A unified systems perspective of family firm performance

Theory and practice indicate that in family-influenced firms, the interaction of the family unit, the business entity, and individual family members create unique systemic conditions and constituencies that impact the performance outcomes of the family business social system. Habbershon and Williams [Fam. Bus. Rev. 12 (1999) 1] have suggested that these unique systemic family influences can be captured through an analysis of the resources and capabilities of the organization. In this paper, we pursue their line of thinking and more specifically examine the systemic relationship of resources and capabilities as a source of advantage or constraint to the performance outcomes for family-influenced firms. The idiosyncratic firm level bundle of resources and capabilities resulting from the systems interactions are referred to as the “familiness” of the firm. Wealth-creating performance for family-influenced firms is a function of the “distinctive familiness” generated by the family business system. The performance model focuses on a particular subset of family-influenced firms whose performance goal is transgenerational wealth and wealth creation potential. We refer to those families that meet this premise as “enterprising families.” We develop a unified systems model of performance that links the resources and capabilities generated in the enterprising families system with their potential for transgenerational wealth creation.     

Where does ESG pay? The role of national culture in moderating the relationship between ESG performance and financial performance

This study investigates the moderating role of a country’s culture as an external contingency factor in the relationship between a firm’s environmental, social, and governance (ESG) performance and financial performance. Using ESG performance data of 4978 firms from 48 countries for 17 years, we argue that the financial return from engaging in ESG varies depending on the countries’ cultural aspects because stakeholder evaluations and appreciations for a firm’s ESG performance differ across nations. We find that a country that espouses a culture of high individualism or masculinity tends to appreciate and reflect on this more explicitly, strengthening the relationship between a firm’s ESG performance and financial performance. Contrastingly, in a country with a culture of high power distance or uncertainty avoidance, firms’ ESG efforts are less likely to be associated with financial performance. Our findings have important implications for multinational enterprises facing various cultural environments when dealing with heterogeneous stakeholder demands across countries.     

The entrepreneurial orientation–performance relationship in private family firms: the moderating role of socioemotional wealth

Drawing on socioemotional wealth (SEW) literature, this paper revisits the established entrepreneurial orientation (EO)–performance relationship in a family business context. The main idea in entrepreneurship literature is that EO leads to increased firm performance. We question this logic in a family business context because family related non-financial goals, like SEW, may prevent the firm to reap the fruits of their entrepreneurial efforts. Specifically, we argue that SEW engenders inefficiencies that place constraints on the realization of the benefits of entrepreneurship. Therefore, we propose that a high level of SEW preservation hinders the transmission of the family firm’s EO into positive performance effects. To test this hypothesis, an empirical study was developed using a sample of 232 Belgian private family firms. Robust linear regression analysis reveals that the positive effect of EO on financial performance decreases as the level of SEW preservation increases.     

Just about money? CEO satisfaction and firm performance in small family firms

This paper examines how family ownership and family ties influence the relative importance of economic and non-economic goals on the CEO’s satisfaction with the firm. Using a sample of small high-tech family and non-family firms, we show that the influence of past firm economic performance on CEO satisfaction is weaker in the case of CEOs leading a family firm. Our results also suggest that this influence becomes weaker as the family firm transitions into subsequent generations. However, contrary to our expectations, we were not able to find a differential effect of firm performance on CEO satisfaction between CEOs who belong to the controlling family and those who do not.     

Family SMEs' Internationalization: Disentangling the Influence of Familiness on Spanish Firms' Export Activity

This paper studies the relationships between family involvement and internationalization of family small and medium enterprises (SMEs), examining the effects exerted by the three main dimensions that comprise the concept of familiness: power, experience, and culture. Disentangling the influence of familiness dimensions lead us to discover the combined effects of family's governance, generation, and culture on SMEs' export activity. The results, using the F‐PEC scale over a sample of 500 Spanish firms, show that this multidimensional approach better identifies the determinants of the family SMEs' internationalization. Specifically, we find that the family experience and its culture orientation positively affect the firm's export activity, whereas family governance/management does not have any significant influence.     

