractLiterature shows that founding-family control tends to positively impact firm performance and valuation. However, it is questioned whether this positive impact also persists in times of crisis or might even be reverted, as in such periods families could be focused on the survival of the firm even at the expense of long-term cash flows. By studying a large sample of listed German firms over the period 1998–2018, we document a significant outperformance of family firms in terms of ROA and (to a lesser extent) Tobin’s Q during the crisis years 2008–2010 relative to their non-family counterparts. Moreover, this crisis resilience is more pronounced the stronger the family influence in terms of equity ownership. Outside the crisis period, there is only weak evidence for any outperformance. Digging deeper into this crisis effect, we find family firms to significantly reduce their leverage during the crisis. This, however, is not done at the expense of future cash flows, as we find weak evidence that family firms increase their capital expenditures as well as their employment relative to their non-family counterparts. Given that these results also hold in a dynamic panel system GMM approach and withstand a battery of robustness tests, we hope to add new evidence on the drivers of family firm performance.

Family Firms’ Acquisitions and Politicians as Directors: A Socioemotional Wealth Approach

This study analyzes how family control influences firms’ acquisition activity using a socioemotional wealth (SEW) approach and discusses their anticipated SEW gains and losses when making acquisition decisions. Data collected from Spanish public companies from 2010 to 2015 indicates that family firms are more reticent about undertaking acquisitions than nonfamily firms, and their lower propensity is more pronounced when there are no former politicians on the board of directors whose presence could reduce potential SEW losses. Furthermore, the benefits of former politicians on the board of family firms in terms of acquisition activity only occur in low-velocity industries.

They Shun to Explore, But Still Survive – (Non-) Founding Family Firms and Explorative Orientation

Balancing exploration and exploitation is proposed to lead to short-term success, while securing long-term survival. Similarly, family firms are indicated to perform equally well in the short-term and are better survivors over time, compared to non-family firms. One might expect that family firms are very good in balancing exploration and exploitation. However, their strong tendency toward family control and risk-aversion imply a predominance of exploitation. We hypothesize and test the effect of family influence in general, and founding and non-founding family influence in particular, on a firm’s relative exploration orientation. By examining S&P 500 companies, we discover family influence to have a negative impact on a firm's relative exploration orientation. We further show that this relationship is particularly relevant for the relationship between founding family influence and relative exploration orientation. While we find argumentative reasons and empirical evidence that non-founding family influence has a negative impact on relative exploration orientation likewise, the results appear less robust to changes in operationalization. We seek to elucidate the so far underexplored field of family firms in terms of exploration and exploitation.

Influence of Government Support on Proactive Environmental Strategies in Family Firms

Scholars have dedicated significant efforts to understanding the factors that influence the environmental strategy of a firm, in order to mitigate the negative impacts on the ecosystem. Learning more about the factors that encourage environmental behavior allows managers and policy makers to improve action and advance correctly in this direction. Despite this academic interest, the literature regarding family business has undertaken limited attention over the issue. Hence, our paper aims to advance in this line of research, by empirically examining the relationship between government support in family firms and their investment in environmental protection. Specifically, we intend to analyze whether the family nature, and the government financial support, influence their environmental strategy. The empirical analysis is developed with a sample of 1802 manufacturing firms in Spain, using a binary logistic regression to evaluate the existence of dependency relationships between the analyzed variables. The results show this dependency, confirming family nature and government support as significant factors for a proactive environmental strategy, funding the idea that family character positively affects environmental performance in line with the socio-emotional wealth approach, and these differences are greater if the company operates mainly in a local area. Likewise, family firms that receive state direct and indirect funding, invest more in environmental issues to mitigate negative external impacts. The practical implications of the results obtained are especially useful for managers of family businesses as well as for central governments and local institutions as a matter of reflection. To reduce administrative processes and costs for family firms in terms of direct and indirect support is of great importance, as an inadequate process may become a barrier to develop environmental strategies.

