Showing papers in "Family Business Review in 2006"
TL;DR: In this paper, the authors examine the nature of family businesses in an attempt to explain why some seem to do so well and others so poorly, and draw conclusions about the drivers that make some family businesses great competitors, while leaving others at a disadvantage.
Abstract: After decades of being viewed as obsolete and problem ridden, recent research has begun to show that major, publicly traded family-controlled businesses (FCBs) actually out-perform other types of businesses. This article examines the nature of such family businesses in an attempt to explain why some seem to do so well and others so poorly. It begins with four fundamental governance choices that distinguish among different kinds of family businesses: level and mode of family ownership, family leadership, the broader involvement of multiple family members, and the planned or actual participation of later generations. Using precepts from agency and stewardship theory, it relates these dimensions to the nature of the resource-allocation decisions made by the business and capability development, which in turn have implications for financial performance. Propositions are drawn about the drivers that make some family businesses great competitors—while leaving others at a disadvantage.
1,097 citations
TL;DR: In this article, the authors provide an explanation for the contradictory evidence in the literature regarding the performance of family-owned firms and suggest that most of the research fails to clearly describe the family effect on organizational performance.
Abstract: The purpose of this article is to provide an explanation for the contradictory evidence in the literature regarding the performance of family-owned firms. The article suggests that most of the research fails to clearly describe the “family effect” on organizational performance. The “family effect,” based on agency theory and the resource-based view of the firm, is described and propositions are generated that examine the relationship between families and organizational performance. Implications for theory and research are also discussed.
903 citations
TL;DR: The authors empirically investigated the competitiveness and stability of family-owned firms relative to firms owned by diverse shareholders and found that family firms tend to experience higher employment and revenue growth over time and are more profitable.
Abstract: This article empirically investigates the competitiveness and stability of family-owned firms relative to firms owned by diverse shareholders. Founding families are present in about one-third of the S&P 500—the sample of this study. Data gathered over the 1992—2002 period confirm that family firms tend to experience higher employment and revenue growth over time and are more profitable. Regression analysis also supports that firm performance improves when founding family members are involved in management. Although evidence on the relative stability in employment among family firms over the long run is tenuous, data from the most recent recession support the role that founding families play in maintaining employment stability during temporary market downturns.
509 citations
TL;DR: This article explored associations between ownership and management profiles and the performance and objectives of family firms using data from privately held family firms in the United Kingdom, and found that the management rather than the ownership structure of a family firm was generally associated with selected firm-performance indicators and non-financial company objectives.
Abstract: Agency and stewardship theories are used to explore associations between ownership and management profiles and the performance and objectives of family firms. Using data from privately held family firms in the United Kingdom, a range of performance measures and objectives were examined. Multivariate regression analysis detected that closely held family firms did not report superior firm performance. The results show that the management rather than the ownership structure of a family firm was generally associated with selected firm-performance indicators and nonfinancial company objectives. Although family CEOs were associated with lower propensity to export, presented evidence generally fails to suggest that private family firms should avoid employing family members in management roles.
443 citations
TL;DR: In this paper, the authors investigate the effect of firm-level natural-environment-related policies on innovation and financial performance in family and non-family firms and demonstrate that family firms are better able to facilitate environmentally friendly firm policies associated with improved firm innovation and greater financial performance more effectively than their nonfamily competitors.
Abstract: In this article, we investigate the effect of firm-level natural-environment-related policies on innovation and financial performance in family and nonfamily firms. Our findings demonstrate that family firms are better able to facilitate environmentally friendly firm policies associated with improved firm innovation and greater financial performance more effectively than their nonfamily competitors.
364 citations
TL;DR: In this article, the concept of family capital was introduced and it was shown that family businesses with high levels of family resources possibly hold a sustained competitive advantage over non-family businesses.
Abstract: Although it has been long asserted that family businesses hold advantages over nonfamily businesses, to date, there have been very few theories developed as to exactly why family businesses hold competitive advantages over nonfamily businesses. This article introduces the concept of family capital and proposes that family capital has potential impact on business performance. Specifically, this article suggests that family businesses with high levels of family capital possibly do hold a sustained competitive advantage over family businesses with low levels of family capital and/or nonfamily businesses.