Family Control,Socioemotional Wealth and Earnings Management in Publicly Traded Firms

We examine the unique nature of agency problems within publicly traded family firms by investigating the earnings management decision of dominant family owners relative to non-family. To do so, we draw upon literature demonstrating that family owners are loss averse with respect to the family’s socioemotional wealth, or the affective endowment derived from firm ownership and control. Our theory and findings suggest that potential reputational consequences of earnings management lead family principals to engage in less of this practice relative to non-family firms, and that founder family firms are less likely than non-founder family firms to use earnings management. Moreover, the family-firm effect varies with the firm size, the degree of CEO entrenchment, and the firm’s stock structure. We provide important insights regarding differences between family and non-family principals in the use of unethical accounting practices, thereby extending agency theory and advancing an underdeveloped research area.     

A Rose by Any Other Name: Are Family Firms Named After Their Founding Families Rewarded More for Their New Product Introductions?

The authors explore the relation between the way different family firms are named, and the shareholder value impact of these firms’ new product introductions. Using an event study of 1,294 product introduction announcements of 107 publicly listed U.S. family firms, the authors find that the presence of the founding family’s name as part of a family firm’s name acts as a valuable firm resource, increasing the abnormal stock returns surrounding the firm’s new product introductions. Superior returns to family-named firms’ new product introductions are partially mediated by these firms’ history of ethical product-related behavior: family-named firms, particularly those with corporate branding, and those wherein a founding family member holds the CEO or chairman position, are more likely to exhibit a history of avoiding such product-related controversies as product safety issues, and deceptive advertising. The authors highlight the managerial and theoretical contributions of this research.     

Non-family chair and corporate performance

Using a sample of Chinese family firms listed from 1999 to 2014, we investigate the relationship between non-family leadership and firm performance. We find that firms with a non-family member as board chair perform significantly worse than firms whose chair belongs to the family. Moreover, we show that the underperformance of nonfamily-chair firms is more pronounced when firms are under weaker outside monitoring and when the controlling families care less about family business longevity. The negative effect of a non-family chair is robust to a variety of endogeneity tests. We also dismiss alternative explanations other than concern for reputation. Overall, our empirical results suggest that the social norms regarding family reputation are important in shaping the controlling shareholders’ expropriation incentives and firm performance.     

Unveiling the global focus-performance relationship in family firms: The role of the board of directors

Drawing on the resource-based view, this study examines how board composition and board tasks affect the relationship between the firm’s global focus and performance in private family firms. Based on a sample of 234 Belgian private family firms, our empirical analyses reveal that nonfamily involvement in the board attenuates the negative relationship between the firm’s global focus and performance. Furthermore, our results show that the global focus-performance link turns positive at higher levels of board networking and advisory tasks, whereas board control task has no significant effect. Ultimately, these findings underscore the board of directors as a key governance contingency, highlighting its important role in overcoming the challenges of global expansion in private family firms.     

Women’s Leadership and Firm Performance: Family Versus Nonfamily Firms

We evaluate the relationship between the appointment of women to CEO or Chair positions and firm performance, and shed light on the differences between family and nonfamily firms. By using a propensity score matching approach on a sample of 394 French firms over the period 2001–2010, we find major discordances between women’s leadership style and family business expectations relative to firm performance, as measured by return on assets and Tobin’s q. Notably, our results support the conjecture that family firms, which are more conducive to transformational leadership, offer women a more appropriate climate for exercising the function of Chair than that of CEO. In contrast, women CEOs perform better in nonfamily firms. Our findings move away from the predominant focus on barriers and stereotypes images about the female leadership and support the contingency theory of leadership, which states that the effectiveness of a leadership style depends on the organization and culture in which leaders operate, and on task-related positions     

Non-family chair and corporate performance

Using a sample of Chinese family firms listed from 1999 to 2014, we investigate the relationship between non-family leadership and firm performance. We find that firms with a non-family member as board chair perform significantly worse than firms whose chair belongs to the family. Moreover, we show that the underperformance of non-family-chair firms is more pronounced when firms are under weaker outside monitoring and when the controlling families care less about family business longevity. The negative effect of a non-family chair is robust to a variety of endogeneity tests. We also dismiss alternative explanations other than concern for reputation. Overall, our empirical results suggest that the social norms regarding family reputation are important in shaping the controlling shareholders’ expropriation incentives and firm performance.     

