Non-family Managers Research Articles

Management Dynamics and Global Strategy in Family Enterprise Strategy

The aim of this research is to emphasize how crucial it is for family companies to grow internationally. Despite the large amount of research that has been done in this field, there are still problems and chances for more study. This study includes six publications that use a variety of approaches, including qualitative case studies, fsQCA, and quantitative analysis of secondary data, to investigate the internationalization of family companies. The study examines the function of the board of directors in global strategy, the dynamics within the top management team between family owners and managers and non-family managers, the impact of financial resources and governance on internationalization strategy, and the influence of historical and contextual factors on internationalization choices. This study offers models and insights into how family firms adapt to shifting institutional and market conditions. and strategies to strengthen their global expansion efforts. The authors recommend conducting comparative studies between family and non-family businesses to identify their respective strengths and weaknesses in the context of internationalization.

What is Your Reference Point? How Price Volatility and Organizational Context Affect the Reference Points of Family and Nonfamily Managers

Drawing from prospect theory, we use an experimental study design to explore how and why reference points of managers of family and nonfamily firms differ. We contribute to research on the role of economic theories for family businesses by elaborating on decision-making mechanisms in the context of family firms. Furthermore, we investigate whether family and nonfamily managers within family firms vary in their investment decisions. Our study demonstrates the importance of price volatility as a determinant of reference points and shows how the same type of information can lead to different reference points based on whether the manager is from a family or nonfamily firm.

Family firm entrepreneurial orientation: the effects of socio-emotional wealth, professionalization and bifurcation bias

PurposeThis paper aims to examine the effects of socio-emotional wealth importance (SEWi) in family firms and family firm-specific HR practices, namely professionalization and bifurcation bias, on their entrepreneurial orientation (EO).Design/methodology/approachThe paper surveyed 133 small and medium-sized family firms in the USA. The respondents were recruited through Prolific Academic.FindingsWhen SEWi is low, a family firm becomes more similar to a non-family firm, thereby enjoying the benefits associated with EO. When SEWi is high, a family firm leverages the unique resources and capabilities specific to family firms. Moderate SEWi levels are associated with lower EO levels. Additionally, the results support the argument that professionalization (involving non-family managers, formalization and decentralization) fosters EO, while bifurcation bias hinders its development.Originality/valueUnlike previous studies, this paper posits a non-linear, U-shaped relationship between SEWi and EO. It contributes to the field by empirically investigating the effects of professionalization and bifurcation bias on EO in family firms.

Board functions in governance arenas: a comparative case study of four Swedish family firms

PurposeThe purpose of this paper is to explore board functions and their location in family firms.Design/methodology/approachThrough structured induction in a four-case study of medium-sized Swedish family firms, the authors demonstrate that board functions can be located in other arenas than in the common board and suggest propositions that explain their distribution.Findings(1) The board is but one of several arenas where board functions are performed. (2) The functions performed by the board vary in type and emphasis. (3) The non-family directors in a family firm serve the owners, even sometimes governing them, in what the authors term “bidirectional governance”. (4) The kin strategy of the family influences their governance. (5) The utilization of a board for governance stems from the family (together with its constitution, kin strategy and governance strategy), the board composition and the business conditions of the firm.Research limitations/implicationsBeing a case study the findings are restricted to concepts and theoretical propositions. Using structured induction, the study is not solely inductive but still contains the subjectivity of induction.Practical implicationsGovernance agents should have an instrumental view on the board, considering it one possible governance arena among others, thereby economizing on governance.Social implicationsThe institutional pressure toward active boards could paradoxically reduce the importance of the board in family firms.Originality/valueThe board of a family company differs in its emphasis of board functions and these functions are performed with varying emphases in different governance arenas. The authors propose the concept of kin strategy, which refers to the governance importance of the structure of the owner and observations on bi-directional governance, indicating that the board can govern the owners.

