The Palgrave Handbook of Heterogeneity among Family Firms

This chapter seeks to identify contributions that led to major research themes that are fundamental in the family business body of knowledge. We found significant influences not only from academic scholars but also practitioners, especially in the early stages of the development of the field. This chapter documents the origins of research streams that dominate family business scholarship as measured by citation count. Following our categorization of topics, we propose directions for future research that may build on the seminal works.

In this chapter, we highlight and review the most frequently cited articles that have influenced family business research between 2006 and 2013 from the five most commonly adopted theoretical perspectives: agency theory, resource-based view, stewardship theory, socioemotional wealth, and institutional theory. Using citation counts from Google Scholar, we identified 21 articles that covered these perspectives. Our review discusses the contributions of these highly cited articles, particularly in terms of understanding family firm heterogeneity. We conclude the chapter by suggesting future research directions using these and other theoretical perspectives.

This chapter examines seven empirical approaches that can be used to investigate family business heterogeneity, each discussed with its applicability, strengths, and weaknesses. The theoretical implications, future research directions, and limitations are also discussed.

We address the issue of family firm heterogeneity and its implications for corporate governance and firm outcomes. We apply social identity theory to differentiate between clan and financial family firm identities and to explain how the domination of each identity leads to distinct governance needs and choices. We propose that family firms dominated by a clan identity will employ a unified bundle of internal corporate governance mechanisms, enhancing non-financial performance outcomes. A financial family firm identity will, on the other hand, result in implementation of a dispersed corporate governance bundle, enhancing the firm’s financial outcomes.

The presence of different generations in family businesses creates intergenerational issues that affect the dynamics of their governance structures. Bringing together literature on family business governance with studies of intergenerational relationships, we contribute to our understanding of governance structures and relationships in family businesses. We illustrate these dynamics through a qualitative approach using an in-depth, longitudinal case study of a 180-year-old family business, which we followed for 10 years. We focus on intergenerational and intertemporal dilemmas faced by the family throughout the generations, focusing on a shift away from ethical toward economic interests, as both family and business have grown in complexity.

Employing a synthesis model, this chapter examines the relationship between board structure and board processes within family firms. By reviewing the family firm governance literature from the past 20 years, we apply the Ilgen et al. (Annu Rev Psychol 56:517–543, 2005) input-mediator-output-input framework to identify heterogeneous family processes which ultimately impact the forming, functioning, and finishing stages of boards of directors in family firms. In doing so, we help to answer questions of why family firm boards are effective rather than what predicts board effectiveness, as well as provide guidance for future research.

This study examines the determinants of advisory boards in Dutch family small- and medium-sized enterprises. Boards of advisors consist of committed people that recurrently provide advice to the family firm’s decision-makers. Using resource-dependence theory, we hypothesize and find empirical support for the positive influence of highly dynamic environments on the presence of an advisory board. Contrary to our expectations, the presence of a board of directors positively influences the likelihood of having an advisory board, suggesting complementarity between these two governance mechanisms. We found no support for a generational effect on advisory board presence.

Gender diversity in family firms is increasingly attracting the attention of scholars across several fields. Despite this, there are few literature reviews that synthesize these research streams in the context of family businesses. To fill this gap, we examined the literature on gender diversity on the boards of family businesses by providing some insights into how the typical traits of family firms’ boards interact with the diversity effects linked to the presence of women. This analysis is the starting point for identifying possible research areas not yet addressed by scholars, and therefore defining the research agenda on the subject.

In a qualitative study of 12 family firms, we examined successor teams composed of both male and female family members (brothers and sisters). We highlighted the changing roles of women and examined their development as successors, using a case study approach and grounded theory analysis. In-depth interviews with family firm leaders identified a movement away from past characterizations of invisibility for women toward more fully recognized positions of authority in family firms. Our findings are summarized by six propositions and a model of sibling successor team formation and function in family firms.

This chapter describes a research agenda for business families. The family has received little attention in family business research. Business families are faced with demands from family and business, which need to be managed in a way that neither the family nor the business is discriminated in the long run. Business families develop “enterpriseness” by accepting business-related rules. The enterpriseness of business families captures the business’ influence on the family and deals with the potential liability of complexity of business families. Based on the dimensions’ involvement, essence and identity enterpriseness is conceptualized and a set of fundamental research questions is developed.