A taxonomy of small- and medium-sized international family firms

This study develops a taxonomy of small- and medium-sized family firms that internationalise and discusses the different configurations of these firms based on firm culture (in terms of organisational orientations), firm strategy (in terms of differentiation, cost leadership and marketing standardisation) and firm structure (in terms of integration, centralisation and specialisation). Although the literature on international family firms has highlighted the significant role of organisational culture in firm internationalisation, the strategies and structures of international family firms and their consequences for performance have been disregarded. To examine the interplay of international family firm culture, strategy and structure, we employ a quantitative taxonomic approach that is rooted in configurational theory, analysing 504 Germany-based small- and medium-sized family firms. Different combinations of strategy, structure and culture result in different configurations of family firms and different levels of non-domestic performance. In considering these configurations, we aim to determine which combinations of strategies, structures and firm orientations are primarily applied by international family firms and whether these organisational configurations are successful. Our empirical findings suggest that there are four groups of firms: Domestic-Focussed Traditionalists, Global Standardisers, Multinational Adapters and Transnational Entrepreneurs. These configurations are clearly distinctive in terms of their structure, orientations and performance but differ less in terms of their strategies. Superior international (i.e. non-domestic) performance tends to be driven by a decentralised entrepreneurial approach.     

Why some are more equal: Family firm heterogeneity and the effect on management’s attention to CSR

Research at the family firm–Corporate Social Responsibility (CSR) nexus lacks agreement about whether family firms are more or less socially responsible than their non‐family counterparts, which leads discussion relating to the bright and dark side of socioemotional wealth (SEW). We add to this ongoing debate in two different ways. First, we build on family firm heterogeneity and argue for a gray side to SEW, located between the bright and dark sides that is dependent upon the kind of family firm ownership. Second, we assume that prior research on a diverse set of CSR behaviors may, to some extent, explain the contradicting results; thus, we propose going back a step and focusing on management’s attention to CSR as an important antecedent of CSR behavior. By analyzing the letters to the shareholders of German HDAX firms from 2003 to 2012, this study finds that family ownership positively affects management’s attention to CSR, mainly driven by founders and family foundations. The research adds to our understanding of the family firm–CSR nexus by scrutinizing the role SEW plays in management’s attention to CSR when it comes to family firm heterogeneity.     

Family-centred non-economic goals and the internationalisation of family firms: Evidence from Australia

Despite the growing body of literature on the internationalisation of family firms, further research is required to understand the underlying factors that influence their international behaviour. Past research has consistently shown that family firms are less likely to adopt an internationalisation strategy compared to their non-family counterparts, yet we still have limited understanding of the underlying reasons why this is so. By incorporating the bifurcation bias concept to the socioemotional wealth perspective of family firm behaviour, we argue that greater attention needs to be given to the influence of family-centred non-economic (FCNE) goals on the family firm’s international behaviour. Using survey data collected on over 300 Australian family firms, regression analysis was used to examine the influence of FCNE goals on the family firm’s extent of international involvement. The results suggest that business families which emphasise FCNE goals are more likely to exhibit a lower attitudinal commitment towards international expansion, which in turn determines the level of international involvement of the family firm. Results also suggest that the extent of international involvement of the family firm has a significant negative effect on the level of achievement of FCNE goals.     

