A Review of Theory in Family Business Research: The Implications for Corporate Governance

In recent years, increasing scholarly attention has been directed toward the field of family business research. Based on an exhaustive sample of 235 publications, this article provides a comprehensive review and a critical assessment of the theoretical underpinnings and corporate governance issues in family business research. Three predominant theoretical perspectives, namely principal–agent theory, stewardship theory and the resource‐based view of the firm, have emerged and provide empirical evidence that family businesses significantly differ from non‐family firms in important dimensions such as agency costs, competitive advantages or corporate governance structure. On their own, none of the aforementioned perspectives succeeds in addressing all complexities associated with family businesses and their corporate governance. Accordingly, joint approaches combining different theoretical frameworks can help to improve understanding of the family business. The article concludes by discussing possible directions for future research that might further contribute to building a comprehensive theory of the family business and its corporate governance.     

The personality factor: how top management teams make decisions. A literature review

Past research has increasingly suggested that CEO/TMT personality can play a relevant role in influencing various external (e.g. firm performance) and internal (e.g. firm organizational structure) management outcomes. These promising results need appropriate systematization and discussion, which we aim at providing through a literature review based on rigorous inclusion/exclusion criteria. Our analysis shows great heterogeneity in regard to both the personality traits and the personality based management outcomes explored by the investigated population of studies. Thus, we specifically use the framework provided by the Five-Factor Model (FFM) of personality to codify the publications and this framework allows us to identify some possible theoretical trajectories. These trajectories mainly regard the empirical testing of the highlighted associations between CEO emotional stability, extraversion and conscientiousness with bureaucratization, strategic pro-activity and firm performance. Our article is primarily intended for those scholars and practitioners who want to improve their knowledge about psychology-based decision making and behavioural corporate governance through the understanding of how CEO/TMT personality can affect their strategic decisions.     

Real Options in Management and Organizational Strategy: A Review of Decision‐making and Performance Implications

This paper contributes to the debate on the role of real options theory in business strategy and organizational decision‐making. It analyses and critiques the decision‐making and performance implications of real options within the management theories of the (multinational) firm, reviews and categorizes the organizational, strategic and operational facets of real options management in large business settings. It also presents the views of scholars and practitioners regarding the incorporation and validity of real options in strategy, international management and business processes 1 . The focus is particularly on the decision‐making and performance attributes of the real options logic concerning strategic investments, governance modes and multinational operations management. These attributes are examined from both strategic and operating perspectives of decision‐making in organizations, also with an overview of the empirical evidence on real options decision‐making and performance.     

The Impact of Alliance Management Capabilities on Alliance Attributes and Performance: A Literature Review

The literature on alliances has identified a variety of inter‐firm antecedents of performance, including information and knowledge sharing between partners, shared partner understanding, and a focus on collective objectives. Recent studies have focused on alliance management capabilities (AMC) – firms' abilities to capture, share, store and apply alliance management knowledge – as an important antecedent of performance. This paper reviews 90 studies on AMC and makes two important contributions to the literature. First, the review provides an overview of and classification scheme for the different types of AMC to better organise the diverse empirical findings that have been presented in the literature. The novel classification distinguishes between general and partner‐specific AMC and between AMC stored within the firm and within the alliance. Second, consistent with the dynamic capabilities perspective, this paper offers a more detailed understanding of why AMC improve performance, by highlighting the intermediate impact of AMC on alliance attributes. In particular, the review demonstrates how the different categories of AMC influence alliances in terms of information and knowledge‐sharing between partners, shared partner understanding and the pursuit of collective goals. The review also demonstrates that these attributes improve performance. The authors note promising avenues for future empirical research that involve combining the classification scheme with research on the impact of AMC on alliance attributes and performance.     

Internationalization of family firms: the effect of ownership and governance

Despite family firm’s dominant role in economies worldwide, there is little empirical knowledge on their internationalization. Drawing on a sample of Austrian firms, this paper investigates the impact of family influence and various governance factors on internationalization. The findings reveal an inverted U-shaped relationship between family influence and internationalization. Family firms with medium family influence are the most internationally active companies. This indicates that concerning internationalization the advantages of being a family firm are highest when the family’s ownership share and involvement in management and governance boards is not too extensive. Additionally, neither the incumbent generation, nor the level of non-family executives in the management board, nor the existence of a supervisory board has a significant influence on going international. Since advisory boards seem to foster internationalization, they might be an adjuvant means of equipping family firms with the necessary capabilities, know-how and contacts to operate internationally.     