343 citations
TL;DR: In this paper, the authors describe the managerial capabilities necessary to configure and leverage a firm's resources in the international marketplace, and discuss the challenges faced by family firms in international expansion.
Abstract: Successful international expansion requires the managerial capabilities necessary to configure and leverage a firm's resources in the international marketplace. Because family firms can face unique...
319 citations
TL;DR: In this paper, the authors investigate the relationship between shifting leadership, different mechanisms of facilitating communication, and the importance to the firm of technical progress, linking each of them to innovation, and conclude that linkages between established family firms and innovation may be substantially stronger than currently assumed.
Abstract: This article studies innovation in family firms, filling in some gaps in existent literature. The research addresses the idea of shifting leadership, different mechanisms of facilitating communication, and the importance to the firm of technical progress, linking each to innovation. Shifting leadership is addressed through the longitudinal design. Communication mechanisms are monitored through two constructs: scope of information and timeliness of information. Technical progress is included in an environmental uncertainty factor technoeconomic uncertainty. The findings suggest that linkages between established family firms and innovation may be substantially stronger than currently assumed by many.
244 citations
TL;DR: The significance of these governance reforms, de facto and de facto, for the publicly held corporation's distant, smaller, but economically robust brethren as discussed by the authors, namely, the closely held, family-owned business, has been missing from this often searing debate.
Abstract: Governance reform of publicly held corporations is an important topic these days, but a critical subtext has been missing from this often searing debate. Namely, what is the significance of these governance reforms, de jure and de facto, for the publicly held corporation's distant, smaller, but economically robust brethren—namely, the closely held, family-owned business? Should these family-owned entities be held to the same governance guidelines and standards that apply to those firms making up the ranks of the Fortune 500, for example? To put it another way, does one size fit all? We caution that many of the most popularized corporate governance practices may be detrimental to family businesses. Many of these recommendations may harm family unity or might be too complex for private firms, and many are applicable only to very large, public companies with dispersed ownership. Popular corporate governance practices are focused toward a market model of corporate governance, found prevalently in the United S...
188 citations
TL;DR: This article examined Confucian values and their effect on family business succession and found that Confucians placed family business in a social context in which the interpersonal relationships inside and outside the business family are subject to a variety of environmental influences.
Abstract: This article examines Confucian values and their effect on family business succession Several implications are drawn One of these is that Confucianism places family business in a social context in which the interpersonal relationships inside and outside the business family are subject to a variety of environmental influences Examining family firms in their social context provides more complete understanding of the dynamics underlying choices and activities in family firms
182 citations
TL;DR: In this paper, the authors investigated the tenure of CEOs in a sample of 304 listed companies in Taiwan; 63 firms were family controlled, 241 were not, and they found that CEO turnover is significantly lower in family firms and its relationship to corporate performance is negative CEO ownership and board ownership are not significant in explaining the length of family CEO tenure.
Abstract: This study investigated the tenure of CEOs in a sample of 304 listed companies in Taiwan; 63 firms were family controlled, 241 were not The results show that CEO turnover is significantly lower in family firms and its relationship to corporate performance is negative CEO ownership and board ownership are not significant in explaining the length of family CEO tenure These findings imply that family boards can still effectively replace the CEO despite relatively low ownership From the ownership structure perspective, this study suggested that the agency theory is applicable for nonfamily firms in Taiwan, but unsuitable for family firms
TL;DR: In this paper, the authors view the survival of a family business as partially dependent on spousal commitment, and they develop models and testable hypotheses to guide empirical research on the antecedents and consequences of spouse commitment to family business.
Abstract: This article views the survival of a family business as partially dependent on spousal commitment. The decision to launch a business should depend not only on analysis of the opportunity, but also on the degree to which one's spouse shares a common vision about the goals, risks, and rewards of the business. Models and testable hypotheses are developed to guide empirical research on the antecedents and consequences of spousal commitment to a family business. The models can benefit individuals considering the launch of a business, couples that currently own a business, business consultants, and university instructors teaching entrepreneurship courses.
TL;DR: The authors examined the influence of family relationships on attitudes of the second generation working in their parents' family businesses and found that two specific family variables are delocalized in attitudes of second generation workers.
Abstract: This research is undertaken to examine the influence of family relationships on attitudes of the second generation working in their parents' family businesses. Two specific family variables are del...