Women Entrepreneurs and Family Firm Heterogeneity: Evidence from an Emerging Economy

Family firms add to the economic and social well-being of countries. While research on heterogeneity of family firms is gaining momentum, it has mostly been gender-neutral. The study fills this gap by examining heterogeneity of family firms owned and managed by women, in the context of a developing country—Brazil. The study draws upon the resource-based view of the firm to investigate the relationships between firm performance, family involvement, and financial resources at the start-up phase. An inductive analysis reveals two patterns. First, family firms that are started with the family achieve better performance than firms that are launched without the family and later evolve into a family business. Second, family firms that are funded with women entrepreneur’s own savings achieve worse performance than family firms that are started with borrowed funds. The results are useful for strategic decision making in fostering family businesses headed by women and proactive public policies for future innovation to enhance the success of women entrepreneurs.     

Defensive Strategy’s Effect on Firm Value: Evidence from Public-Listed Companies in Malaysia

This study examines the relationship between defensive strategy and firm value for a sample of 596 listed firms in Malaysia over the period 2008 to 2015. For the sake of robustness, the institutional setting is considered in this research by gauging the ownership structure. More specifically, this study seeks to determine whether a firm’s ownership structure might have a significant contribution to the value of its defensive strategy. Additionally, the value creation of defensive strategy is compared among family firms, government-linked firms, and foreign firms. This study concludes that defensive strategy, especially retrenchment strategy, has a positive significance on a firm’s excess value. This implies that defensive strategy will improve the firm performance. The reduction of the costs and assets, the efficiency of monitoring structure, the threat of dismissal, and the promotion of stewardship can enhance a firm’s benefits. Low profitability is found to be better for the firm performance. However, the ownership structures of government-linked and foreign firms tend to have a discount value on the excess value when these firms adopt retrenchment actions. The implication of this study lies in two main points. Firstly, it enriches the body of knowledge by showing how an effective defensive strategy creates value, and the role corporate governance plays in that relationship. Secondly, it helps to inform regulator and policymakers about how defensive strategy might have a good corporate governance to create value.     

Family Control,Socioemotional Wealth,and Governance Environment: The Case of Bribes

This study examines the relationship between family control and young entrepreneurial firm’s bribing behavior around the globe. Relying on over 2,000 young firms from the World Bank Environment Survey, we find that family control helps to reduce a firm’s bribery behavior, but further investigation shows that this effect only exists in countries with weaker macro-governance environment. In countries with more established and transparent governance mechanism, family control does not seem to make any difference. We interpret our findings as the business family’s preservation of socioemotional wealth.     

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.     

The effect of institutional quality on firm export performance in emerging economies: a contingency model of firm age and size

It is widely accepted that countries with sound formal and informal institutions create more robust environments for firm performance. However, due to the liabilities faced by firms without available slack and/or market power, we contend that institutions are especially important for new and small firms. Unfortunately, there is little research examining the potential moderating effect of firm size or age on the relationship between institutional quality and export performance. In response, we hypothesize that institutional quality will be more important to increasing the export performance of new and small firms compared with their large, established counterparts. We test our hypotheses using data from the World Bank’s World Business Environment Survey. The results of our analyses offer support for our model, although some institutional variables appear to be more important to export performance than others. We conclude by discussing the implications of our results.     

Do Firms Spend More on Suppliers That Have Environmental Expertise? An Empirical Study of U.S. Manufacturers’ Procurement Spend

Stakeholders expect focal firms to improve their environmental performance. While firms may be able to accumulate the environmental expertise needed to achieve this goal internally, doing so may require significant time and resource commitments. Alternatively, buyer firms can leverage their suppliers’ existing environmental expertise and gain access to such expertise when they purchase products and services from these suppliers. The purpose of this study was to develop and test theory regarding under what conditions suppliers’ environmental expertise influences a buying firms’ procurement spend with these suppliers. We ground our study in transaction cost economics and agency theories and empirically test our hypotheses using a unique buyer–supplier dyadic data set. We find that buyer firms are willing to increase their overall business spend with suppliers that have strong environmental expertise, particularly when the buyer firms are more profitable and have higher levels of absorptive capacity. However, we find the opposite effect when the buyer firm’s executive compensation is linked to the firm’s environmental, social, and governance (ESG) performance. Likewise, we also find that the buyer firm’s environmental concern ratings negatively moderate the relationship between the supplier’s environmental expertise and the buyer’s procurement spend with the supplier.