Trends and Directions in the Development of a Strategic Management Theory of the Family Firm

Abstract

555This article provides a review of important trends in the strategic management approach to studying family firms: convergence in definitions, accumulating evidence that family involvement may affect performance, and the emergence of agency theory and the resourcebased view of the firm as the leading theoretical perspectives. We conclude by discussing directions for future research and other promising approaches to inform the inquiry concerning family business.

The Benefits of Family Ownership, Control and Management on Financial Performance of Firms

“…At the same time family control expresses an active and directed monitoring behavior of families towards their assets and firms, therefore it might be regarded as the 'essence' of a family firm as well. This perception can be useful to further the development of a convergent or even unified theory of the family firm as proposed by Chrisman, Chua and Sharma (2005).…”

“…A notable counter-trend to utilitarian use of definitions is lead by Chrisman, Chua and Sharma (2005). They try to further convergence in family business definitions by separating two main aspects of prior family business research.…”

“…if family ownership exceeds 50% a binary for 'family' reaches unity) or other arbitrary attempts to draw a clear distinction. Nevertheless this is clearly a very operational alternative to the conceptual approach of Chrisman, Chua and Sharma (2005), but it is complementary with the "…extremes of a continuum" insight of Chua, Chrisman and Sharma (1999, p.39) and uses observations instead of assumptions to identify the 'essence' of family firms. 2 Fama and Jensen (1983, p.307) criticize the notions of ownership and control as "somewhat imprecise".…”

“…Furthermore the alignment of interests that are beneficial for the whole organization is easier in small groups of owners and is reinforced by altruistic and kinship motives if this group happens to be a family. In noncomplex businesses it can be beneficial for firm competitiveness to combine ownership, control and management within the same agents; a belief that is convergent with the strategic management view of family business (Chrisman, Chua & Sharma, 2005). At the same time more complex (larger) family businesses who omit to separate control and management suffer from their restricted human capital pool and are likely to underperform (Schulze, Lubatkin, Dino & Buchholtz, 2001).…”

Internationalisation of publicly traded family firms: a transaction cost theory perspective and longitudinal analysis

“…Third, rather than following a simplistic approach by investigating whether family firms internationalise more or less than non-family firms, we illustrate that the impact of family's involvement on internationalisation is a complex one with differential non-linear effects of family ownership and management/board involvement. In summary, we contribute to the literature by providing a TCT perspective into the emerging theory of the family firm (Chrisman, Chua and Litz, 2004;Chrisman Chua and Sharma, 2005;Chua, Chrisman and Sharma 1999).…”