Centralization and delegation practices in family versus non-family SMEs: a Rasch analysis

Abstract

In this paper, we examine differences in centralization and delegation practices of family and non-family firms. Using Aston studies measures, we examine specific types of decisions and the level of authority involved in decision making by ownermanagers. We use Rasch analysis to examine the concentration of authority in a sample of 124 smalland medium-sized firms. We find that family firms maintain more centralized decision making and delegate differently than their non-family counterparts. Whereas family firms prioritize centralizing operational issues, non-family firms centralize employment issues more. Our findings have implications for understanding the distinctiveness and professionalization of family firms.

The Strategic Behaviour of SMEs

“…In this way, the Rasch Measurement Theory (1960 achieves measurements that are objective and invariant of the subjects and items of the analysed constructs. This contribution is in line with other works presented in the Business Management research literature, such as Salzberger et al (2014), Oreja-Rodríguez and Yanes-Estévez (2007), García-Pérez et al (2014) and Martin et al (2016) within the Rasch Measurement Theory (Rasch 1980), and those of Carroll et al (2016) within the Item Response Theory (Lord 1980). Finally, the Rasch Measurement Theory (1960 allows us to place the strategic types of Miles and Snow (1978) along a linear continuum and to analyse the different interactions of groups of items with groups of SMEs.…”

“…The application of the Rasch Measurement Theory (Rasch 1980) in business administration and management is one the most recent methodological contributions in this field, after its growth in other disciplines like psychology, education, and medicine. This paper, therefore, fits within the collection of pioneering studies in applying this methodology to SMEs and to strategic management (for example, Fischer et al 2006;Salzberger et al 2014; Oreja-Rodríguez and Yanes-Estévez 2010; Oreja-Rodríguez 2015; Yanes-Estévez et al 2010;García-Pérez et al 2014;Martin et al 2016).…”

Management processes and strategy execution in family firms: from “what” to “how”

“…There are several possible reasons for these findings. As suggested by Martin et al (2016), decentralizing human resource decisions may represent an attempt by family owners to signal that they are committed to professional management practices and eschew biased treatment of nonfamily employees (Verbeke and Kano, 2012). If successful, such signaling efforts can reduce agency costs not only by limiting the potential for moral hazard on the part of disgruntled employees but also by allowing the firm to attract higher quality workers, thus decreasing the potential for adverse selection.…”

The earliness of exporting and creeping sclerosis? The moderating effects of firm age, size and centralization

“…As with other influences on the earliness/performance relationship, therefore, outcomes may be empirically estimated but not conclusively predicted, and centralization has been found in the majority of empirical studies (e.g. Caruana et al, 1998;Love et al, 2002;Martin et al, 2016;Musso & Francioni, 2013) to have had a negative influence in an IB context. It is tautologous to propose that over-centralization will have a negative impact, but on the basis of the balance of empirical work we can propose a "liability of centralization" as a result of a centralized firm's strategic inflexibility across international boundaries (Wu & Zhou, 2018), with its roots in formalized, ritualized routines that might impede firms from seizing international opportunities (Carr et al, 2010).…”

“…Hsu, Chen, & Cheng, 2013;Nummela, Saarenketo, Jokela, & Loane, 2014) reported cases of decision-making being centralized around the CEO, and that family firm owner-managers are less inclined to delegate (e.g. Martin et al, 2016). We therefore ran additional OLS regression models with a sample of family firms with a family CEO (Model 1 and 2 in Table 5).…”