Family-owned Firms Research Articles

Achieving Governance Disclosure – the Surprising Case of an Emerging Market Family Business

Since 1961, when the first paper to clearly recognize and study family firms was published, the business literature has seen an increasing trend in the number of articles relating to family firms. One reason why interest in this field has grown may be because family-owned firms do not behave as expected by the predominant theoretical framework. Family-ownership has been shown to be unique in its effect on the firm when compared to other firm ownership structures. Such divergent behavior is disconcerting, knowing that, globally, family firms may be the most common firm structure. Governance is one of the largest streams of research within the family business literature. Regrettably, most research on family businesses is focused on Western developed economies suggesting that theory building when it comes to family business governance has been largely driven by the Anglo-Saxon corporate governance model. This is unfortunate because we know that context plays a vital role in governance outcomes and in family firm behavior. One of the important challenges faced by developing countries is governance disclosure, with potentially grave repercussions for their economic futures. The aim of this research is to help understand the motivations behind the decision of a family, non-listed firm, in a developing country context, to disclose governance information on its board members. We propose a larger role for institutional isomorphism at the intersection of the family, governance, disclosure, and developing country literatures. To this end, we identified a family business in the emerging market of Lebanon that has demonstrated this phenomenon. Despite the odds, this firm was able to overcome multiple challenges - family firm structure, secretive culture, no legal requirements, information sensitivity - to ultimately share this information with the public. Our case study helps us suggest a context-specific governance disclosure model based on the institutional theoretical framework.

Young Consumers’ Perceptions of Family Firms and Their Purchase Intentions—The Polish Experience

Although family-owned businesses have been widely investigated, the question of consumers’ perceptions of family firms is still worth more in-depth study. Drawing on the theories of family businesses and consumer behavior, this paper investigates the relationship between the consumers’ perceptions of family-owned enterprises and their purchasing decisions. Using a questionnaire, we surveyed 1069 young Polish consumers. Our findings demonstrate that young consumers’ convictions about family businesses are well-formed, despite their quite modest knowledge of these business entities. The vast majority of the survey participants were not able to provide any family business names. This implies that young consumers’ views on family businesses result from speculation or adoption of opinions that are dominant in a given society. To raise the level of awareness of their brands and transform consumers’ intentions into real purchasing behavior, family business entities need to intensify the educational significance of their promotional activities to help counteract the stereotypes about family businesses. The analysis presented here has important implications for current debates on whether the development of emotional relationships with family business entities and their brands is a suitable strategy to shape the purchasing attitudes towards the products made by family companies. The research findings could also form the basis for an extended study exploring what strategies family companies can implement in order to effectively shape young consumers’ perceptions about these firms. The research results can also serve as an aid for family firm owners and managers in rebuilding their client-oriented activities. The aforementioned knowledge can support family firm owners and managers in establishing effective marketing strategies. It also opens interesting avenues for further research.

Sacrifice, Protect, and Hope for the Best: Family Ownership, Turnaround Moves, and Crisis Survival

A critical yet unanswered question for family-owned firms in a survival-threatening crisis is which turnaround moves to employ and for what reasons. Building on noneconomic goals associated with family ownership and related socioemotional wealth (SEW) considerations, we theorize that the higher the degree of family ownership, the more likely family owners are to sacrifice normative SEW dimensions and to protect instrumental SEW dimensions. This then affects which operational, portfolio, financial, and managerial turnaround moves are likely to be employed, and ultimately, the odds of insolvency. Analyzing a unique sample of responses from 209 bank turnaround managers generally confirms our theorizing.

Occupational mental health of non-family members in family firms: Evidence from Pakistan.

Family-owned firms display distinct dynamics as compared to other firms. Consequently, the outcomes and consequences of these dynamics are also expected to be different. The aim of this study was to explore the impact of perceived employee-organization psychological distance (EOPD) on the occupational mental health (OMH) of the employees. Considering the complexities associated with employee–employer relationship, the study also investigated how this relationship between PD and OMH might be mediated by psychological safety (PS) perceived by the employees. Furthermore, the study also included proactive personality (PP) as a potential moderator of the relationship between PD and OMH. Results using SEM and fsQCA show a partial mediation effect on psychological safety. The study contributes by examining the distinct nature of family firms and their impact on the mental health of non-family member employees. This study contributes to the family firm literature by adopting a novel methodological approach to unveil the complexity behind the relationship between employees and owner-employers of family firms.