Digital innovation in family firms: The roles of non-family managers and transgenerational control intentions

AbstractDigital innovation, i.e. the creation of products and services, processes, or business models on the basis of digital technology, represents a new innovation phenomenon that offers important opportunities, but also entails high risks. Family firm research argues that family firms generally possess a greater ability to innovate, but differ in their willingness to do so. We propose that with regard to digital innovation family firms rather face an “ability and willingness challenge”, i.e. they differ in their willingness and their ability to engage in digital innovation. We analyze two factors—non-family managers and transgenerational control intentions—that might help family firms overcome the ability and willingness challenge and that allows to explain heterogeneity among family firms in the adoption of digital innovation. An empirical, survey-based investigation of 104 German family firms supports our hypotheses. We contribute to the literature on digital innovation in family firms as well as on family firm professionalization.

Family firm internationalization and top management team collaboration: Roles, emotional attachment, and risk perceptions

This study examines how collaboration within top management teams (TMTs) composed of family owner-managers (FOMs) and nonfamily managers (NFMs) influences internationalization decisions. Based on a qualitative multi-case study, we identify four roles taken by TMT members: drivers (typically FOMs), experts (both FOMs and NFMs), boundary spanners (typically NFMs), and administrators (typically NFMs). We theorize how congruence regarding roles, emotional attachment, and risk perception fosters internationalization decisions, whereas frictions arise in case of incongruence and hinder decision-making. The study contributes to research on family firm internationalization and to emerging research on TMT structure.

The relationship between non-family management in family firms and firm performance: A meta-analysis

The purpose of this meta-analysis is to empirically quantify the relationship between non-family management and family firm performance and to examine the potential influence of moderating factors on this relationship. Integrating findings from 69 studies and 105 total samples, we find a significant, positive, and weak relationship that is contingent on firm variables including firm size, age, and listing on the stock market as well as methodological variables including research design and measures for both non-family management and family firm performance. Our findings show that non-family management has a stronger performance effect in studies with small, young, and private family firms and in those with panel datasets as opposed to cross-sectional ones. The study contributes to the family firm literature and yields important implications for research and practice.

Impact of TMT structural power asymmetry on family firm internationalization

We examine the impact of the top management team’s (TMT) structural power asymmetry on a family firm’s degree of internationalization. Structural power is the administrative power drawn from formal positions and is different from ownership power. We argue that family identity creates a faultline between the family and non-family managers in the family firm’s TMT. This faultline gets strengthened when the family managers skew ‘structural power’ toward themselves (termed as ‘family structural power concentration’), leading to poor team integration and cooperation among family and non-family managers. Resultantly, family firms are unable to leverage the knowledge, expertise, and network of the non-family managers in the firm’s TMT for the firm’s internationalization attempts. We hypothesize a negative relationship between ‘family structural power concentration’ and the ‘firm’s degree of internationalization’. Further, we argue that this relationship is moderated by environmental dynamism and competitive intensity. Our findings have implications for research and practice.

Hiring family or non-family managers when non-economic (sustainability) goals matter? A multitask agency model

Nepotism, altruism, lower managerial abilities, and a small pool of qualified family candidates may speak against family management. However, a large share of family-owned firms is run by family managers. Our study develops a theoretical model that provides an explanation for this paradox, linked to the multitasking problem of managing economic and non-economic tasks in family firms. Comparing the performance of family and non-family managers under moral hazard and imperfect performance measurement, we find that incentive pay leads to an effort distortion towards economic outcomes for both manager types, however less so for family managers. This effort distortion is less pronounced when economic and non-economic management tasks are complements. We show that family managers with excellent skills regarding non-economic goals of the owner family often outperform non-family managers even if they have poor skills in economic tasks or, what is more, if they have lower average abilities altogether. We further show that the interdependence between economic and non-economic goals in the manager’s job tends to have a moderating effect on the family manager’s relative performance. Our study contributes to the literature about family management and agency costs in family firms and has practical implications for family firms’ hiring decisions. By highlighting the importance of non-economic goals, it moreover adds to the current discussion about the compliance with firms’ sustainability goals.

Tacit Knowledge and Decision Making Practices in the Context of Family Businesses.

Decision-making practices in family business are crucial and usually involve several stakeholders. To determine the decision-making mechanism in the family business, qualitative research approach was carried out. 30 semi-structured interviews were conducted involving family owners and non-family managers. Thematic analysis was used to analyze data. Three themes such as Business sense, consultation with elders, and ceremonial approval of the board were generated. Study reveals that decision-making is informal and based on tacit knowledge. Study emphasizes the codification of tacit knowledge, the codification will make decision-making more formal and institutionalized.

