Heterogeneity Of Family Firms Research Articles

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.

Family Firm Heterogeneity and Tax Aggressiveness: A Quasi-Experimental Analysis of the Impact of Different Family Generations

This paper analyses tax aggressiveness in family firm generations. Moreover, taking into account the heterogeneity in family firms, we check whether the successive generations in control show different tax avoidance behaviour. The empirical evidence, based on the quasi-experiment of the 2012 Spanish thin capitalization rule, reveals that there is a positive relationship between tax aggressiveness and successive generations. Moreover, the founder and second generations follow a similar conservative tax avoidance approach, whereas the third and fourth generations are found to be more tax aggressive.

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.

Slack and Performance in Family Owned SMEs: An Agency Theory Perspective

Building on the notion that unabsorbed, absorbed, and potential slack resources positively affect financial performance in small and medium enterprises (SMEs), we take a family firm angle and theorize from an agency theory perspective that these relationships are weaker when SMEs are family-owned. Delving deeper into family firm heterogeneity, we then investigate how founding-generation board control and the presence of a family CEO moderate the slack-performance relationships in family-owned SMEs. A longitudinal analysis of a panel dataset of Italian SMEs largely confirms our expectations while also revealing counterintuitive findings that offer important contributions to existing literature.

Digital innovativeness in family firms: The role of non-family managers and family goals

Digital innovations offer immense opportunities for organizations to reinvent their business model and renew their product and service offerings, yet, due to their complexity, rapid pace and generativity, they are also perceived as riskier than regular innovations. Since family firms are often more risk and loss averse in their innovation approaches, they might struggle to adopt digital innovations, which begs the question which governance conditions foster the adoption of digital innovations. To investigate this issue, the article examines the relationship between the share of non-family members in the top management team, transgenerational control intention (TCI) and digital innovativeness in family firms. Based on the risk and loss aversion of family firms and the characteristics of digital innovation, we argue that the presence of non-family managers only has a positive effect on digital innovativeness when the level of TCI is low. An empirical investigation of 104 CEOs of German family firms supports our hypotheses that non-family managers can only unfold their positive effect on digital innovation when the family does not pursue strong family goals. As such, we contribute to the growing research on digital innovation in family firm as well as family firm 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.

Heterogeneity in Family Firms

This research explores in greater depth the importance of considering the heterogeneity between family businesses so as to better understand the differences in their strategic behavior, performance and business results. With this, we attempt to contribute to the theories on the relationship between corporate governance and strategic management in the field of family business research.
 Our study identifies the different configurations that may be adopted in the ownership structures and the management and governance bodies of family firms, analyzing how these configurations are related to the firm’s strategic outcomes. Using a sample of 111 family firms, we perform a cluster analysis that allows us to determine distinct types of family businesses based on a set of dimensions regarding the characteristics of their governance bodies, both in business and in the family, as well as their ownership structure and degree of family involvement in management tasks. We then link the different types found with the profiles of managers, the repertoire of strategies used by these companies, and the differences in obtaining results in recent years.

Family Firm Heterogeneity: A Definition, Common Themes, Scholarly Progress, and Directions Forward

While progress has been made in recent years to understand the differences among family firms, insights remain fragmented due, in part, to an incomplete understanding of heterogeneity and the scope of differences that exist among family firms. Given this, we offer a definition of and review the literature on family firm heterogeneity. A latent semantic analysis of 781 articles from 33 journals identified nine common themes of family firm heterogeneity. For each theme, we review scholarly progress made and highlight differences among family firms. Additionally, we offer directions for advancing the study of family firm heterogeneity.

Family management and family guardianship: Governance effects on family firm innovation strategy

Drawing on agency and stewardship theories, we examine how two dimensions of family governance influence family firm innovation strategy. Specifically, we differentiate between the effects of Family Management (family CEO, family managerial involvement, and next-generation involvement in the business) and Family Guardianship (trustees and family council) and study their effects on explorative and exploitative modes of innovation strategy. Our analysis of unique survey data from 328 UK private family firms shows that specific dimensions of Family Management (next-generation involvement) and Family Guardianship (the existence of a family council) are significantly positively associated with exploration. Exploitation, however, is positively associated with next-generation involvement only. These findings answer calls to theorize and empirically examine the heterogeneity of family firms’ innovation modes. These findings further respond to calls to better understand the relationship between governance and behavior, advancing scholarly debate at the intersection of agency and stewardship, family governance, and innovation.