Family firms and innovation: a revisit to SEW perspective

ABSTRACT Extant literature on innovation in family firms has generated mixed results regarding the preference of family firms for innovation. By integrating literature on family ownership and management, we propose an inverted U-shaped relationship between family firm ownership concentration and innovation. Our Poisson regression-based model on a sample of 532 family firms from India for ten years shows that family ownership concentration follows an inverted U-shaped relationship with innovation. Our findings further suggest that the family CEO moderates this inverted U-shaped relationship.

Capital Structure Determinants of State and Family Firms: A Comparative Analysis

This study aimed to analyze how the capital structure determinants i.e. ownership, profitability, firm size and current ratio of state and family firms in Indonesia Stock Exchange effect capital structure of each type of firm respectively during 2016-2020 research period and also examined whether there was a difference in capital structure of the two types of firms. The population consists of 107 firms i.e. 22 state-owned and 85 family-owned firms. Using a purposive sampling technique, the total samples of 66 firms were obtained (11 state-owned and 55 family-owned firms). Multiple regression and Independent sample t-test were employed to test the hypotheses. The results showed that ownership of state firms had negative effect on their capital structure. Contrary, ownership of family firms positively influenced on their capital structure. Profitability and current ratio of the two types of firms impacted negatively on the capital structure of each type of firm respectively but firm size did not. There was a difference in capital structure of the two types of firms.

Nexus between environmental disclosures and top management team characteristics: a systematic review.

Voluntary nature of sustainability disclosures in most of the countries shifts focus of academicians towards discretion of top executives as a major determining force for firms to make their operations environmentally and socially sustainable. Based on two decade literature on the topic available at Scopus database this study aims to present a comprehensive knowledge map of intellectual structure on the relationship of top management characteristics on sustainability spending and disclosures. A bibliometric systematic review of 164 articles from 2002 to 2022 has been conducted with the help of VOSviewer and identified most influential journals, articles, and the countries whose corresponding authors have contributed in the field and influential research clusters in the literature. These research clusters are first, red cluster with 94 articles has discussed the upper echelon's personal and professional characteristics in relation to sustainability disclosures. Second, green cluster with 60 articles has discussed particularly the gender diversity in top executives and board of directors in relationship with sustainability disclosures. Third, blue cluster with 10 articles has elaborated the influence of independent directors on sustainability disclosures of corporate sector. The findings of this study will particularly help the regulators to make regulations regarding critical mass of female on boards and top management, family-owned firms, and politically connected directors. Moreover it will also help consultants, analysts, and investment bankers to differentiate firms with pressure-resistant and pressure-sensitive institutional investors. From this review shareholders can be very much clear in the selection of their representatives and ultimately the appointment of top management team. This study also provides an insight for future direction so that unexplored dimension of this field may further be discovered by upcoming researchers.

Corporate governance reform, and ownership, and control: perspective from Japan

ABSTRACT The direction and extent of corporate governance reforms in any country are determined by its ownership and corporate control structure. Three forms of markets in corporate control could be distinguished. The first is the external market for corporate control, closely associated with the dispersed, outsider-dominated ownership systems of the UK and the US. The second form is the insider market for the purchase and sale of blocks of shares in family-owned firms in Continental Europe and Asia. The third form, which is observed in Japan, is the internal markets in which managers reorganize their ownership structure. Under this framework, this study examines the relationship between corporate governance reforms, and ownership and control in twenty-first century Japan.