From family commitment to entrepreneurial orientation: exploring the role of cultural mechanisms in mature family firms

At a stage of life cycle maturity, the unique advantages of family influence are often outweighed by organizational conditions of conflict, risk-aversion, and inertia which makes it difficult to exploit entrepreneurial opportunities. Guided by the proposition that a positive culture enables the entrepreneurial spirit to be preserved over time, this study focuses on examining the cultural dynamics between family and business social systems to advance our understanding of the heterogeneity of mature family firms in terms of entrepreneurial orientation (EO). Specifically, it bridges the link between family commitment and firm-level EO by considering long-term orientation and stewardship climate to operate as organizational culture mechanisms. From a quantitative study of 208 family firms, the findings provide evidence for EO to be supported by the proposed serial mediation process. A family’s strong commitment toward the business thus seems to stimulate EO only when passing through long-term-oriented priorities among the firm’s dominant coalition and an organizational environment characterized by collective stewardship.

The first turnaround response of family firms in a crisis situation

Building on recent advances in the socioemotional wealth (SEW) literature and the concept of bifurcation bias, we explore the first turnaround response of family firms to a decline in financial performance. We argue that heterogeneity among family firms in terms of their levels of family ownership and family involvement in management alters their response to an economic crisis situation. We also contend that severity of a crisis situation significantly moderates the relationships. Our multi-level analysis of a sample of crisis situations pertaining to family firms supports our hypotheses.

Heterogeneity in family firms: contextualising the adoption of family governance mechanisms

PurposeThis research is aimed to better understand what characteristics of family firms create a context in which family governance systems are more frequently adopted.Design/methodology/approachWe analyse a sample of 490 Spanish family businesses using cluster analysis, and we identify four different types of family businesses whose characteristics are associated to the adoption of different family governance systems, i.e. family councils and family protocols. The comparison between clusters of the baseline parameters was performed using one-way analysis of variance (ANOVA) for parametric variables, the χ2 test for parametric variables and Kruskal-Wallis for nonparametric variables. By conducting between-profile analysis of covariance (ANCOVA), we tested for differences in the dependent variables (i.e. the existence of family councils and/or existence of family protocols) between the clusters, using cluster membership as the independent variable.FindingsTaking into account the characteristics of family firms in terms of ownership structure, management involvement, and family and organizational complexity, we identify four different contexts that create different communication needs and are related to the use of different family governance mechanisms. We characterize the different contexts or types of family firms as: founder-centric, protective, consensual and business-evolved. Our findings show that family protocols are associated to contexts with high family involvement in management and family complexity, while family councils are more frequent when there is a separation of managerial and ownership roles and there is a high organizational and family complexity.Research limitations/implicationsThe study highlights the value of social systems theory in order to explain the association between the characteristics of different firm types and contexts, and the use of family councils and family protocols to govern the relationship between the owner family and the business.Practical implicationsFamily governance mechanisms are widely recommended by practitioners and scholars. However, they are usually adopted only by a small percentage of family firms. This study helps to better understand what family governance systems may be more appropriate in different contexts and relativize the necessity of these governance mechanisms in function of the communication needs created within each context.Social implicationsThe improvement of family governance mechanisms helps to increase the likelihood of survival and durability of family firms. These firms contribute to more than 60% of employment in most developed countries. Consequently, good governance in family firms has social implications in terms of labour conditions and stability.Originality/valueMost family firms don't use family protocols or family councils to govern the relationship between the owner family and the firm. However, little is known about the reasons for this lack of structuration of the family-firm relationship. Using social systems theory, our research contributes to better understand the conditions in which business families are more prone to use structured forms to manage this relationship, as well as the reasons that may be constraining their adoption.

