Family Governance and Firm Performance: Agency, Stewardship, and Capabilities

Abstract

After decades of being viewed as obsolete and problem ridden, recent research has begun to show that major, publicly traded family‐controlled businesses (FCBs) actually outperform other types of businesses. This article examines the nature of such family businesses in an attempt to explain why some seem to do so well and others so poorly. It begins with four fundamental governance choices that distinguish among different kinds of family businesses: level and mode of family ownership, family leadership, the broader involvement of multiple family members, and the planned or actual participation of later generations. Using precepts from agency and stewardship theory, it relates these dimensions to the nature of the resource‐allocation decisions made by the business and capability development, which in turn have implications for financial performance. Propositions are drawn about the drivers that make some family businesses great competitors—while leaving others at a disadvantage.

Personal relations and their effect on behavior in an organizational setting: An experimental study

“…Hence, the conflict between meritocracy and nepotism may produce unsatisfied workers, who are less motivated to work hard. Miller and Le Breton-Miller (2006) point out that a bias in favor of family candidates risks alienating other talented managers.…”

“…Kang (2000) argues that family-related managers have a deep knowledge of the firm that allows them to evaluate risks more adequately and to make better strategic decisions. Miller and Le Breton-Miller (2006) discuss the possible positive effects of choosing a family member as a top executive due to higher motivation -in the line of stewardship theory.…”

Psychological contract and social exchange in family firms

“…The advantages of succession planning have been documented (Björnberg and Nicholson, 2012;Eddleston et al, 2013), but few firms actively plan for succession to future generations (Gilding, 2005). Our finding that succession planning is positively related to firm performance helps to substantiate theoretical propositions that aim to explain that relationship (Cabrera-Suarez, De Saa-Perez and García-Almeida, 2001;Miller and Le Breton-Miller, 2006). Further, we find a connection between succession planning and family members' perceptions of the levels of participative decision-making and distributive justice in their firms, which helps to explain the variation in levels of family firm succession planning.…”

Los gerentes no familiares en las Pequeñas y Medianas Empresas familiares

“…Por otro lado, si bien no existe un consenso internacional sobre el impacto que la incorporación de al menos un gerente externo puede ocasionar sobre el rendimiento de la empresa (Dekker et ál., 2015;Rodriguez Azira et ál., 2015;Miller y Breton-Miller, 2006;Durendez et ál.,2007;Chua et ál., 2003), la investigación desarrollada por Sciascia y Mazzola (2008) en 620 empresas familiares italianas, la mayoría de pequeña y mediana dimensión, ha demostrado la existencia de una relación negativa entre la participación de la familia en la dirección de la empresa familiar y el rendimiento obtenido por la empresa. En otras palabras, los resultados señalan que el rendimiento disminuye a medida que la cantidad de familiares que se encuentran en las tareas de gerenciamiento de la empresa aumenta.…”