Stewardship-oriented Culture and Family Firm Performance: A Study on the Moderating Effects in an Emerging Economy

Abstract

Prior literature has provided inconclusive evidence on the effects of family involvement in management (FIM) on family business (FB) performance. However, so far in the literature, there have been very few attempts to investigate FIM and family essence simultaneously as antecedents of FB performance. Therefore, we address this gap by studying how a stewardship-oriented culture (being a feature of FB essence) moderates the relationship between FIM and FB performance. We test our hypotheses with the Structural Equation Modeling technique using survey data in combination with archival data on a sample of 69 medium and large private Brazilian FBs. We find that a stewardship-oriented culture makes the relationship between a family CEO and FB performance weaker and observe that a stewardship has no moderating effect on the relationship between FIM and FB performance. These findings contradict prior literature on the beneficial role of stewardship in family-managed FB. Only in case of a nonfamily CEO, a stewardshiporiented culture positively moderates the relationship with FB performance. In addition, our study reveals a U-shaped nonlinear relationship between the level of FIM and FB performance, which is consistent with recent literature on the existence of faultlines derived from heterogeneous TMT and the impact on firm outcome.

How is risk different in family and non-family businesses? A comparative statistical analysis during the COVID-19 pandemic

“…That is because the commitment and the trust of the people that are part of the organization, as well as the knowledge, experience and capabilities of the family's businessman have a positive influence on the promotion of cooperation with third parties. Mucci et al (2020) consider that a culture oriented toward management weakens the relationship between a chief executive officer (CEO) of the family and the family business's performance. They also observe that the board has no moderating effect over the relationship between the family's involvement in the management and the performance of the family business.…”

“…Mucci et al (2020) consider that a culture oriented toward management weakens the relationship between a chief executive officer (CEO) of the family and the family business's performance. They also observe that the board has no moderating effect over the relationship between the family's involvement in the management and the performance of the family business.…”

Family governance and firm performance: exploring the intermediate effects of family functioning and competitive advantage

“…Most studies overwhelmingly use agency theory and the stewardship perspective when analysing governance-performance connections (Azila-Gbettor et al, 2018), and both of these theories have their benefits and limitations (Chrisman, 2019). Consequently, other complimenting theoretical approaches, such as the resource-based view (RBV) and stakeholder theory, have also started to gain traction (Azila-Gbettor et al, 2018;Lohwasser et al, 2022;Mucci, Frezatti, Jorissen, & Bido, 2020).…”

“…These studies simply consider family governance as an input and examine firm performance as an output. More advanced studies employ multilayered theoretical approaches that link family governance to various intermediate outcomes which must occur in order to reach the higher-level, end outcome of firm performance (Bammens et al, 2011;Mucci et al, 2020). For example, Le propose that the seemingly contradicting good and bad performance outcomes observed due to family governance are the result of either stewardship or agency orientations, respectively.…”

The effect of ownership and management structure on family businesses performance

“…Some researchers show that family members in ownership and management of the family business are considered good stewards and a source of stewardship that is positively associated with the performance of the business (Alves & Gama, 2020;Le Breton-Miller et al, 2011;Corbetta & Salvato, 2004;Davis et al, 2010;Eddleston & Kellermanns, 2007;Mucci et al, 2020;Zahra et al, 2008). Organizations with good stewards and a stewardship orientation, however, do not have the costs associated with an agency, and, as a result, can direct resources that would have been spent on monitoring and control, toward maximizing firm performance.…”