Influence and values: The connection between participation and commitment in family firms

Family commitment is critical for the continuity of a family firm, and family ownership does not always translate into a higher commitment to the firm in family members. The heterogeneity among family firms in terms of family members’ commitment may be due to varying degrees of family participation and influence in the firm. In this study, we utilize the theory of psychological ownership to propose that participation, influence, value congruence and commitment are related. Specifically, we hypothesize that family influence and value congruence mediate the relationship between family participation and commitment. Our study expands the current understanding of participation and commitment by recognizing that not all types of participation are the same. Specifically, we investigate how various types of participation affect members’ influence in the firm and their attitude toward the firm.

Knowledge, Renewal and Flexibility: Exploratory Research in Family Firms

This study aims to explore how family firms pursue strategies that promote strategic flexibility and knowledge-management (KM) practices to respond to strategic-renewal goals. Specifically, based on a knowledge-based view of the firm, the following research question is proposed: Are there heterogeneous groups of family firms in terms of knowledge management, strategic flexibility and strategic renewal goals? To answer this question, an exploratory study using a two-step cluster analysis is developed. It reveals natural groupings from a sample of 288 small and medium-sized Spanish family enterprises (SMEs). The results obtained identified three distinctive clusters of family firms, namely proactive family firms, transitional or adaptive family firms, and rigid family firms. After two-step cluster analysis, we also conducted analysis of variance (ANOVA) to confirm that significant differences amongst the three clusters exist. After heterogeneity been confirmed, a further profile of the cluster solution was provided by using CEO and board characteristics, as well as the generational stage of the company. The findings offer some counterbalance for those studies that tend to study family businesses as a homogeneous entity, thus permitting researchers to access more information, providing rich explanations for renewal managerial decision-making purposes in family firm contexts.

How social capital influences performance in family firms: the moderating role of nepotism

Although a large body of research has explored how organizational social capital (OSC) benefits organizational performance, results are not conclusive. Consequently, scholars have called for more research on the factors that may moderate the effects of OSC on organizational performance. We address this research gap and examine the role of nepotism, which is the preferential treatment of family members in human resource management (HRM)-related decisions, such as development or rewards, in the relationship between OSC and organizational performance. Using a sample of 77 family firms in Switzerland, we found that the relationship between OSC and organizational performance is stronger in firms with higher nepotism. This research contributes to the HRM literature by exploring how the preferential treatment of family members in HRM-related decisions (i.e. greater nepotism) can provide benefits to family firms in terms of the impact of OSC on organizational performance.

The influence of family involvement and generational stage on learning-by-exporting among family firms

This paper explores the link between export activity and product innovation in family firms. Following the learning-by-exporting (LBE) hypothesis and considering that family firms are not homogeneous entities, we examine differences among family firms with regard to the influence of export activity on product innovation, based on the degree of family involvement in management and on the generational stage. Based on a sample of 7742 observations corresponding to over 770 family firms operating in 20 different manufacturing industries in the period 2007–2016, empirical findings point to significant differences between family firms in terms of converting the benefits of exporting into product innovation. A greater level of family involvement in management fosters the LBE effect on product innovation through an inverted U-shaped pattern, which reaches a peak when there are 2.45 family members involved in managing the company. Contrary to expectations, results also show a positive influence of first-generation family firms on the LBE effect on product innovation.

A Contingent Perspective on Management Accounting Systems in Family Firms

This study analyzes both theoretically and empirically management accounting system choices in family firms with family CEOs in comparison to non-family firms and family firms with external CEOs. After theorizing differences with regard to both decision-facilitating (timeliness of management accounting information) and decision-influencing (objective performance evaluation, target specificity, target deviation tolerance) management controls, I argue that family CEOs with a propensity for technocratic decision making are better capable of balancing family and business perspectives. This implies that technocratic decision making weakens the family effect on management accounting system choices. Drawing on a dataset of 190 Austrian small and medium-sized firms from the manufacturing industry the results indicate idiosyncratic behavior of family firms in terms of management accounting system choices. Furthermore, the results corroborate the hypothesis that technocratic decision making moderates the family effect on management accounting systems. Finally, I also conduct an exploratory performance analysis to shed more light on the performance effects of management accounting systems in family firms. The findings indicate that only timeliness of management accounting information displays a significant positive effect while the decision-influencing management controls are not related to firm performance.