This study examined how corporate governance codes specific to private family firms encourage the bright side and restrict the dark side of family influence. Moreover, it investigated whether these codes foster agency or stewardship tendencies of the family’s involvement in the business. The results of this qualitative research study revealed that the eight analyzed codes are not consistent in their recommendations and focus on different aspects of family influence. Nevertheless, some common recommendations could be identified—for instance, the relevance of family governance mechanisms to avoid conflicts.

Researchers have used a myriad of different definitions in seeking to explain the heterogeneity of family firms and their unique behavior; however, no widely accepted definition exists today. Definitional clarity in any field is essential to provide (1) the basis for the analysis of performance both spatially and temporally and (2) the foundation upon which theories, frameworks, and models are developed. We provide a comprehensive analysis of prior research and identify and classify 82 definitions of family business. We then review and evaluate five key theoretical perspectives in family business to identify how these have shaped and informed the definitions employed in the field and duly explain family firm heterogeneity. Finally, we provide a conceptual diagram to inform the choice of definition in different research settings.

Conventional wisdom holds that goals drive behavior and measured goals lead to results. The preeminent goals in business research revolve around financial performance. However, recently, more attention has been paid to non-financial goals, such as applied in the balanced scorecard. Family business research has also taken special note of goals, as family influence in business typically enhances the salience of non-financial goals that must be accommodated with more materialistic, financial objectives. For this and other reasons, goals are challenging to study in private family firms where goals reflect desired outcomes for family and business, and relative to publicly traded entities, owning-families have great freedom in goal selection, resulting in higher levels of goal idiosyncrasy and heterogeneity. To further the discussion of private family business goals, this chapter provides a concise review of the extant literature on family business goals, imparts relationships between financial and non-financial goals, and expounds processes of family business goal formation.

We examine an underlying assumption that is implicitly suggested in family business scholarship that the heterogeneity among family firm financial performance follows a normal distribution. Instead, performance heterogeneity may be represented more accurately by alternative distributions. In the present work, we substantiate this premise through the examination of three samples, and we argue that an examination of heterogeneity through this lens presents important research opportunities. This may help researchers better understand why recent meta-analyses, aggregating the relationship between family involvement and firm financial performance, indicate that the family’s involvement, at best, marginally influences financial performance. Methodologically, this perspective introduces a set of techniques that can offer novel insights into our understanding of important family firm questions.

This chapter reviews prior, so far inconclusive, research on the risk behavior of family firms. On the one hand, scholars assume risk-averse behavior of family firms based on agency theory and wealth concentration arguments. On the other hand, scholars predict that family firms are willing to take substantial financial risks to preserve their SEW. By integrating finance, management, and entrepreneurship literature, we show that different underlying definitions of “risk” are key for a better understanding of family firms’ risk behavior and subsequent strategic decisions. We provide a conceptual model, highlight gaps in the existing literature, and propose fruitful areas for further research.

Socioemotional wealth (SEW) is a key concept in family business research. In this chapter, I follow recent work et al. (2012) by emphasizing the theoretical relevance of SEW; at the same time, I share concerns about conceptual and empirical issues that still need to be examined. For example, the concept still needs to be tested more directly. My first aim is to provide an overview of previously published alternatives to directly measuring SEW. This is in line with criticism of the mismatch between the theoretical construct and its empirical correlate. This debate has only recently led to the development and validation of new measures to directly grasp SEW. In this chapter, I review the recent discussion, lay out emerging possibilities of directly measuring SEW, and discuss challenges associated with using direct measures of SEW.

We contribute to the theoretical depiction of family firms’ reactions during a downturn by adopting the ability and willingness approach. Specifically, we suggest that the combination of the ability and the willingness to pursue family-centered noneconomic (FCNE) goals makes family firms less likely to engage in restructuring activities and more likely to engage in an escalation of commitment. Moreover, we further investigate the family firms’ heterogeneity and introduce the idea that the willingness of family firms to pursue FCNE goals may be influenced by the geographical context and the generational stage of the enterprising family.

The role of family values is considered here as one potential contributor to heterogeneity. The pursuit of profit as an end goal may be key for many family businesses, but there are well-documented cases of businesses where corporate citizenship and philanthropy are integral to the business model. Earlier work has highlighted that where one family has a predominant level of control in a business, their family values may assume greater importance and thereby be more likely to influence strategy. Within this chapter, we propose that the concentration of family values that occurs when one family has a predominant level of control within the business may be a key contributor to the development of financial and non-financial dynamics, representing one way in which strategy is developed and implemented.