Innovation in family firms: The Brittelstand

PurposeThe Brittelstand are innovative, family-owned firms that offer national and international opportunities in the United Kingdom (UK). These fast-growing businesses are customer-oriented and proud of family ownership and embeddedness of the businesses within communities. While Brittelstand firms are as likely to deploy open innovation models as non-Brittelstand firms, these firms' engagement with customers in regional and national markets and the ability to benefit from this collaboration contrasts with these firms' willingness to engage in open innovation.Design/methodology/approachUsing longitudinal data and regression analysis on 13,876 firms with 24,286 observations over 2004–2020, the authors develop and test a theoretical framework of open innovation in the Brittelstand. The authors' model explains the willingness and ability of the Brittelstand firms to engage in open innovation and benefit from it.FindingsThe authors' results show that Brittelstand firms are less willing than non-Brittelstand firms to collaborate with customers and universities, contrasting prior research on family firms, and distinguishing the innovation model of the Brittelstand from a family business model. The Brittelstand firms who are able to engage in collaboration with customers in domestic markets will outperform the firms' non-Brittelstand counterparts in innovation outputs.Research limitations/implicationsIn line with other studies, this study is associated with several limitations that open opportunities for further research that replicate and/or extends this study. First, this study is unbalanced panel data and the fact that some firms appear in the model only once from 2004–2020. The longitudinal study will allow to enforce causality of the relationship and examines the dynamics of open innovation in the Brittelstand. Second, the indicator on the extent and mechanisms of collaboration with customers could be better explained and measured, for example, using a scale indicator instead of a binary variable for knowledge collaboration across different types of partners and four geographical dimensions.Practical implicationsFirst, Brittelstand firms who are less likely to employ open innovation models nationally and with customers. However, those Brittelstand firms who decide to collaborate with customers nationally are more likely to increase the innovation sales compared to those firms that do not engage in such collaborations? This is an interesting and unexpected finding, which means that low willingness of cross-country and cross-regional collaboration for Brittelstand firms is not optimal and engagement in collaboration with customers in domestic markets is beneficial for innovation. Managers and policymakers may use this finding to design and re-design open innovation strategies managers and policymakers with customers within and across regions in the UK. Second, managers may benefit from the integrated view on the two drivers of firm innovation – collaboration with customers and the local embeddedness of such collaboration.Social implicationsThe authors' results show that Brittelstand firms outperform the firms' non-Brittelstand counterparts by adopting an open model of innovation with customers in domestic markets. This means that the most dynamic and fast growing Brittelstand firms are those who collaborate with customers for new ideas and innovation.Originality/valueThis study describes the phenomenon of the Brittelstand and investigates the link between open knowledge sourcing across different geographical proximities and partners and innovation outputs. First, the authors contribute to open innovation and resource-based view (RBV) literature in family firms by theorizing and empirically testing the open innovation model for the Brittelstand firms. The authors also debate that the Brittelstand firms should overcome this inertia of willingness to collaborate across heterogeneous external partners and convert regional/national embeddedness of the firms with customers into strengths for greater product innovation. Second, the authors contribute to family business literature by explaining how and why the Brittelstand firms can achieve greater innovation outputs. In doing so, the authors draw on the concept of familiness and local embeddedness.

Restructuring Strategies in Family Firm Portfolios

How do owners of family firm portfolios restructure poorly performing firms? Drawing upon the socio-emotional wealth perspective and escalation commitment literature, we suggest that family firm owners initially retain poorly performing portfolio firms to safeguard firm-level SEW and restructure these portfolio firms by investing and reshuffling. Yet, when the existence of their remaining firm portfolio and thus portfolio-level SEW is threatened by retaining portfolio firms, family firm owners divest preferably via sale as an ongoing concern and if unsuccessful, via liquidation. Based on these findings, this study contributes to the literature on SEW, restructuring and especially divestment research in the context of portfolio entrepreneurship.

Private Equity and Family Firms - Barbarians on the Yard: A Vignette Study

External succession through the private equity route has recently become a more common option for family firms. Drawing on the socioemotional wealth (SEW) perspective, we study what factors influence the selling decision of family firm owners and managers and look at the moderating role of family firm portfolios. Based on a unique vignette study conducted with 200 vignette responses by family firm owners and managers, we unveil that levels of SEW and financial performance influence the propensity to sell. Surprisingly, the existence of family firm portfolios only significantly moderates the relationship between innovation performance and the propensity to sell. Our research provides important implications for research on family firm external succession and the SEW literature, contributing insights on the factors influencing decisions on the private equity succession route

How Faith Affects the Leadership of U. S. Family Firm Owners

How does faith matter in today's business world? Family businesses are the dominant organizational form globally. Yet, religion in family firms has been under-researched for many years, with only limited articles published in the past two decades. While our study focused on the Christian faith, we recognize the contributions of other religions to family businesses. The significant influence of faith needs to be better understood by Christians and others alike to promote harmonious relationships within and between faith groups. In a qualitative study, we examine the utilization of faith-led values among the owners of 15 U.S. multigenerational family firms, using a grounded theory approach and the theoretical lens of family systems theory. We analyzed the reported perceptions of 33 family firm owner-manager and family-manager respondents, focusing on the impact of faith on relationships with stakeholders, including, but not limited to family members, employees, and customers. These perceptions were based on the respondents' faith, their practice of prayer at work, prayer for the business, and the acknowledgment of God's power. Therefore, we propose that a faith system is central for such family firm leaders in addition to the family, business, and ownership systems. We depict the faith system as the hub of a wheel with spokes representing the family, business, and ownership systems driving the family firm. We summarize our findings with six propositions.