Family firms, firm characteristics, and corporate social performance

Purpose – The purpose of this paper is to explore corporate social performance attained by listed family and non-family firms in Japan. They are measured by the composite CSP index and five attributes composed of employ relations, social contributions (SCs), firm security and product safety, internal governance and risk control, and environment concern. Design/methodology/approach – The authors employ univariate and regression analyses on the quantitatively aggregated CSP score data of Japanese firms from 2007 to 2009. Findings – Japan non-family firms tend to perform better than family firms in terms of attaining corporate social performance overall. Family CEOs positively affect CSP in the foods, textiles and apparels, and pharmaceutical industries as well as in retail trade, wholesale, and services industries, but negatively affect CSP in the heavy manufacturing industry. In these industries the joint effect of the percentage of family shareholdings and the fraction of family members on the board also augments the positive role played by family CEO. The findings are robust when the sample is ranked by Tobin’s q. Research limitations/implications – The observation period is short due to the data availability of CSP by Toyo Keizai Inc. This data covers all the listed firms which answered the questionnaire, which may also contain sample selection problems. Practical implications – Positive role of CEO and negative effects of shareholdings among listed family firms in Japan call for attention and corrective measures for top management and family shareholders. Social implications – While family firms in Japan may accumulate socioemotional wealth, they should exert more efforts to advance CSP and create social capital. Originality/value – This is the first comprehensive quantitative study in the field, which explored CSP of all the listed family firms vs non-family firms in Japan with large sample.

Study of factors influencing knowledge transfer in family firms

Purpose: We propose in this paper to analyze what are the factors that influence knowledge transfer both intra and intergenerational in family firms. The main objective is to establish a framework that can be used later in empirical research, although we maintain a completely theoretical approach in this paper Design/methodology/approach: This study, which is a comprehensive framework characterized the knowledge transfer literature in family firms in terms of the factors influencing them, was developed by an extensive literature review. Findings: Based on an extensive literature review, we conclude that knowledge is best transferred when family members value the following factors: trust between family members, commitment to the family business, intergenerational relationships, intragenerational relationships, psychological ownership of the family business, successor’s aspects and training, predecessor involvement in the successor training, organizational culture and relationships with Family Business Associations. Research limitations/implications: The study demonstrates the extensiveness and variety of knowledge transfer research. However there is not the same situation in family firms’ field. For academics, these different factors can be used as a map for future empirical studies. Originality/value: There is a notable lack of research into knowledge practices in small and medium-sized enterprises and especially in family firms. Besides, there is a gap in the understanding of an effective way to transfer these resources across generations; actually, existing studies on knowledge management in family businesses are scarce. The main value of our paper is to fill out partially this gap.

Family Communication and Innovativeness in Family Firms

This conceptual article seeks to address the heterogeneity of family firms in terms of their innovativeness by investigating business family communication dynamics. We use the established family communication constructs of conversation and conformity orientations to develop a typology of family firms in terms of innovativeness. We provide empirically testable propositions and present possible operationalizations for future research. In particular, we argue that supportive business families (i.e., families characterized by high conversation orientation and moderate conformity orientation) are associated with the highest levels of innovativeness in the family‐controlled firm. Through this article we hope to deepen our understanding of the relationship between family and firm levels of analysis, to develop a stronger bond between communication and innovative behavior, and to identify family‐related antecedents of heterogeneity in family firm innovativeness.

How do Family Firms Deal with the Crisis?

