Showing papers in "Family Business Review in 2007"
TL;DR: In this article, the authors focus on risk taking as one important dimension of entrepreneurial orientation and its impact in family firms and find that risk taking is a distinct dimension of entrepreneurship orientation in families and that it is positively associated with proactiveness and innovation.
Abstract: This article focuses on risk taking as one important dimension of entrepreneurial orientation and its impact in family firms. Drawing on a sample of Swedish SMEs, we find that risk taking is a distinct dimension of entrepreneurial orientation in family firms and that it is positively associated with proactiveness and innovation. We also find that even if family firms do take risks while engaged in entrepreneurial activities, they take risk to a lesser extent than nonfamily firms. Moreover, and most importantly for our understanding of entrepreneurial orientation in family firms, we find that risk taking in family firms is negatively related to performance. Both theoretical and practical implications of our findings are provided.
1,130 citations
TL;DR: In this paper, the authors show that family firms display a longer time horizon than most of their non-family counterparts, since they tend to have a longer CEO tenure, and this type of firm strives for long-term independence and succession within the family.
Abstract: Recent literature (McNulty, Yeh, Schulze, & Lubatkin, 2002) states that the assumptions behind the capital asset pricing model, in particular the irrelevance of time horizon, do not correspond to the characteristics of firms that prefer long-term investment horizons. I show that family firms display a longer time horizon than most of their nonfamily counterparts, since (1) family firms display a longer CEO tenure, (2) this type of firm strives for long-term independence and succession within the family, and (3) due to the fact that family firms are overrepresented on western European stock markets in cyclical industries in which business cycles inhibit short-term success. As the annual default risk of an investment diminishes with increasing holding period (Hull, 2003), the risk-equivalent cost of equity capital of firms with longer planning horizons (e.g., family firms) can be lower as well. Based on the assumption that economic value to shareholders is created when firms invest in projects with returns above the associated cost of capital (Copeland, Koller, & Murrin, 2000), I argue that long-term-oriented firms can tackle unique investment projects represented by two generic investment strategies-the perseverance and the outpacing strategy. The first one, the perseverance strategy, represents investment strategies in which long-term-oriented firms invest in lower return but equal risk projects than their more short-term-oriented counterparts. The second one, the outpacing strategy, comprises investment projects with higher risk and equal return than the short-term competitors.
397 citations
TL;DR: In this paper, the impact of family ownership on firm performance was studied by using a set of data on Chilean firms, from a sample of 175 firms listed on the stock market, the group of 100 family-controlled firms.
Abstract: We studied the impact of family ownership on firm performance by using a set of data on Chilean firms. From a sample of 175 firms listed on the stock market, the group of 100 family-controlled firm...
313 citations
TL;DR: In this paper, a case-based approach was used to examine the effect of the family structure on the actualization of an effective market orientation, thereby constituting a competitive advantage.
Abstract: This article considers the familiness construct within the resource-based view of the firm by examining the manner in which intangible and other unique resources translate into competitive advantages held by family businesses. Specifically, this article, through a case-based approach, questions whether the familiness qualities of a firm contribute to actualization of an effective market orientation thereby constituting a competitive advantage. Analysis of multiple interviews from family owners and managers suggests that familiness qualities, including, but not limited to, strategic focus, customer orientation, family relationships, and operational efficiency, do contribute to a propensity for execution of an effective market orientation.
249 citations
TL;DR: In this paper, the authors explored the impact of professionalization of management on succession performance in Indian family business groups, and drew from case studies on succession process in three Indian business groups.
Abstract: Based on inductive reasoning—case evidence from Indian family business groups and the authors' experience with family businesses in India—this article explores the impact on succession performance of succession to a nonfamily professional manager as compared to a family member, commonly referred to as professionalization of management. An important distinction is drawn between family-owned and family managed businesses and family-owned and professionally managed businesses. Then, drawing from case studies on succession process in three Indian family business groups, the article puts forth five propositions pertaining to the impact of professionalization of management on succession performance. Several directions for further research are indicated.