Do dissimilarities in the family involvement in family firms lead to different levels of indebtedness? Evidence from Spain

PurposeThis paper examines how differences in the family involvement in a family business can influence its level of indebtedness. Assuming the influence of family is not the same for all family firms, we consider each company as a combination of the family involvement in three dimensions of the business: ownership, management and governance structure.Design/methodology/approachUsing the partial least squares technique allows us to address the heterogeneity of family firms through an integral concept of family involvement in business that jointly considers the level of family participation in the ownership, management and governance structure of each firm.FindingsOur results demonstrate that the level of family involvement in a family firm, considering the heterogeneity existing within the family business group, directly influences its level of indebtedness. In addition, we find that family involvement in ownership and governance structures individually considered are positively related to the level of indebtedness of the family business.Originality/valueOur findings prove that some indebtedness patterns, which previous literature has described as common to all Spanish family businesses, may actually be valid only for specific family firms with a particular level of family involvement. In addition, the way of measuring family business heterogeneity through our integral concept of family involvement can be replicated by other authors because of the manageability of the items, thus contributing to an increased understanding of the effects of family involvement in firms' development.

Socioemotional wealth and financial decisions in private family SMEs

This study focuses on heterogeneity in family firms by analyzing whether the non-economic aspects that meet the family’s affective needs, or socioemotional wealth (SEW), influence debt financing. In the context of private family small and medium-sized enterprises (SMEs), our results indicate that family firms which are more concerned about preserving their SEW have lower debt levels (total and financial debt) and that CEO gender plays an important moderating role, with female CEOs strengthening the negative effect of SEW preservation on debt financing. Moreover, when family firms are managed by the first generation, the SEW effect on financial debt is even more negative. The findings are consistent with SEW being the point of reference in family SMEs’ financial decisions, and highlight the importance of the CEO and family generation in charge of the firm as moderators of the relationship between SEW preservation and debt financing.

Bonding and bridging social capital in family firm internationalization

Purpose of the paper: This paper aims to study how family firms manage their Global Value Chain (GVC). In particular, we investigate how family firms are able to keep control over operations outsourced to foreign partners. Prior research focused on understanding how firms control their GVC has mainly concentrated on large multinational enterprises. However, while large multinational enterprises can overcome transaction cost complexities by exploiting their superior legitimacy and power control over weaker firms, family SMEs often do not have that amount of power due to financial and managerial constrains. In this study, we thus conceptually examine a unique characteristic that can help family SMEs to overcome resource limits and gain control over the GVC: their distinctive social capital. Methodology: Conceptual Findings: Family SMEs can exploit their superior social capital in order to build long-term relationships based on trust with foreign partners, thereby being able to control their GVC without legally owning it. Research limits: The study is conceptual, future research should test the model and empirically examine the theorized mechanisms. Social capital is only grasped according to its positive side and in relation to cohesion, future research should examine the negative side of social capital and the role of conflict in our model. Finally, family firm heterogeneity is currently neglected. Practical implications: Our study offers insightful managerial suggestions to family firm executives and their foreign partners in terms of design and governance of their GVC. Originality of the paper: Our study offers theoretical and managerial contributions to the current understanding of family firm internationalization beyond exports.

Individual entrepreneurial orientation and performance: the mediating role of international entrepreneurship

This paper analyses the role that individual entrepreneurial orientation (IEO) plays in the success of international entrepreneurship moves. We focus on the mediation effect of international entrepreneurship in the relationship between IEO and firm performance. We argue that entrepreneurial experience constitutes an important source of IEO and propose an objective measure of IEO. The hypotheses are empirically analysed using a 22-year panel of family SMEs. Our results confirm the hypotheses and provide a better understanding of the role of IEO in the success of corporate strategies such as internationalisation. Specifically, IEO is found to improve firm performance indirectly by increasing the speed of internationalisation, and this effect is non-linear. Our study contributes to the literature by extending international entrepreneurship literature by offering a more complete view of the causes and consequences of IEO. Finally, our results also contribute to the literature on family firm heterogeneity.

Nonfinancial Considerations in Eco‐Innovation Decisions: The Role of Family Ownership and Reputation Concerns

Societal pressures for greater sustainability can encourage firms to target part of their innovation activities at ecological initiatives (i.e., eco‐innovation). Yet, depending on their value function, firms can respond differently to such pressures and exhibit variance in their eco‐innovation activities. In this paper, we investigate the idea that a firm’s ownership structure may play a significant role in determining its engagement in eco‐innovation. Specifically, we propose that ownership by family blockholders increases the value attached to the company’s reputation and that this, in turn, stimulates higher levels of eco‐innovation. In other words, we model the company reputation motive as a key mediator in the relationship between family ownership and firm‐level eco‐innovation. To account for family firm heterogeneity, we also model the moderating role of owners’ intention to pass the business on to the next family generation (transgenerational intentions) and of the extent to which these owners reside in the firm’s local community (local embeddedness). As theoretical backdrop, our study builds on institutional theory and the mixed gamble logic. To test our hypotheses, we use a large sample of German firms and nonlinear moderated mediation regression analysis. Results reveal that family ownership is positively related to the introduction of eco‐innovations by firms, in part because of the stronger emphasis being placed on the company’s reputation. We find that this effect is strongest when the owning‐family has transgenerational intentions. As such, this study advances our understanding of firm‐level drivers of eco‐innovation. In view of the prevalence of family‐owned firms and the mounting importance of ecological sustainability, it is valuable to extend knowledge on the contingent and indirect effect of family ownership on eco‐innovation.