This research note proposes to analyse how family firms faced the financial crisis of 2008. Generally, the conceptual literature seems to confirm a better performance of family firms in terms of financial, trade, and economic performance. Indeed, specific characteristics related to family firms may generate competitive advantage in comparison with other types of companies. These theoretical developments are validated empirically (Anderson & Reeb, Journal of Finance, 2003; Maury, Journal of Corporate Finance, 2006; Bughin & Colot, Revue francaise de gestion, 2008), although contradictory results may be found (Gomez-Mejia et al., Academy of Management Journal, 2001 ; Schulze et al., Organization Science, 2001). Indeed, family ownership, family control, involvement of family members across generations, and other control mechanisms enhancing performance have been analysed without a strong consensus. Besides, the financial turmoil that happened in 2008 has had a huge impact on the economic fabric all around the world. Analysing the performance of family firms in such a context therefore seems particularly interesting since minimal research has been carried out in the field during economic or financial downturns. The purpose of this paper is thus to shed new light on the performance of Belgian large family firms during the crisis through a comparison with non-family firms evolving in the same context. This analysis will show that family firms develop idiosyncrasies that make them more resilient than non-family firms. While several arguments arising from stewardship, agency, or resource based theories indicate that family firms may outperform non-family firms during a crisis, evidence has shown that in public family firms where the founder is no longer involved, minority shareholders are expropriated by family shareholders who want to maximize their personal wealth during a period of disturbances. A principalprincipal conflict is thus more likely to occur in family firms under these Int Adv Econ Res (2013) 19:313–314 DOI 10.1007/s11294-013-9412-5

How one bad family member can undermine a family firm: Preventing the Fredo effect

Family owned and managed firms represent a large proportion of businesses operating domestically and globally. Dynamics introduced by family members can develop into significant problems for the family-owned firm, and have far-reaching implications for its performance. One challenge entails coping with a family member employee who, for various reasons, behaves in ways that have toxic and damaging effects on the business. We label this phenomenon ‘the Fredo effect,’ referencing the incompetent brother from The Godfather books and movies. Herein, we discuss the Fredo effect in a family firm context, why the Fredo effect is unique to family firms, and how the effect develops over time in family relationships. We further analyze how the Fredo effect hurts family firms in terms of leadership succession and performance, and what family firm leaders can do to address it.

Financial Behaviours of Family and non-Family Firms in Belgium

The aim of this paper is to distinguish the financial behaviour adopted by family firms in comparison with non-family firms in an environment where tax regulation can influence the financing costs of equity capital. Indeed, the coming into force of an allowance for corporate equity on the Belgian market creates a field where relevant investigations on capital structure can be carried out. Moreover, the literature review shows how little attention has been paid to family firms in terms of financial behaviour, the main research focusing on family SMEs (Colot & Croquet, Management et Avenir, 2007; Lopez-Gracia & Sanchez-Andujar, Family Business Review, 2007). The analysis of our results demonstrates a divergence between family and nonfamily firms. Nevertheless, this situation must be appreciated for the period 2006– 2010, since no significant evidence regarding a behavioural dissimilarity was found for the previous period, 2002–2005. While family firms seem to pursue an indebtedness target ratio and to finance their funding deficit by issuing stocks, non-family firms follow none of the theories considered in our research. Hence, the financial policies adopted by family firms shift towards a reduction of their indebtedness level and an increase of their financial independence level. Such a situation allows them to limit their financial distress costs (Frank & Goyal, Journal of Financial Economics, 2003) and to benefit from a tax advantage owing to the deductibility of a fictitious and undisbursed interest expense. The double benefit resulting from the coming into force of the new tax regulation could thus exercise an effect on the financial behaviour adopted by family firms. Nonetheless, we cannot draw a robust conclusion, as the observation period 2006–2010 was perturbed by the consequences of the financial and economic crisis. In such a context, it would be inappropriate to attribute Int Adv Econ Res (2012) 18:459–460 DOI 10.1007/s11294-012-9372-1