212 citations
TL;DR: In this paper, the authors present empirical evidence on the determinants of the financial behavior of small family businesses and their differences from non-family small businesses, taking into account two consolidated financial approaches, (1) the trade-off theory and (2) the pecking order theory.
Abstract: This article presents empirical evidence on the determinants of the financial behavior of small family businesses and their differences from nonfamily small businesses. Taking into account two consolidated financial approaches, (1) the trade-off theory and (2) the pecking order theory, several hypotheses on the financial behavior of both groups of firms have been tested. By estimating these models through panel data methodology, using a sample of Spanish family businesses together with another control group of nonfamily businesses, we have obtained results confirming that a business's family nature does lead it to employ financial policy different from the rest of businesses. Furthermore, results indicate that growth opportunities, financial distress costs, and internal resources appear to be the main factors that differentiate the financial behavior of family firms from their nonfamily counterparts.
207 citations
TL;DR: In this paper, a combination of the resources-based view and agency theory is used to analyze the internal dynamic of the family business and its evolution, and the evidence seems to suggest that the desire to keep family control produces specific sources of value and conditions the firm's financial capacity to acquire resources.
Abstract: This exploratory study is intended to analyze how a combination of the resources-based view and agency theory can provide a better understanding of the internal dynamic of the family business and its evolution. Our evidence seems to suggest that the desire to keep family control produces specific sources of value and conditions the firm's financial capacity to acquire resources. These peculiarities change between first and following generations. During the first generation, we find that less severe agency costs balance the negative effect of scarce financial structure on the family firm's value. After descendants join the firm, the increasing agency costs are compensated by the enlargement of the firm's financial structure.
206 citations
TL;DR: In this paper, the authors empirically examined the relationship between CEO duality and firm performance in family-controlled public firms and found that duality by itself does not influence firm performance.
Abstract: Using the competing agency theoretic and stewardship theory perspectives, we empirically examine the relationship between CEO duality and firm performance in family-controlled public firms (FCPFs). We find that duality by itself does not influence firm performance in FCPFs. However, our results show that the relationship between duality and performance is contingent on the family's ownership stake in the firm. In nondual firms, performance is inversely related to family ownership level. Dual FCPFs do not exhibit any changes in performance dependent on family ownership levels. Our findings reveal, in short, that when family ownership is low, the separation of CEO and board chair roles is beneficial in terms of shareholder returns. Having different persons occupy the CEO and board chair positions is a useful governance control as the risk of family entrenchment increases.
195 citations
TL;DR: The authors used author co-citation analysis (ACA) to identify different research trends within the field, studying all the papers published in the Family Business Review from its foundation in 1988 through to the December 2005 issue, finding that despite the literature being fragmented and showing a lack of consensus, we are facing a development of the research frontier by enlarging the number of approaches used for understanding the family business.
Abstract: This article aims at identifying the characteristics of the family business as a differentiated field within management. For that aim, we use author co-citation analysis (ACA) to identify different research trends within the field, studying all the papers published in the Family Business Review from its foundation in 1988 through to the December 2005 issue. Results show that despite the literature being fragmented and showing a lack of consensus, we are facing, in Kuhn's words, a development of the research frontier by enlarging the number of approaches used for understanding the family business.
194 citations
TL;DR: In this article, the authors investigate power structures and interactions among father-daughter and father-son family business decision teams experiencing management transfer, and find that women in the father son business experienced feelings of exclusion, incidents of higher conflict among family members, which produced less shared meaning, and lower levels of integration among families members.
Abstract: The purpose of the study was to investigate power structures and interactions among father-daughter and father-son family business decision teams experiencing management transfer. Analytic induction was the methodology used to test the family FIRO theory. Support was found for the theoretical premise of sequential and developmental relationships among the three dimensions (inclusion, control, and integration). The women in the father-son business experienced feelings of exclusion, incidents of higher conflict among family members, which produced less shared meaning, and lower levels of integration among family members. On the other hand, women in the father-daughter business experienced feelings of inclusion, resulting in lower conflict that created high levels of shared meaning, collaboration, and integration among family members. In management transfer consultations, if the entire family business decision team is not included in information gathering, and if the decision team is not observed interacting...