TL;DR: In this article, the authors provide an empirical test of the developmental model for family business (DMFB), developed by Gersick, Davis, Hampton, and Lansberg (1997), and identify key groups of variables that can help explain family business development.
Abstract: This research contributes to the family business literature by providing the first empirical test of the developmental model for family business (DMFB), developed by Gersick, Davis, Hampton, and Lansberg (1997). Our testing of the DMFB, along with a review of the literature since its publication, allow us to identify key groups of variables that can help explain family business development. Specifically, we identify owner, firm, and family characteristics to augment the DMFB. Our hierarchical regression analysis of 934 firms suggests that the original model provides asolidfoundation forclassifyingfamily firms, but the augmented model explains significantly more variance in family firm development.
TL;DR: In this paper, an exploratory study examines the relationship between retail small/medium enterprises (SMEs) that are family business owned, organizational commitment, and management and employee perceptions of customer service on a number of dimensions.
Abstract: The Middle East is a growing, lucrative marketplace that has recently captured the interest of the world for political as well as economic reasons due to the War in Iraq, which began in 2003. This exploratory study examines the relationship between retail small/medium enterprises (SMEs) that are family business owned, organizational commitment, and management and employee perceptions of customer service on a number of dimensions. The results suggest that managers and employees of family-owned businesses in the Middle East behave in ways similar to those in Western countries; however, there are differences, probably related to cultural characteristics. The Middle East is a richly diverse region, a myriad of unique cultures. As the market becomes more sophisticated, the importance of service quality increases. Global retailers can benefit from this study by better understanding the managers and employees in the region and the pivotal role of the family on business. Implications for practice are discussed.
TL;DR: This article explored the characteristics of Lebanese family businesses using a sample of 114 firms and tested various propositions regarding the relationships between correlates of effective succession planning and longevity. But their findings indicated that older firms are more inclined to use a participatory decision-making process, as evidenced by more reliance on advisory boards, and a significantly larger proportion of older firms relative to younger ones holds family meetings and has formal redemption and liquidity plans.
Abstract: This article explores the characteristics of Lebanese family businesses using a sample of 114 firms and tests various propositions regarding the relationships between correlates of effective succession planning and longevity. Successful family businesses in Lebanon exhibit a variety of responses to the variables that are conducive to success. The findings indicate that older firms are more inclined to use a participatory decision-making process, as evidenced by more reliance on advisory boards. A significantly larger proportion of older firms relative to younger ones holds family meetings and has formal redemption and liquidity plans. Firms in our sample are characterized by liberal attitudes: more than 75% consider female ownership acceptable and more than two-thirds of the firms respond positively to potential female CEOs.
TL;DR: Sharma et al. as discussed by the authors examined relationships between the existence of boards of directors and advisory boards and the use of planning in family businesses, drawn from a survey of more than 130 family businesses.
Abstract: This study examines relationships between the existence of boards of directors and advisory boards and the use of planning in family businesses. It is argued that both of the primary roles of boards, the governance of a firm’s management team for the firm’s stakeholders and the provision of valuable business resources to the firm’s management team, are significantly related to the use of planning activities in family businesses. The empirical evidence, drawn from a survey of more than 130 family businesses, largely supports the hypotheses. Conclusions and suggestions for future research close the article. Research has established the importance of both strategic planning and the formation of boards for the success of family businesses (Sharma, Chrisman, & Chua, 1996, 2003; Ward, 1988). Like other forms of businesses, family-owned firms that have clear perspectives on how their managers run their firms and that have proper and effective governance structures are more likely to enjoy long-term success. There are, of course, alternatives to utilizing strategic planning and boards. Instead of planning, managers may choose to make decisions based on intuition or simply continue on the trajectories set for the business in years past. Boards may not be formed or ignored once in place, and family businesses may choose to rely only on informal interactions with family members for the advice and aid provided by boards at other firms. Scholars have explored both planning and boards, to varying degrees, in family businesses, but little or no research has been conducted on the relationships between them. This lack of research represents a significant gap in our understanding of how family businesses grow and develop, especially in today’s world of intense competition and renewed interest in corporate governance. The specific research question that guides this article is: Is there a relationship between the existence of boards and the prevalence of planning in familyowned businesses?
