Family Involvement In Management Research Articles

Family involvement in management and risk-taking of family firms: The moderating role of kinship composition

Corporate risk-taking is a crucial factor that influences firm growth, performance, and survival. Based on the socioemotional wealth and agency theories, we investigate the effect of family involvement in management on risk-taking by considering the moderating role of kinship composition. Using data on Chinese listed family firms, we find that increased family involvement in management significantly reduces family firms’ risk-taking level. The richness of family managers’ kinship weakens the negative effect of family involvement in management on the risk-taking level. Our study enriches the socioemotional wealth and agency theories, by introducing insights of the differential order mode perspective, and demonstrates the significance of kinship ties of family managers on family firms’ risk-taking strategies.

Cash holdings decision‐making in Spanish family firms: Exploring the impact of heterogeneity

AbstractCash holding decision‐making is one of the main corporate challenges for family firms (FFs), with significant consequences for their growth and survival. It is closely connected to key financial decisions such as financing, investments, and dividends. The motivations behind adjusting cash holdings vary, encompassing precautionary, risk avoidance, opportunity cost considerations, and the spending hypothesis. In our study, we aim to integrate specific motivations for cash holding decisions that stem from the influence of family dynamics within these businesses since FFs have unique characteristics, which affect their financial choices. Therefore, we analyze the impact of family involvement in management and the generational stage of FFs on their level of cash holdings. The results of the partial least squares–structural equation modeling, which was estimated on a sample of 7269 unlisted Spanish FFs, show that the higher the level of family involvement in management, as well as the higher the generational stage, the higher the level of cash holdings, with this having a positive effect on the firm's performance. In addition, we find that the positive relationship between family involvement in management and the level of cash holdings is strengthened by family ownership and weakened by family governance. These findings are relevant for a better understanding of the complexity of cash holding decision‐making in FFs and have practical implications not only for the FFs themselves but also for the entities related to them due to the important links between a firm's liquidity and its risk of default and performance.

Family involvement in management, social trust and the environmental responsibility performance of family firms

Based on the perspective of socioemotional wealth, this paper explores the effect of family involvement in management on environmental responsibility performance and the moderating role of social trust by using the data of Chinese A-share listed family firms from 2010 to 2019. The results show that an increase of family involvement in management significantly improves the environmental responsibility performance of family firms, and a decrease in social trust strengthens the positive effect of family involvement in management on environmental responsibility performance. We further investigate the impact of life cycle stages on the above relationship and find that family involvement in management has the most significant positive effect on environmental responsibility performance and that social trust has the most significant moderating role in mature family firms. Our results demonstrate the importance of socioemotional wealth, external environmental factors and life cycle stages for the environmental responsibility strategies of family managers.

Family firms and investment innovation

This study, with the aim of improving the performance of small and medium-sized companies, expresses the impact of the decision-making of managers and entrepreneurs of these companies in the direction of investment innovation in today’s business conditions with wide variables and technological growth. This paper focuses on the phenomenon of innovation within family businesses, seeking to identify and analyse its role in enhancing family-owned firms. The research investigates the influence of family ownership, family management involvement, internationalization strategies, and company size on innovation within the context of family-owned manufacturing companies listed on the Indonesia Stock Exchange. Data spanning is the 2019-2021 period, collected from annual reports and announcements of these manufacturing firms, reveals that family ownership and firm size correlate with investment in innovation. However, the recruitment of family management and the implementation of family-owned business internationalization strategies appear to exert limited influence on innovation activities. Considering the importance of family companies in economic and technical progress and the complexities and changing conditions governing their business environment, this research main contribution is to show how managers and entrepreneurs make decisions in investment innovation according to the conditions of governing in family small and medium companies.

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.