Family business narratives connect the past, present, and future. This chapter offers an initial conceptualization of the parts of narratives dedicated to myths, through a systems view of the family business. Bridging literatures from different fields ranging from history to strategic management, family psychotherapy, and anthropology, we suggest a dynamic process of myth formation and transformation along with its impact on both family and business systems over the life cycle.

We explore heterogeneity in family firms from its core antecedents: the presence of family and their pursuit of dual logics in decision-making and position servant leadership, stewardship, and trust as emanating core philosophies, which manifest in an organization-level (AGES) and individual-level (SAGE) framework, and ultimately skill-sets that are all unique to family firms but which also serve to differentiate within this class of firms. Our conceptual meta-model of family enterprise heterogeneity serves as a guide for family firms to identify and understand the perception versus reality of their heterogeneity, and then enables the development of strategies to maintain organizational culture and/or evaluate organizational change.

To extend the understanding of justice perceptions in family firms, we take stock of the small but growing literature by reviewing notable conceptual and empirical papers published in the last 15 years that put forward research questions, propositions, and hypotheses related to justice perceptions in the family firm context. With the goal of providing a future research agenda, we identify research questions awaiting empirical answers and present potential difficulties in translating conceptual ideas into empirical studies. To capture differences in how the family aspect of a firm may influence justice, we discuss and identify reliable, valid measures of justice-related constructs and family influence.

Family firms are often assumed to have distinct ethical cultures compared to nonfamily firms; however, this assumption neglects to consider the ethics-specific heterogeneity that exists across the landscape of family firms. Therefore, this chapter reviews the literature on family firm ethics, highlighting those vast differences. We identify 29 articles published between 1996 and 2016 that we synthesize by focus: the ethics of family firms versus nonfamily firms, family-related antecedents, and firm-level outcomes of ethical cultures. We present avenues for future research, including the need to investigate how professionalization and context influences family firm ethical cultures.

Dysfunctional and deviant behavior may have different antecedents and effects based on diversity of the family system and the family firm. This chapter describes deviant behavior at varying levels of analysis and discusses how deviance can diminish, as well as enhance, family firm functioning and performance. Utilizing multiple theories of family science, we develop a framework contrasting and classifying different types of deviance as dysfunctional, functional, and strategic and apply these types to family firms. We also examine the impact of culture, familial imprinting, and differences among families to address when deviant behavior is likely to result in positive or negative implications for the family firm. We then suggest avenues for future research that examine the potential for deviant behavior to improve or detract from family firm performance.

We develop a new perspective on leadership and identity in the family business using the concepts of identity process theory, transformative learning and identity work to demonstrate how the leader of a first- to second-generation transitioning family business in a traditional masculinist manufacturing sector constructs her identity in the face of significant identity threats personally and organisationally. We illustrate the interconnectedness between the leader’s identity, her lived experience, current context and enactment of her leadership. Our analysis demonstrates the applicability of identity process theory as a novel framework for identity research in family business, and of transformative learning as both a coping strategy and an identity workplace in the face of significant identity threats.

One of the most distinct challenges that family businesses face is succession. Several researchers have recognized that it is not a single event, but a process associated with social and psychological challenges. This chapter advances knowledge on these challenges drawing on the theory of collective psychological ownership (CPO). More precisely, we present the socio-psychological challenges in succession and the main factors related to them, and discuss how CPO affects this relationship. This work serves as an analytical framework for future research on the topic.

This chapter responds to the calls for identifying different categories of family firms. The authors contribute to the literature by extending family firm typologies. To reach this goal, they introduce the construct of the professionalism of the top management team (TMT). In order to expose the multidimensional nature of the TMT, they first review the literature on TMTs based on Hambrick’s and Mason’s (Acad Manag Rev 9, 2:193–206, 1984) demographic variables. Thus, they conduct a cluster analysis on an original dataset of 500 Italian family firms to identify the different “types” of family firms based on a multidimensional conceptualization of TMT professionalization.

Building on extant research on family firm resilience, we propose a framework to discuss the impact of family-centered non-economic goals on a firm’s ability to absorb and react to environmental jolts. This chapter aims to advance current knowledge on the goal-related antecedents of innovation strategies in family firms by theorizing on how family firms approach slack resource deployment and choose between investments in closed vs. open innovation as a response to environmental jolts. Building on prospect theory assumptions about risk-taking behavior, we make a contribution to understanding heterogeneity of resilient family firms, which are spurred to innovate in light of the degree of relevance of pursued family-centered non-economic goals.