TL;DR: In this paper, ownership concentration, owner preferences, and competitive advantage of family-controlled businesses are modeled and used to explain how successful family controlled businesses differ from firms with less concentrated ownership and less successful FCBs.
Abstract: This article models ownership concentration, owner preferences, and competitive advantage. It argues that ownership structure and owner preferences can give rise to resources and capabilities that increase firm profits. The model is then used to explain how successful family-controlled businesses (FCBs) differ from firms with less concentrated ownership and less successful FCBs. Because of their ownership concentration and reduced monitoring costs, many FCBs will have a resource surplus. That surplus and the tendency toward long-term investment among some FCBs create unique competitive opportunities under conditions we specify.
TL;DR: In this article, the authors compare various measures of success, explore the differences in their outcomes, and analyze whether a model of success measurement using configurational fit can be used to overcome subjective biases.
Abstract: The problems associated with measuring success in small businesses are primarily caused by a lack of comparable data due to the ambiguity of success and by subjective biases. Success evaluation is dominated by the estimates of business owners, who tend to overestimate overall
success and internal strengths. However, reliable success measurement instruments would be useful for small business owners/managers as well as small business policymakers.
The main purposes of this article are to compare various measures of success, to explore the differences in their outcomes, and to analyze whether a model of success measurement using configurational fit can be used to overcome subjective biases. The study is based on a recent
survey of 103 small family-owned businesses in the eastern Austrian border region.
Our analysis of the data confirmed the existence of the measurement problems mentioned above. While some individual indicators show significant biases as well as effects due to company age, size and industry, the aggregated indicator based on the concept of configurational fit seems to be
an appropriate means of overcoming most of these drawbacks.(author's abstract)
TL;DR: In this article, data from the 1997 and 2000 panels of the National Family Business Surveys were used to examine continuance in copreneurial business relationships, finding that those who continued as a team were more likely to be older, more educated, and running larger, more successful businesses.
Abstract: Data from the 1997 and 2000 panels of the National Family Business Surveys were used to examine continuance in copreneurial business relationships. Three groups, copreneurs who continued as a team from 1997 to 2000, coprenpreneurs in 1997 who discontinued by 2000, and couples who became copreneurs between 1997 and 2000, were compared on various characteristics. Findings indicate that those starting copreneurial business relationships were more likely to be older, more educated, and running larger, more successful businesses. Those who discontinued the copreneurial business relationship during the three years of the survey had lower levels of education and success, both financially and in terms of number of people employed, than the other groups.
TL;DR: In this article, the authors examine the responses of family companies to the emerging environment of mergers and acquisitions, specifically within the international wine industry, and examine how the family perspective influences responses of a family firm to the prospect of merger or takeover.
Abstract: In this article, we examine the responses of family companies to the emerging environment of mergers and acquisitions, specifically within the international wine industry. At issue is the question of how the family perspective influences responses of a family firm to the prospect of merger or takeover. We examine the issue through a case study of the takeover of an Australian wine producer and family firm, Peter Lehmann Wines. The case study demonstrates ways in which the family perspective is critical in driving responses, for example, in the strength and forms of opposition to one of the potential acquirers in the case, indicating just how important the preservation of a family legacy was to key family members. However, the case also illustrates how in a takeover fight the dynamics of the takeover process itself become important in determining outcomes. In addition, the case demonstrates that family involvement and influence can be maintained in spite of takeover.
TL;DR: In this paper, the authors investigate the link between established family firms and innovation and suggest that linkages between established families and innovation may be substantially stronger than currently assumed by many, and the importance of technical progress to the firm's innovation is linked to shifting leadership, different mechanisms of facilitating communication, and linking each to innovation.
Abstract: This article studies innovation in family firms ,fi lling in some gaps in existent literature. The research addresses the idea of shifting leadership, different mechanisms of facilitating communication, and the importance to the firm of technical progress, linking each to innovation. Shifting leadership is addressed through the longitudinal design. Communication mechanisms are monitored through two constructs: scope of information and timeliness of information. Technical progress is included in an environmental uncertainty factor technoeconomic uncertainty. The findings suggest that linkages between established family firms and innovation may be substantially stronger than currently assumed by many.