Drivers and Performance Outcomes of Innovativeness: An Empirical Study

The issue of innovativeness within organizations has attracted considerable attention in the literature. However, limited knowledge exists about the drivers of and their simultaneous effects on innovativeness and the role of innovativeness in enhancing performance. We adopt the resource‐based view (RBV) of the firm and insights from the literature on capabilities to investigate specific capability types serving as antecedents to innovativeness and to examine its performance outcomes. From a sample of 218 Greek manufacturers, the results indicate that managerial, entrepreneurial and technical capabilities facilitate the establishment of innovativeness, which in turn enhances business performance. The study lends support to prior research that highlights the importance of innovativeness in enhancing organizational performance and sharpens understanding of the drivers of innovativeness and the way they collectively operate through innovativeness to boost performance. The study further provides new insights into the role of innovativeness from the perspective of the RBV, while highlighting certain firm capabilities that might both enable and impede competitive advantage and superior performance creation. As such, this study contributes to the effective management of the innovativeness process within organizations.     

How Governance Misalignment and Outsourcing Capability Impact Performance

Notwithstanding the popularity of outsourcing as a business strategy, the performance benefits realized through outsourcing efforts are observed to be mixed in practice. This leads to important unresolved questions regarding why some firms are able to derive substantial value from their outsourcing initiatives while other firms are left disappointed. This study joins an emerging literature integrating transaction cost economics and capabilities‐based perspectives to develop a deeper understanding of the drivers of outsourcing performance. I develop a theoretical model that examines the independent and joint influence of governance misalignment (i.e., deviation from transaction cost's predicted mode of governance) and a firm's outsourcing capability on the performance of outsourced processes. I test the theoretical model using a dataset of 172 outsourced and 156 in‐house processes. The finding that governance misalignment corresponds to inferior process performance supports transaction cost's discriminating alignment hypothesis. Interestingly, I also find that a retained technical expertise (TE) and outsourcing knowledge management routines (OKMR; both contributors to a firm's outsourcing capability) positively influence outsourcing performance both directly and via their relationship with governance misalignment. While a retained technical expertise and outsourcing knowledge management routines each positively influence outsourcing performance, they do so in distinctive ways. These findings have important managerial implications and make a significant theoretical contribution. Specifically, this study demonstrates that the notion of a governance misalignment is firm‐specific, conditional on the governance capabilities of the organization. This insight underscores the value of integrating transaction cost logic with capabilities‐based perspectives.     

The Bind that Ties: Socioemotional Wealth Preservation in Family Firms

A growing body of research shows that family firms are different from other organizations in significant ways. In this paper we review this literature by examining how family firms differ from nonfamily firms along five broad categories of managerial decisions. These categories encompass a set of key organizational choices concerning management processes, firm strategies, corporate governance, stakeholder relations and business venturing. We argue that socioemotional wealth or affective endowment of family owners explain many of these choices. We also examine some contingency factors (namely family stage, firm size, firm hazard, and the presence of nonfamily shareholders) that moderate the influence of socioemotional wealth preservation as a point of reference when making managerial decisions in family firms. Lastly, we explore the firm performance consequences of family ownership.     

Understanding the transgenerational orientation of family businesses: the role of family governance and business family identity

The development of a transgenerational orientation is one of the most significant challenges that family businesses face and only a small number actually survive across generations. While prior research has focused on the business unit to provide us with a solid understanding of how corporate governance affects business performance and continuity, the role of the business family in the development of a transgenerational orientation has received less attention. To address this gap, this article applies a new systems and social identity theory framework to examine how family governance and business family identity can contribute to strengthening the transgenerational orientation of the business. A transgenerational orientation is defined as a decision premise to maintain the family’s control over the business across generations. Using a large data set, findings show that the presence of family governance measures and the business family’s identity are positively related to a transgenerational orientation of the business, with business family identity acting as a mediator. Thus, the development of family governance measures can foster communication within the business family and enhance the family members’ emotional investment in the business which strengthens the transgenerational orientation in the business.     