Advising in Family Firms: Shaping Relational Dynamics and Trustful Connections in Strategy Work

The purpose of this article is to explore strategy advisors’ actions and interactions with family actors and nonfamily managers for strategy work in family businesses. By combining the strategy-as-practice perspective with the concept of emotional engagement practices, we interpret the case of a family firm collaborating with an external advisor over a 15-year period. We add to prior studies by showing how advisors work to build trustful and emotional connections that shape relational dynamics within evolving spaces of strategic discussion. We highlight the implications for strategy work, which change as relational dynamics develop over time.

Promoting Nonfamily Managers’ Felt Inclusion in Family Business: Role of Owner Paternalism

Nonfamily managers play a vital role in family businesses. However, they often feel like “second-class citizens” within the firm, which harms their work achievements. Therefore, it is important to explore ways to reduce the sense of marginalization of nonfamily managers. In the study, we propose that owner paternalism can enhance nonfamily managers’ perceived inclusion. Further, with a higher level of felt inclusion, nonfamily managers become more engaged in their work and create more value for the family business. Survey data were collected from 183 matching data of owners and nonfamily managers in China. The hypotheses were largely supported: (1) owner paternalism was positively related to nonfamily managers’ work engagement and job performance through felt inclusion; (2) Nonfamily managers’ power distance orientation positively moderated the relationship between owner paternalism and the non-family manager’s felt inclusion, as well as the serial indirect relationship between owner paternalism and nonfamily managers’ job outcomes through felt inclusion and job engagement. Both theoretical and practical implications were discussed.

Gender Differences in Managerial Turnover in the Context of Family Business: Evidence from Korea

This study investigates gender differences in managerial turnover among top managers in South Korea. While there is a growing literature on the gender diversity in corporate management, we still have little understanding on the gender gap in workplace in the family business context. We address this research gap by examining the Korean corporate context in which the family plays a crucial role in corporate decision making. We argue that the gender gap in managerial turnover for Korean managers is different for family managers and non-family managers and is dependent upon gender composition of the management. We test our predictions using data from senior managers in Korean firms for the period of 2014-2019. The findings show lower exit rates for female managers compared to male managers, especially when they belong to the family (via either kinship or marital ties) of the ultimate firm owner. In addition, we find that lower exit rates by female managers are subject to gender composition among family managers. By empirically documenting gender difference in managerial turnover in the family business context, our study contributes to the research about gender and management and suggest that firms make strategic decisions in their response to the social pressure of gender diversity by keeping female family members in top management.

A manager's stewardship identification in Brazilian family firms: the role of controls' design and procedural justice

Purpose The paper investigates whether a family firm's control context is directly associated with a manager's stewardship attitude or whether this relationship is mediated by the manager's perception with respect to the fairness of the control processes. Design/methodology/approach The authors have sent a survey to family businesses in Brazil. The authors tested the hypotheses with the data collected from 141 responding family and nonfamily managers with the use of structural equation modeling (SEM) analyses (SmartPLS). Findings The authors find that more participative and more formal controls are associated with higher procedural justice perceptions. Zooming in on the types of control, namely forward-looking action controls, like target setting (TS), and backward-looking results controls, like performance measurement (PM), the authors observe that TS is significantly positively associated with stewardship identification through a manager's procedural justice perceptions for both control characteristics (partial mediation for participative TS and full mediation for formal TS). PM on the other hand is only significantly directly related to a stewardship identification if it is of a participative character. In addition, the authors find a significant moderating effect of family affiliation, increasing the strength of the association between PM procedural justice and stewardship identification for nonfamily managers. Originality/value Prior literature focused on discussing stewardship attitudes and behaviors in family firms, but few provided empirical evidence that a stewardship attitude in a family firm is associated with contextual factors, like the design of controls in family firms in combination with a manager's individual perception of family firm's process factors.

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.