175 citations
TL;DR: In this article, a typology of predecessor roles during and after instatement of the successor from five small and medium-sized family businesses that have successfully completed their first generational transfer is presented.
Abstract: The last two steps in the succession process—the joint management and withdrawal phases—differ from preceding phases in that they mark the successor's official entry into the family business as future head and the gradual retirement of the predecessor. Alone at the helm until that point, predecessors are faced with an important period of transition in their life where their role as leader is replaced by other roles that have not yet been clearly defined in the existing literature. Using a case study research strategy, this article presents a typology of predecessor roles during and after instatement of the successor from five small and medium-sized family businesses that have successfully completed their first generational transfer.
TL;DR: The Family Climate Scales (FCS) questionnaire as discussed by the authors is a multilevel, self-report, whole-family index of aspects of family culture and process for use in nonclinical settings with families where the children may be adults.
Abstract: The article reports on the development of the Family Climate Scales (FCS) questionnaire. The FCS is a multilevel, self-report, whole-family index of aspects of family culture and process for use in nonclinical settings with families where the children may be adults. It was designed to be particularly but not exclusively applicable in the context of family business. The FCS measures on six scales: Open Communication, Adaptability, Intergenerational Authority, Intergenerational Attention to Needs, Emotional Cohesion, and Cognitive Cohesion. Results indicate very high levels of internal consistency. Subscale intercorrelations are also high, with the exception of the Intergenerational Authority subscale. Analyses using structural equation modeling confirmed the hypothesized sixfactor structure of family climate. No significant differences in family climate were found between business/nonbusiness families in the sample. Other relationships in the data set lend support to the validity and usefulness of the measure. Implications for family business theory/research and practitioners are discussed.
TL;DR: In this article, a model of family business that accounts for the unique characteristics and diversity of family businesses and addresses the dynamics among family business subsystems is developed, which can help researchers advance theory building on family business.
Abstract: The purpose of this article is to develop a model of family business that accounts for the unique characteristics and diversity of family businesses and addresses the dynamics among family business subsystems. An open-systems approach serves as the conceptual foundation of the model. The distinctive features of the proposed model are the multiple levels of analysis and the dynamics and interdependencies among the subsystems, allowing the integration of mainstream theories. The model can serve to discover and explore a relevant research question in the context of family business, which may help researchers advance theory building on family business. Furthermore, the model may help family business practitioners better understand the particularities of family firms.
TL;DR: In this paper, the authors present a study based on interviews with 27 family members and non-family CEOs (NFCs) with the objective of exploring what makes for successful NFCs.
Abstract: Nonfamily CEOs are an important part of the managerial efforts of many family businesses. However, little academic work has focused on these managers, who reside in the dual worlds of business and family. This article presents a study based on interviews with 27 family members and nonfamily CEOs (NFCs) with the objective of exploring what makes for successful NFCs. We find that successful nonfamily CEO engagements are characterized by the selection of an individual with both business and interpersonal competencies, and the support of both family business boards and councils.
TL;DR: This paper examined levels of objective and perceived control held by incumbents and successors in 100 Canadian family businesses approaching succession and found that control remains largely with incumbents, while indicators of succession readiness were more reliably correlated with the successors' levels of control.
Abstract: This research examines levels of objective and perceived control held by incumbents and successors in 100 Canadian family businesses approaching succession. Although results suggest that control remains largely with incumbents, indicators of succession readiness were more reliably correlated with the successors' levels of control. Generational differences in the association between succession indicators and actual levels of control are highlighted. Implications of these generational differences and the association between succession readiness indicators and control outcomes are discussed.
TL;DR: In this article, a study characterizes employee compensation in family owned and managed firms compared to that in non-family firms and professionally managed family firms and the general results show that employee compensation differs between firms.
