Bound by Laws, or by Values? A Multi‐Level and Cross‐National Approach to Understanding the Protection of Minority Owners in Family Firms

Abstract

Manuscript Type: ConceptualResearch Question/Issue: How do firm-level attributes and country-level institutions affect cross-national and firm-level differences in how minority owner rights in family firms are protected? Research Insights: We consider differences in family dynamics, stewardship-oriented organizational culture, and countries' legal and cultural dimensions to develop theory predicting differences in minority owner protection in family firms. We advance propositions and a model delineating the role of these key firm-level and country-level constructs. Theoretical/Academic Implications: We contribute to the literature in three ways: (1) We illustrate the importance of family dynamics for predicting the likelihood of a stewardship-oriented culture to emerge in a family firm; (2) our multi-level and cross-national approach extends earlier explanations of agency and stewardship that are centered at the firm, family, and individual levels of analysis; and (3) we consider the impact of cross-cultural dimensions on family firms, an area that has received limited attention in the literature. Practitioner/Policy Implications: Our research implies that individuals considering becoming a minority owner in a family firm should take into account not only the legal institutions of that country (which might not be as strong as they first seem) but also intra-firm family dynamics and the prevalent norms and values of the firm's national culture to get a more complete picture of the protections available to them.

Tracing the Roots of Innovativeness in Family SMEs: The Effect of Family Functionality and Socioemotional Wealth

“…As families play a major role in their firms, and family‐firm boundaries are often blurred (Deephouse and Jaskiewicz, ; Stevens, Kidwell, and Sprague, ), the family members' functional integrity and satisfaction with family‐internal relationships may influence their decision‐making processes (Jaskiewicz and Dyer, ) and choice of family and business goals (Danes et al, ), including economic and noneconomic goals (Berrone et al, ; Kammerlander and Ganter, ). The concept of family functionality is used to assess the health of the family firm system (e.g., Danes, ; Gardner et al, ; Neff, ; Philbrick and Fitzgerald, ).…”

“…The resulting strong family bonds among family members and high level of mutual trust and commitment can benefit both the family and the firm when the emotional connection is intense (Sundaramurthy, ). These family bonds influence to what extent family members hold key governance positions, how they act in ownership and management positions in the firm, and how strongly their behavior focuses on the firm's well‐being (Corbetta and Salvato, ; Stevens et al, ). This is consistent with the recent view that the family's functioning is fundamental to understanding family firm behavior (Jaskiewicz and Dyer, ).…”

“…Holding key governance positions, family members can “override, abolish or ignore” control mechanisms (Stevens et al, , p. 207), and exert influence by steering the family firm in their favored direction, based on the family's aspirations (Ainsworth and Cox, ). SEW, however, relates to the family's desire to achieve noneconomic goals and the question arises whether family functionality only relates to the family members' ability to control the firm and/or their willingness to do so.…”

“…In family-owned organizations, family members share experiences and a mutual history (Gomez-Mejia, Cruz, Berrone, and Castro, 2011). Given the blurred family and firm boundaries (Stevens et al, 2015), family members' emotions determine the firm's relationships and business activities (Eddleston and Kellermanns, 2007). Thus, particularly important for well-functioning families is maintaining strong emotional attachment, close ties, and high levels of harmony in both the family and the firm.…”

Family Firms and Productivity: The Role of Institutional Quality

“…To the best of our knowledge, no published paper has explored this issue in terms of the Italian market and the empirical evidence on this subject in international literature is extremely limited. Moreover, with the exception of Amit et al (2015), previous studies have not considered the different dimensions of institutional quality but, instead, have focused on specific aspects of institutional quality, such as quality of the rule of law (Carney & Gedajlovic, 2002;Gilson, 2007;La Porta, Lopez De Silanes, & Shleifer, 1999), formal legal regimes and shareholder protection rules (amongst others Stevens, Kidwell, & Sprague, 2015;van Essen et al, 2015).…”