The Mixed Gamble of Competitive Aggressiveness in Family Firms

This study develops a mixed gamble perspective of competitive aggressiveness that explains how family-controlled firms frame and evaluate the difficult trade-offs in pursuing competitive aggressiveness that entails potential gains and losses in financial wealth (FW) and socioemotional wealth (SEW). An analysis of 570 listed Korean firms from 1998 to 2017 reveals that family firm owners are reluctant to pursue competitive aggressiveness because of aversion to loss in and risk to their SEW and uncertain FW gains. Under vulnerable conditions, however, family owners are more willing to undertake an aggressive series of competitive actions because FW and SEW could disappear entirely if the firm does not survive.

Implicit Theories of Family Firm Ownership and Heterogeneity of Family Firm Risk Taking

A firm’s proactive risk taking is essential to sustaining a firm. Ownership structure is an important variable that purportedly determines risk taking. In relation to the most common ownership form around the world, existing literature suggests that family firms take less risk than non-family firms. However, family firms may differ in their risk preferences. To understand the drivers of family firm heterogeneity in risk taking, we leverage research on implicit theories to propose that family owners’ entity and incremental implicit theory orientations may influence risk taking. We then further consider several some key internal and external contingencies likely to influence the extent to which some family firms are likely to pursue risk taking based on their implicit theories.

Research and innovation and the role of competition in family owned and managed firms

PurposeThis paper examines the innovation behavior of family-owned firms versus non-family-owned firms. The role of internal family governance and the influence of external stimuli (competition) on innovation are also considered.Design/methodology/approachThe data of 20,995 family and non-family firms across 38 countries are derived from the World Bank Enterprise Survey during the period 2019–2020. Probit models are used to examine the impact of family ownership, family governance, and competition on innovation outcomes.FindingsFamily firms are more likely to make R&D investments, acquire external knowledge, engage in product innovation (including innovations that are new to the market) and process innovation, relative to non-family firms. However, a high propensity of family member involvement in top management positions can reduce innovation. Competition has a negative impact on innovation outcomes for both family and non-family firms, but it has a positive moderating effect on the innovation activities of family firms where a higher level of family member involvement in management is present.Originality/valueThis paper provides novel insights into family firm innovation dynamics by identifying family firms as more innovative than non-family firms for all types of indicators, debunking the idea that family firms are conservative, reluctant to change, and averse to the risks in innovation activities. However, too much family involvement in decision making may stifle some innovation activities in family firms, except in cases where the operating environment is highly competitive; this provides new insights into the ownership-management dynamic of family firms.

Sustainable Palm Oil: What Drives it and Why Aren’t We There Yet?

Manuscript type: Research paper Research aims: This study explores the institutional pressure and motivation that drives Malaysian palm oil companies to embark on sustainability practices, and uncovers the impediments of substantive change in producing truly sustainable palm oil. Design/Methodology/Approach: A case study methodology was employed, gathering primary and secondary data through semistructured interviews with the company’s personnel and external stakeholders, through informal conversations and group discussions with company workers, document analyses, and observations. The neo-institutional and legitimacy theory were used as the primary lens to explain the study findings. Research findings: The results indicate that both external pressures and internal issues have forced the company to engage in sustainability practices – primarily through certification. Unlike the independent stakeholder pressure found in previous studies, a chain reaction of pressures was found from NGOs and competitors to multinational buyers, whom in turn put pressure on the case company, thus jeopardising their financial bottom lines. Regulatory pressures, conforming to the industry norms, wooing host country’s government, investors, and financiers add to the external motivation. Reputational problems and labour shortages, business case for sustainability, and the philanthropic nature of family-owned firms are the internal elements behind the endeavour. The barrier to change towards sustainability was mainly caused by cost concern, technical difficulties, mindset of workers, unsupportive business environment and impracticalities of safety equipment design. Originality/value: The findings shed light on the inner motive and barriers of change towards producing sustainable palm oil, the understanding of which is vital in driving further substantive changes in the palm oil industry towards sustainable development. Research limitation/Implication: The study was restricted to a single case company in the Malaysian palm oil industry and hence, generalisation of the study findings onto another context should be done in a cautious manner. Keywords: Organisational change, Neo-institutional theory, Legitimacy theory, Palm oil, Sustainability reporting and practice JEL Classification: Q56

Value Relevance of Earnings and Book Value: Impact of Earnings Management and Family-Owned Firms