整合能力与企业绩效：商业模式创新的中介作用

经济全球化的背景下,企业为了构建竞争优势,获取更好的绩效,开始利用整合能力和商业模式创新应对多变的外部环境。然而,当前研究对于两者之间存在何种联系的认识是模糊的。针对理论研究的缺陷,基于动态能力的理论视角,通过分析商业模式创新对整合能力与企业绩效的中介作用,揭示企业整合能力和商业模式创新促进企业绩效提高的内在机制,采用中国6省1市319个企业样本数据,运用线性回归的统计方法对理论假设进行实证检验。研究结果表明,整合能力和商业模式创新都对企业绩效具有正向的促进作用,同时整合能力与企业绩效之间存在着一定的中间机制。整合能力通过提高组织变革和价值创造效率两个方面促进商业模式创新,而商业模式创新作为中间纽带将整合能力与企业绩效联系起来。企业的整合能力越高,越有利于开展商业模式创新,进而促进企业绩效的提高。研究揭示了整合能力和商业模式创新共同促进企业绩效提高的内在理论机制,打开了能力与绩效间关系的“黑箱”,对于中国企业开展商业模式创新具有重要的实践指导意义。     

Boards of Directors in Family Businesses: A Literature Review and Research Agenda

This paper offers a review of the theoretical and empirical literature addressing boards of directors within the unique organizational setting of family businesses. By reviewing and structuring past research, this paper aims to improve the understanding of how family involvement in firms affects the roles and behaviours of boards. The review of the literature is structured according to the family business board's two primary tasks as an internal administrative body, namely the exercise of control and the provision of advice. For both board tasks, theoretical perspectives and the match between theory and empirical findings will be discussed. The review concludes by offering an integrative discussion of the relevant theories and by highlighting the need for multi‐theoretic, process and contextualized approaches in future research on boards of directors in family businesses.     

Dual-class shares,external financing needs,and firm performance

Whereas the agency theory predicts that dual-class shares decrease firm performance, the stewardship theory predicts that dual-class shares increase firm performance. The cumulative findings on the performance consequences of dual-class shares have been weak and/or inconclusive. Because endogeneity is a constant challenge in empirical corporate governance studies, this study uses a unique law change in Switzerland as a source of exogenous variation in the fraction of firms with dual-class shares. Controlling for firm fixed effects and time-varying confounders, we find that dual-class shares neither harm nor benefit firm performance on average. However, dual-class shares increase firm performance if the firm requires external finance and dual-class shares decrease firm performance if the firm does not require external finance. External financing needs mitigate the agency costs between controlling and minority shareholders and create a context in which dual-class shares facilitate firm-specific investments instead of private perquisites. The study’s results have both managerial and policy implications.     

Does Quality Still Pay? A Reexamination of the Relationship Between Effective Quality Management and Firm Performance

Because of the changing competitive environment, quality might have lost some of its luster and emphasis in business. The research question we aim to address in this paper is: Does quality still pay in the new competitive environment? Using replication research, we re‐examine the impact of an effective total quality management (TQM) program on a firm's operating performance in the new competitive environment. We use publicly available data for award‐winning firms and adopt several control‐firm‐selection approaches in our event study. Based on data from more than 500 firms, we find that over a 10‐year period—6 years before to 3 years after winning their first quality award—firms in our sample perform significantly better than control groups in various operating performance measures. Not only do award‐winning firms have better results after receiving awards, they also have superior performance records before the award. Our results suggest that quality is still critical to achieving long‐term competitive advantages, and firms who continuously improve their quality continue to reap rewards by way of sales and financial performances exceeding those of their competitors.     

To Divest or not to Divest: A Meta‐Analysis of the Antecedents of Corporate Divestitures

Corporate divestitures have been identified as important strategic actions with a positive impact on firm performance. Yet, what is still missing in the strategic management literature is an integrative framework that quantitatively synthesizes the relative impact of various antecedents to divestitures, and theoretically reconciles the multitude of theories underlying divestiture research. To fill this gap, the author conducts a meta‐analysis (based on a sample of 35 studies) and develops four broad categories of determinants: corporate governance; firm strategy; performance; and industry environment. Evidence is found that divestitures are driven mainly by prior divestment experience, structural factors (firm size and firm diversification) and weak unit performance. In addition, the relative predictive validity of several theoretical perspectives on divestment decisions is assessed.     