Innovation Promoter or Inhibitor? Non-Family CEO's Effect on Innovation in Family Businesses

Increasing scholarly and practical attention is being paid to determining whether a nonfamily chief executive officer (NFC) is a remedy for the lack of firm innovativeness in the face of ever-changing markets. Departing from the inconclusive findings of NFC research, this article aims to revisit the NFC effect on a family firm's investment in innovation, which is subject to the contextual influence of governance arrangements. In a sample of 6201 firm-year observations of Taiwanese family firms in high-tech industries in the period from 2002 to 2017, we found that the mixed relationship between the NFC and innovation investment is better clarified by considering family involvement in management (FIM) and board independence (BI), both of which yield significantly negative and positive moderating effects on the innovation investment of NFCs, respectively. This article further examines the configurational effect of two moderators on the main relationship, and shows that the negative effect of FIM not only outweighs, but also deteriorates, the positive moderating effect of BI. Our findings contribute not only to family business research, but also to innovation literature by arguing that the risk-taking orientation of an NFC is not universally held, but rather is deliberately arranged for effect.

The COVID-19 pandemic and family business performance

This study examines the impact of the COVID-19 pandemic on corporate financial performance using a unique, cross-country, and longitudinal sample of 3350 listed firms worldwide. We find that the financial performance of family firms has been significantly higher than that of nonfamily firms during the COVID-19 pandemic, accounting for pre-pandemic business conditions. This effect is pertinent to firms with strong family involvement in management or in both management and ownership. We also identify the role of firm-, industry-, and country-level contingencies for family business financial performance during the COVID-19 pandemic. This study offers a novel understanding of the financial resilience across different types of family business and sets an agenda for future research on the drivers of resilience of family firms to adverse events. It also provides important and novel evidence for policymakers, particularly for firms with different ownership and management structures.

The Lights and Shadows of Family Involvement in Small and Medium-Sized Firms

This study analyzes the influence of human capital (HC) and altruism on small- and medium-size firms’ (SMEs) performance, contingent upon the effect of family involvement in management. HC, understood as the abilities, skills, and knowledge of firm personnel, has been proved to contribute to firm performance. Even more, firms’ outcomes benefit from aptitudes and also from attitudes, such as altruism. What is not so clear is if having a family character enhances the effect of HC and altruism on firm performance. Our results show that family involvement in management presents lights and shadows in its ability to extract all the potential of HC and altruism. By moving one-step forward in understanding these relationships, our findings contribute to the Family Firm, Human Resources Management, and Resource-Based View literatures.

Process innovation in family firms: Family involvement in management, R&D collaboration with suppliers, and technology protection

Drawing on insights from the upper echelon theory, this article aims to examine the impact of family involvement in management on process innovation within family firms, considering the mediating role of R&D collaboration with suppliers and the moderating role of technology protection. Conducting a panel data analysis on 5,332 firm-year observations of Spanish manufacturing family firms for the period 2007–2016, we find that the negative relationship between family involvement in management and process innovation is mediated by R&D collaboration with suppliers. Furthermore, we find that the negative effect of family involvement in management on R&D collaboration with suppliers and ultimately on process innovation is mitigated by technology protection and even becomes positive for high levels of technology protection.

Effects of Family Involvement on Succession Planning: Mediating Role of Socioemotional Wealth

This study aims to clarify the paradoxical relationship between family involvement in ownership and management on succession planning and ascertain the mediating role of socioemotional wealth (SEW) in this relationship. Succession, which is considered as transfer of leadership and ownership from one generation to another, is a critical component within family businesses. Based on the SEW perspective, this study argues that family ownership and management positively influence succession planning via CEOs perceived SEW toward family business. Hypotheses were tested through structure equation modeling with a data set of 174 Taiwanese family controlled publicly listed firms. The results showed that family management positively impacts succession planning through the partial mediating effect of SEW. However, nonsignificant relation was obtained from the path of family ownership to succession planning. These findings contribute to clarifying the heterogeneity within family businesses in terms of the mechanism through which family involvement in management affects succession planning.