Abstract: This study characterizes employee compensation in family owned and managed firms compared to that in nonfamily firms and professionally managed family firms. The general results show that employee compensation differs between firms. This is an important finding because to understand employee compensation designs it is necessary to understand the role of ownership concentration and management composition in the firm, since the compensation components are explicitly defined according to risk sharing and to the interest of the owners, CEO, and employees.
TL;DR: The authors employed an explorative qualitative research methodology by querying a group of family business presidents to describe the skills critical for success, and organized this feedback into a framework depicting the key challenges associated with leadership succession.
Abstract: Given the importance of succession planning in family-owned businesses, our research is focused on identifying the key dimensions that could comprise af amily business selfefficacy scale. We employed an explorative qualitative research methodology by querying a group of family business presidents to describe the skills critical for success. Using a resource-based perspective and relevant family business succession literature, we organized this feedback into a framework depicting the key challenges associated with leadership succession. The presidents’ comments highlight as et of general and family business skill requirements that fall into the domains of social and human capital.
TL;DR: In this article, a practical consequence of institutional weakness suggests that family businesses perform both wealth-creation and wealth-preservation tasks in an emerging market, and the financial goals of the family firm are subject to frequent trade-offs between entrepreneurial activities that generate new wealth and more defensive activities that preserve, hide or allow for the geographic or intergenerational transmission of wealth.
Abstract: The prevalence of minority family businesses in emerging markets has several theoretical and practical implications. First, a practical consequence of institutional weakness suggests that family businesses perform both wealth-creation and wealth-preservation tasks in an emerging market. Legal protection for property rights and financial institutions specializing in wealth reallocation and preservation are often ineffective in emerging markets. Lacking such security, the family business unit necessarily becomes something more than a value-creation device; it may also serve as a wealth-protection and intergenerational and/or geographical transmission device used to preserve and transfer wealth through various informal and often nontransparent means. Consequently, the financial goals of the family firm are subject to frequent trade-offs between entrepreneurial activities that generate new wealth and more defensive activities that preserve, hide, or allow for the geographic or intergenerational transmission of wealth.
TL;DR: In this paper, the authors describe, in the Spanish setting, family ownership and explore how families hold their shares (the use of indirect ownership, pyramids, and cross-shareholdings).
Abstract: This aim of this article is to describe, in the Spanish setting, family ownership and to explore how families hold their shares (the use of indirect ownership, pyramids, and cross-shareholdings). It also seeks to describe to what extent cash-flow rights differ from control rights and the degree of the firm's professionalization according to every type of owner category, but especially for families.
TL;DR: In this article, a grounded theory study examines successful post-divorce copreneurs and proposes a model that can help advisors navigate the many potential pitfalls a divorcing couple can experience.
Abstract: It is a commonly held belief that divorce “kills” the family business, especially when copreneurs divorce or separate. Yet there are examples of copreneurs who have successfully continued to work together postdivorce. However, to date, there have been no studies or theories developed regarding successful, postdivorce copreneurs. This grounded theory study examines successful postdivorce copreneurs and proposes a model that can help advisors navigate the many potential pitfalls a divorcing couple can experience. This study finds that copreneurs who have a great deal of trust in one another can continue to work together postdivorce. Emotional connection, compartmentalization, synergy, commitment to the business, and positive gender issues also contribute to the success of the business and the business relationship.
TL;DR: In this paper, the authors consider insider sales that represent voluntary releases of voting control by managers who continue to manage their firms, and ask if a manager's willingness to relinquish control is affected by the presence of other blockholders.
Abstract: A large stock sale by an insider can be good news for a firm if it increases the potential for meaningful monitoring. I consider insider sales that represent voluntary releases of voting control by managers who continue to manage their firms, and ask if a manager's willingness to relinquish control is affected by the presence of other blockholders. I found that managers of family firms are much more defensive about maintaining their voting control, especially when there are other family members in management.