Market Orientation,Ownership Type,and E‐Business Assimilation: Evidence from Chinese Firms

While more and more firms have implemented e‐business in business operations, a better understanding of the factors that successfully drive the assimilation of e‐business will provide insights for firm executives and practitioners to develop effective strategies for e‐business. Different from previous studies that focus on individual‐level factors related to business executives and top management teams, this study examines how firm‐level strategic and cultural factors shape e‐business assimilation. Based on the strategy and marketing literature on market orientation and firm ownership, we developed a research model to describe how a firm's market orientation impacts e‐business assimilation. The model also describes the moderating effect of firm ownership type on the relationship between market orientation and e‐business assimilation. Based on data from 301 Chinese international trade firms, we found that two dimensions of market orientation (i.e., customer orientation, competitor orientation) had significant effects on e‐business assimilation. However, the third dimension, interfunctional coordination, was only partially significant. In addition, ownership type was a significant moderator of the effects of customer orientation and competitor orientation on e‐business assimilation, although ownership type was not a moderator of interfunctional coordination. Being one of the first studies of the impact of market orientation and firm ownership type on e‐business assimilation, we conclude with a discussion of the implications for future research and practice.     

Business angel post-investment activities: a multi-level review

In this article, empirical research on post-investment activities of business angels is reviewed and conceptualized as five distinct governance processes: boundary spanning, structuring, leadership, doing, and monitoring. These processes have the potential to reduce the exposure of business angels to relational risk and market risk. The identification of these governance processes also contributes towards understanding the social aspect of business angels’ post investment involvement. In particular, it is shown how the recognition of the cognitive/institutional dimension opens up for new questions about post-investment involvement. Finally, it is proposed that venture performance can be enhanced in practice if business angels and venture members develop skills that are connected to the governance processes.     

The Interplay Between Employee and Firm Customer Orientation: Substitution Effect and the Contingency Role of Performance‐Related Rewards

This paper identifies and explains a potential tension between a firm's emphasis on customer orientation (CO) and the extent to which employees value CO as a success factor for individual performance. Based on self‐determination theory and CO implementation research, the authors propose that firm CO may represent both autonomous and controlled motivations for CO, but that employees’ CO is more strongly linked to individual performance when employees experience solely autonomous motivation. Hence, the authors expect a substitution effect whereby the link between employees’ CO and their performance is weaker when firm CO is high. Furthermore, the authors examine a boundary condition for the previous hypothesis and propose that performance‐contingent rewards have a positive effect on the internalization of the extrinsic motivation stemming from firm CO. Two multilevel studies with 979 employees and 201 top management team members from 132 firms support these hypotheses. Against previous research, these findings offer a new perspective on the effectiveness of CO initiatives, propose employees’ motivational states as the theoretical explanation for the heterogeneity in the link between employee CO and performance, and reappraise the role of performance‐contingent rewards in CO research. Managerial implications for the effective implementation of customer‐oriented initiatives within firms are provided.     

Entrenchment in publicly traded family firms: Evidence from the S&P 500

Family involvement in corporate governance through ownership, management, and board membership presents a unique dilemma for understanding the strategic impetus and costs of entrenchment decisions. The presence of shared family ties and the family-centered goals of firm principals call to question the applicability of extant agency arguments regarding the nature and antecedents of managerial entrenchment. Exploring this, we develop and test a model of family firm-specific determinants (i.e., family ownership and family's involvement in management and governance) of entrenchment in publicly traded firms by drawing upon principal-principal agency theory. Findings of the empirical analysis of family owned S&P 500 firms suggest family firms are motivated to entrench managers when doing so supports the pursuit of family-centric goals. However, the extent to which entrenchment supports such goals varies at different levels of family ownership.     

Does Outsourcing Really Improve Firm Performance? Empirical Evidence and Research Agenda

The phenomenon of outsourcing has spawned a rich body of scholarly work in the last two decades. Yet, the answer to one important question has remained elusive: Does outsourcing really improve firm performance? Addressing this question is important as firms across nations continue to embark on the practice of outsourcing to save operating costs and remain competitive. Scholars, practitioners and policy‐makers need to understand whether and how outsourcing benefits the firm. However, no comprehensive review of empirical evidence has been published so far that can address this question. This study reviews 57 empirical research articles that investigated the outsourcing–firm performance relationship in 47 peer‐reviewed scholarly journals over a 20‐year time‐span (1996–2015). The articles differ widely in research scope, context, level of analysis, data source, time‐span, industry sector, extent of outsourcing and measure of performance. The findings suggest that outsourcing can produce positive, negative, mixed, moderated or no significant impact on the firm. This study also provides useful directions for future research on outsourcing and firm performance.