Employer Brand as a Strategic Weapon to Reduce Organizational Turnover in Family Business

This study examines the impact of employer brand on organizational turnover in family firms with the family involvement in management. In this research, employer brand is operationalized by using two proxies including corporate governance evaluation ranking system (CGER) and the number of negative news about company's violations. Drawing on the resource-based view and employer brand equity perspective, we hypothesize that CGER positively while negative news negatively affect organizational turnover. Besides, the extent of family member presence in the board moderates the influence of employer brand on organizational turnover. Using longitudinal data from Taiwan Economic Journal over a 5-year period of more than 1.000 publicly family firms to test the proposed model, the findings indicated that CGER is marginally positively significant with organizational turnover while negative news significantly positively affects organizational turnover. Moreover, this study found that the low level of family presence in the board may enhance the negative impact of CGER on organizational turnover while the high level of family presence in the board mitigates the effect of negative news on organizational turnover. These findings enhance the literature on both employer brand in the organizational behavior field and the heterogeneity within the family business.

How organizational readiness for digital innovation shapes digital business model innovation in family businesses

PurposeFamily businesses often lack sufficient knowledge about digital business model innovation digital business model innovation (BMI). This study's purpose was to analyze how and when organizational readiness for digital innovation exerts a positive impact on family businesses' digital BMI. To do so, the authors examined the mediating effect of the familiness learning mechanism and the moderating effect of family involvement on this relationship.Design/methodology/approachA quantitative survey method was used to collect the data for this study. Using a sample of 282 family businesses involved in manufacturing in China, the authors conducted hierarchical regression analyses to evaluate the authors' theoretical model.FindingsThe results of this work demonstrate a positive relationship between organizational readiness for digital innovation and family businesses' digital BMI, and the find that the familiness learning mechanism mediates this relationship. The findings also show that second-generation family involvement in management moderates the direct effect of organizational readiness for digital innovation on the familiness learning mechanism, as well as the indirect effect of organizational readiness for digital innovation on digital BMI via the familiness learning mechanism. Moreover, the results establish that family involvement in ownership moderates the direct effect of the familiness learning mechanism on digital BMI, as well as the indirect effect of organizational readiness for digital innovation on digital BMI via the familiness learning mechanism.Practical implicationsThis study provides practical contributions to the literature on family businesses and to public policy, providing concrete suggestions for fostering digital innovation in family enterprises. This study also enriches our understanding of the unique conditions by which family businesses can successfully implement digital BMI.Originality/valueThis research confirms that organizational readiness for digital innovation is an antecedent of digital BMI. This finding offers a new perspective that helps explain what might lead family businesses to engage in digital BMI. This study also places the familiness learning mechanism into a theoretical framework, which expands the current understanding of how organizational readiness for digital innovation facilitates digital BMI. Moreover, this work provides new insights into the boundary conditions by which organizational readiness for digital innovation affects the digital BMI of family businesses in terms of second-generation family involvement in management and family involvement in ownership.

The workplace social performance of family firms: a configurational approach

PurposeThe purpose of this study is to explore the drivers for proactive workplace social performance in family firms through a configurational approach. Comparative research on family versus non-family firms and workplace social performance has produced mixed results. Consequently, several calls have been made to account for family business heterogeneity to understand better how family involvement in the business affects the workplace social performance. The authors respond to these calls by exploring the governance antecedents that can catalyze family firms’ workplace social performance.Design/methodology/approachUsing qualitative comparative analysis, the authors analyze 131 family firms from the STEP survey data.FindingsThe authors find two governance configurations that lead to better family business workplace social performance. The first configuration is the combination of 100% family ownership, high family involvement in management and a mix of outside directors and family members on the board. The second configuration is the combination of less than 100% family ownership and low family involvement in management.Originality/valueThe study builds on and extends the nascent work suggesting the integration of agency and stewardship theories. The authors show that these two theoretical approaches are able to not only coexist, but that they can also be complementary in helping to understand the unique workplace social behaviors of family firms.

Family enterprise and technological innovation

Family enterprises in China have significant impact on China’s social and economic development. Yet did technological innovation in Chinese family enterprise play a role on this impact? We examine the role that technology innovation played in the rise in importance of Chinese family businesses. We analyze the impact of family enterprises on companies’ technological innovation through both family ownership and family management involvement. We further scrutinize how Chinese family-owned business internationalization strategies affected their technological innovation activities. The authors show that family ownership without family management involvement has a negative relations with companies’ technical innovation. We further demonstrate that family ownerships with family management involvement have a positive relations with enterprises’ technical innovation. Our study provides some effective measures to increase the investment in firms’ technical innovation and minimize the disadvantages of family business. The research result has practical significance in the governance of family enterprises.