The ability to pursue both exploitation and exploration is known to enhance family firm performance. Nevertheless, the interplay that family-centered non-economic goals and socioemotional wealth preservation have in the process of exploitation and exploration is still unknown. In this exploratory study, we address ambidextrous orientation and socioemotional wealth preservation of entrepreneurial families, to introduce the “dual balance” of Transgenerational Families. Using cluster analysis in the Latin American context, our study attempts to open further discussions in the intersection of strategic management with family business research.

This chapter aims at establishing a link between family business research and regional science. Drawing from the density dependence model from organizational ecology and embeddedness theory, we develop four testable propositions to inquire about the effect of the emergence of family firms’ agglomerations in the territory on firms’ survival.We theorize that increased family firm density reduces the likelihood of firm failure and this effect is (a) higher for family firms than for non-family firms, (b) lower in urban than in rural areas, and (c) higher in fine-grained variable environments than in stable environments. Contributions and future research implications are detailed in the concluding section.

This chapter uses an international opportunity identification-based approach to understand specific foreign market entry mode choices of family firms. We employ an exploratory case study design based on ten German family firms’ entry mode choices for China and India. Our main findings suggest that for first-time entries, the type of international opportunity identification—accidental or purposeful—influences foreign market entry mode choices. Family firms that accidentally discover international opportunities choose an international joint venture, whereas purposeful searches lead to a selection of the most suitable foreign market entry mode only after careful consideration of different possibilities. Further, the perceived cultural distance of the target market impacts accidental opportunity discovery, a test phase carried out prior to market entry explains the dynamics of purposeful opportunity searches.

While entrepreneurship is inextricably linked to the survival, growth, and longevity of family businesses, we address the surprisingly sparse attention in the literature to the conceptual and contextual grounding of entrepreneurial action in family firms. We review the extant literature on entrepreneurial action and conceptualize as well as contextualize it for family firms. We subscribe to the subjectivist view of entrepreneurial action that views entrepreneurial opportunities as constructed by the author of the action. We integrate issues such as the impetus for action in the family, the cultivation of entrepreneurs, and crafting of opportunities in a family. We describe two methods to achieve a workable consensus on the definition and understanding of entrepreneurial actions in the family business field and provide a few promising research directions.

Family firms vary in their decision of whether or not to communicate the involvement of the family in the firm as part of their branding attempts. Currently, we do not have a clear understanding of why these differences in branding practices occur. In an attempt to address this gap, the current chapter develops a model to explain why there is heterogeneity in the branding practices of family firms. Taking a sender approach, we develop a conceptual model to understand why and how two predictors (i.e., family firm identity and market orientation) drive the decision of family business representatives regarding the choice to explicitly and actively communicate the “Family Business Brand” (i.e., the involvement of the family in the business). This chapter develops the rationale for this model and presents ideas for future research.

How is “familiness” related to performance? In this chapter, we propose three dimensions of familiness (process, human, and organizational resources) from a perspective based on the resource-based view. Does the generation in charge of the business demonstrate a relationship between familiness and performance? We aim to look for the strongest relationship between three dimensions of familiness to show which one has the most influence on the performance of family firms and to find out if the first or second generation has a moderating function on familiness and performance. We interviewed family members from a sample of 194 Mexican family businesses and discovered that they have many characteristics in common, despite the diverse regions of Mexico in which they are located. We also used control variables such as company size, the sector in which the company was involved (commerce, services, or manufacturing), and business age to analyze the sample from different points of view. Our findings demonstrate that in our sample of Mexican family firms, “familiness” is strongly related to performance and that the generation in charge is not a relevant moderating variable between familiness and business outcomes.

Literature concerning intra-family succession versus non-family succession is still limited. As a result, we know relatively little about the impact of an internal succession on keeping strategically relevant knowledge inside the business. Consequently, this chapter’s primary research interest is the interplay between market context and strategically relevant knowledge resources in long-lived family firms. Based on the market-based view and resource theory, we suggest that in some market environments, family-business-specific experiential knowledge forms a basis for competitive advantage and that such knowledge can be transferred to internal successors easier than to external successors. Several propositions are developed and discussed in relation to six case studies of long-lived family businesses from different market contexts. As a result, we put forward four revised propositions for future research to investigate.