Comparative analysis of export determinants in Italian and Polish firms: The moderating role of non-family management

PURPOSE: The paper analyses the determinants of exporting from a cross-country perspective, comparing Italy and Poland. It focuses on three objectives: i) investigating if age and size influence the firm’s probability to export; ii) if there are differences between family and non-family management; iii) if and how non-family management positively moderates the relationship between age, size, and the firm’s probability to export. METHODOLOGY: Microeconometric analysis using probit regressions on two surveys carried out in Italy and Poland on representative samples of manufacturing SMEs (1,100 for Italy and 680 for Poland). We control for several factors, such as innovation, geographical location, economic sector, and banks relationship. FINDINGS: In both countries, the larger firms have a higher probability to export, with a higher significant effect in Italy than in Poland. Business experience proves to be a factor affecting the likelihood of exporting only in Italy (in a positive sense: older firms are more likely to export) and not in Poland. External (non-family) management is a driver for the internationalization of family-owned firms, especially for younger firms in Italy and for smaller firms in Poland. All these findings are confirmed by robustness check analyses on the subsample of family-owned firms. IMPLICATIONS: i) the role of corporate governance can differ between countries with reference to a firm’s competitiveness; ii) favoring management openness to external managers for family-owned firms; iii) small firms require greater support in encouraging exporting behavior; iv) the need to consider jointly the issues of innovation, internationalization and corporate governance modes (familynon-family management) in the agenda of the firm’s competitiveness. ORIGINALITY AND VALUE: The paper contributes to the literature on the determinants of exporting by simultaneously studying some firm’s characteristics related to size and age with others related to corporate governance, which are usually addressed separately. Furthermore, this paper tries to fill a gap concerning a lack of cross-country studies focusing on European countries other than those more advanced.

Influence of socioemotional wealth on non-family managers’ risk taking and product innovation in family businesses

PurposeThere is a growing interest in understanding family firms’ strategic behavior using the socioemotional wealth (SEW) perspective. This study explores how family SEW dimensions influence non-family managers’ attitudes toward risk in the context of product innovation. This study also examines whether managerial risk-taking mediates the relationship between SEW and product innovation.Design/methodology/approachThe study uses a sample of 150 family firms in the United Arab Emirates and collects data from family owners and non-family managers via self-administered questionnaires. The study uses SmartPLS structural equation modeling to test the conceptual model and the proposed hypotheses.FindingsThe results indicate that multidimensional SEW influences non-family managers’ risk-taking behavior in different magnitudes and directions, thus impacting firms’ product innovation. Moreover, risk-taking partially mediates the relationship between SEW dimensions and product innovation.Originality/valueWhile product innovation could be seen as a loss scenario for family firms due to the potential loss of SEW, growth, continuity and reputation outweighed the desire to maintain control for the firms in this sample. Thus, these firms encourage non-family managers to take risks in product innovation.

The influence of non-family members in top management teams on research and development investment: Evidence from Chinese family firms.

The diversified management ability of the non-family members in the top management teams (TMTs) can significantly increase the research and development (R&D) investment of the family firms. However, existing studies focus on family characteristics. To bridge the gap, this study explored the R&D investment propensity for family firms from the perspective of non-family members' participation in TMTs. Based on the upper echelons and the socioemotional wealth theory, this paper incorporated the non-economic goals that influence strategic decisions on family firms into the analytical framework. According to the questionnaire data of Chinese private enterprises, the Tobit regression model was used to analyze the influence of family members on R&D investment decisions under non-economic goal orientations. The results indicated that the preference for control and influence among family members weakens the positive effect of non-family managers on R&D investment, while the preferences for status perception and social responsibility strengthen the positive effect.

Effects of CEO Identity on Non-family Managers’ Pay Dispersion in Family Firms: A Social Comparison Perspective

The fairness of compensation has been a prominent focus for non-family managers, and pay dispersion, which reflects compensation fairness, has attracted much attention from scholars. Based on social comparison theory, this study investigates the factors that affect the pay dispersion between CEO and non-family managers. In family firms, the role of CEO, which is central in corporate governance, can be filled by either a family or a non-family member. This study provides insights into how the identity of the CEO affects pay dispersion and investigates the moderating effects of CEO tenure and institutional environment. Using the data of Chinese listed family firms from 2009 to 2015, the results show that the presence of non-family CEOs could decrease the pay dispersion between CEO and non-family managers. Empirical evidence also supports that the negative relationship between CEO identity and pay dispersion weakens when CEO tenure increases and the institutional environment matures.

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.