Managerial ability and CEO pay of family firms in Malaysia: does family involvement in management matter?

ABSTRACT Family managers are found to get lower pay, especially when family members are involved in management. This paper examines whether managerial ability has a positive impact on CEO pay in family firms. We further examine whether the relationship is higher for nonfamily CEOs compared with that for family CEOs, and whether family involvement in management affects the relationship. The data covered were hand-collected information on CEOs of 362 listed family firms in Bursa Malaysia during the 2009–2015 period. We found a positive relationship between pay and managerial ability for Malaysian family firms, and nonfamily managers are found to be compensated with a higher pay for their managerial ability compared with family managers. Also, when a family has a dominant involvement in management by chairing the board and remuneration committee, they accord pay increment for every unit increase in a CEOs ability. In the case of family chairing the board, nonfamily CEOs tend to get a higher pay with higher managerial ability compared with family CEOs. Our finding shows that family firms, especially those with a dominant involvement in management, adhere to devising first-best contract when rewarding nonfamily CEOs.

Informal authority and economic outcomes of family firms: An issue of national power distance

This paper delivers empirical evidence of how the informal authority of owner families determines the extent to which these can extract private benefits and secure preferential resource access. We argue that owner families in high power distance cultures enjoy increased informal authority. Consistent with our predictions, family firms in higher power distance countries display lower operating performance and are less likely to underinvest. Both effects are moderated by family ownership, family management involvement, and formal country-level governance mechanisms. Moreover, family firms in higher power distance countries are more commonly led by family members and pay lower costs of debt. Overall, our results emphasize the relevance of informal institutions for the economic outcomes and governance situation of family firms.

Family Involvement in Management and Risk-Taking of Family Firms

Family Involvement in Management and Risk-Taking of Family Firms

How can Selling Families increase their Firms’ Valuation? Non-Family Managers as Signal of Quality

Based on agency theory and the resource based view, prior research has explained the differences in family firm valuation by differentiating among other factors the level of family involvement in management. However, the important case of fully professionalized managements in family firms, and its association with firm valuations, has not been explored. To fill this research gap, I draw from the acquisition context and argue based on signaling theory that the absence of family managers in family firms generates a relevant, costly, and visible signal for potential acquirors to infer more positive and less negative family firm characteristics, resulting in higher price paid by acquirors. Furthermore, I argue that the signal is expected to be interpreted more positively by financial institutions and investment firms and further strengthened in situations characterized by a high degree of information asymmetry – in particular, by lower statutory disclosure standards and non-industry relatedness between acquirors and targets. Based on a sample of German and Italian acquisitions, I find support for most of the developed hypotheses in line with signaling theory. The results provide evidence for the view that firm valuation is not only driven by family firm heterogeneity but also different investor heterogeneity.

The influence of private family firm characteristics on audit fees: the family name as a red flag

PurposeThis study aims to examine the relationship between family firm characteristics and audit fees. It also examines the extent to which the family name is considered a red flag during the risk assessment of these firm characteristics.Design/methodology/approachUsing an external panel data set that includes 1,252 firm-year observations of 204 private German firms with a time series from 2010–2016, regression analyses were conducted to test the hypotheses.FindingsThis study’s results indicate that family involvement in management and the supervisory board are negatively related to audit fees, suggesting less demand and supply of audit effort due to lower Type I agency conflicts. Family ownership is found to be positively associated with audit fees due to higher Type II agency conflicts. Moreover, the negative effect of family involvement in management on audit fees becomes weaker if the firm name contains the family name, indicating that it is considered a red flag by auditors during their risk assessment.Originality/valuePrior studies that examined audit fees in family firms mainly compared family firms to non-family firms. However, auditors are not likely to look at firms in a dichotomous way during their risk assessment, especially as there are numerous definitions of family firms. Instead, they will assess the underlying characteristics regarding management, ownership and governance, although a firm name containing the family name may influence this assessment. This study contributes to the literature by accounting for the heterogeneity of family firms and examining how auditors will assess this heterogeneity.

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.