The purpose of this study is to investigate whether family-owned firms and earnings management as a result of financial distress affect the value relevance of earnings and book value. The study is based on companies listed on the Indonesia Stock Exchange (IDX). An unbalanced panel dataset of 592 firms trading in the IDX from 2012 to 2017 was used to test the price model. Results reveal that owing to high financial distress, earnings management through an income-increasing strategy was opportunistically conducted. Moreover, earnings management (as opposed to financial transparency, which is a principle of sustainability) decreases the value relevance of earnings. Due to high financial distress, there is a trade-off between the value of earnings and relevance of book value in the presence of earnings management. Further, results demonstrate that the value relevance of earnings in family-owned firms is higher than in nonfamily-owned firms in Indonesia. It indicates that earnings management due to high financial distress contributes to the alignment effect on family firms.

Caught in the spider's web: an investigation of dysfunctional behavioural patterns in a family firm

PurposeDrawing on the theory of goal systems applied to family business this case study focuses on the interdependence between non-economic goals and family goals, in order to identify if and how achieving non-economic goals generates dysfunctional behavioural patterns for family members in the long term.Design/methodology/approachThis study used an inductive, 20-year longitudinal case-study based methodology.FindingsThis case study shows how the business family faces ethical/affective dimensions, struggling every day for a balance and often undermining the legitimisation and differentiation of its children. Findings show that the achievement of non-economic goals can occur to the detriment of family goals, such as by generating a dysfunctional system, specifically in business family adaptability.Research limitations/implicationsThe principal limitation is that this single case study evidently does not allow for complete generalization of the findings.Practical implicationsThis case study makes a contribution to alerting the family business system to the long-term risk they face in trying to simultaneously maintain both harmony/cohesion and ethics/responsibility. Practitioners and consultants are therefore called on to help family firm owners with adopting a strategic vision by considering possible long-term counterfinal (i.e. mutually incompatible) goals.Social implicationsSMEs are the most widespread type of firm in the world, and consequently dysfunctional behavioural patterns within business families represent a prominent socio-economical problem for policy makers and institutions.Originality/valueThis study shows that, in the long term, that which is perceived to be a desirable goal can transpire to be a dysfunctional pattern. In doing so, this research introduces a new point of view to the literature on goal systems in family business.

Psychological Ownership in Heterogeneous Family Firms: A Promising Path and a Call for Further Investigation

Abstract This essay responds to recent calls for more research on family firms’ heterogeneity from an ownership perspective. We complement the legal and economic view of ownership by focusing on the concept of psychological ownership (feeling of possessions) in family firms. We explore its dynamics, processes and implications as well as its limited inclusion in the family business field to date. Building on a brief review of the literature, we suggest the concept of psychological ownership can help expand our understanding of family firms’ heterogeneity. Additionally, we put forward a future research agenda for psychological ownership in family firms.

Emotions, identity, social bonds and commitment to the family business: moderating role of controlling generation

PurposeDrawing on the stakeholder theory, the purpose of this study is to examine relationships between family identity, emotional attachment and binding social ties, and commitment of family firm owners to the family enterprise in the context of an emerging economy. Furthermore, this study examines whether the strength of the above relationships significantly vary between the founder generation and the subsequent generation of owners.Design/methodology/approachA set of hypotheses is tested by applying partial least squares structural equation modeling on a sample of 357 family-owned manufacturing companies in Bangladesh. Deploying SmartPLS (v. 3.2), the path model is analyzed through bootstrapping procedure. The moderating effect is tested through multigroup analysis.FindingsThe findings suggest that the relationships between emotional attachment and family identity and commitment are positive and significant, whereas the association between binding social ties and commitment was not significant. Furthermore, a multigroup analysis revealed that there is a significant difference between the founder generation and their next generation in terms of influence of binding social ties and family identity on commitment, whereas there appears to be no difference in terms of emotional attachment and commitment between the two generations.Practical implicationsThis study shows that compared to the founder generation, the next generation prioritizes family identity and social bonds, which leads to greater levels of collective commitment to the organization. Such knowledge may provide clues to incumbent family-firm leaders by identifying the areas where they need to emphasize in generating greater levels of commitment among their successors.Originality/valueTo the best of the author’s knowledge, this appears to be the first such study that provides a nuanced understanding of how family generation in control of the family firm influences the relationships between psychosocial components of socioemotional wealth and collective commitment of the owners of family firms in the context of an emerging economy.