Unmasking the Social Ghost in the Machine: How the Need to Belong and Family Business Potency Affect Family Firm Performance

Research often assumes that a controlling family’s social bonds contributes to superior firm performance. However, there is little theory to address these relationships and findings are often mixed. Here, we integrate resource-based and need-to-belong theories to address these issues, introducing family business potency as a key mediating variable between family cohesion, participative strategy processes, and firm performance in 109 family firms. Altogether, our study answers ongoing theoretical calls for more need-based psychological research in family firms, introduces family business potency to the literature, and contributes to research on family firm heterogeneity. Implications for future research and practice are also discussed.

Experimental studies in family business research

Experimental studies are at the heart of scientific inquiry but have yet to gain their due recognition in the methodological repertoire of family business researchers. In this article we discuss the usefulness of experiments to further the development of family business science. We argue that well-developed experiments can enable family business scholars to not only scrutinize difficult-to-isolate relationships, but explore multilevel and causal processes that form the foundation of family firm heterogeneity. Hence, the purpose of this article is to draw researchers’ attention to the value of experiments in generating new and relevant insights in family firm contexts. Our work is intended to encourage, guide and inspire family business scholars to increase methodological variety in our field by carefully designing, evaluating and carrying out experimental studies.

Family business or business family? Organizational identity elasticity and strategic responses to disruptive innovation

Organizational identity represents a characterizing aspect of family firms with the potential to drive their heterogeneity and decision making. While the intertwined relationship between organizational identity and strategy is increasingly receiving attention from scholars in general management, research in the family firm field has yet to tackle it. Building on the construct of organizational identity elasticity, we conceptually examine how heterogeneity of family firms’ organizational identities influences, and is affected by, strategic decisions. We ground our conceptual investigation in the ideal context of disruptive innovation, a technology shift that might eventually threaten the traditional solution of an incumbent family firm. Thus, our study contributes by unveiling the multifaceted and dynamic nature of organizational identity in relation to family firm strategy and develops a novel perspective on typologies in family firms by identifying the theoretical underpinnings of the distinction between family business and business family archetypes. In addition, we advance the emerging debate on family firms’ interaction with exogenous technological changes.

Corrigendum to Innovation heterogeneity in family firms: Evidence from the date

Corrigendum to Innovation heterogeneity in family firms: Evidence from the date

Mapping family firm internationalization research: bibliometric and literature review

Internationalization is an important entrepreneurial strategy for the growth and long-term survivability of family firms. Research on family firm internationalization (FFI) has attracted increasing interest as there has been rapid growth in the number of academic publications in recent years. Since its initial stages, this research field has evolved significantly and developed in different directions. In this context, the goal of this study is to provide an overview of the cornerstones of the FFI literature, its main research trends, and promising avenues for future research. To this end, we conducted several analyses, including bibliometric performance and co-word analyses as well as a literature review that provide an updated overview of this growing research field and identify key topics underpinning it. Our analysis covered 115 journal articles published in the Web of Science between 2002 and 2018. The main results of the co-word analysis reveal six thematic clusters: (1) corporate governance, (2) entry mode, (3) board of directors, (4) foreign market knowledge, (5) entrepreneurship, and (6) competitive advantage, which provide a holistic view of the field and offer a new and useful means of determining its traceability. Subsequently, we conducted an in-depth full text review of the articles whose keywords are included in each of these clusters with the objective of identifying potential avenues for future research that can contribute to advancing the knowledge of the uniqueness and heterogeneity of family firms. Hence, we help in understanding the interplay between family and firm behavior, and how family firm-specific features shape the dynamics and processes of internationalization.

Corporate social responsibility (CSR) in Canadian family firms

PurposeThe purpose of this paper is to examine corporate social responsibility (CSR) activities in Canadian family firms.Design/methodology/approachThis paper is an empirical work using a sample of Canadian listed companies for eight years between 2010 and 2017.FindingsRelying on five measures for CSR, this paper finds that, compared with other listed firms, family listed firms have a higher level of CSR engagement. Further tests show that family-named family firms engage in more CSR activities; family firms with second largest shareholders engage in more CSR activities; and family firms affiliated with large business groups engage in more CSR activities. However, family firms whose family members are CEOs, presidents or board chairpersons engage in less CSR engagement.Originality/valueThis paper contributes to the current CSR literature by highlighting the importance of family firm heterogeneity in shaping a firm’s CSR practices. It focuses on four characteristics of Canadian family firms that are potentially connected to CSR, namely, family-named family firms; family firms with family members being CEOs, presidents or chairpersons; family firms with second largest shareholders and family firms affiliated with large business groups.