Religion logic and family firms’ ethical behavior towards employees

The ethical behavior of organizations is becoming increasingly important, and it often determines organizational success or failure (Gomezel and Stritar 2023; Reck et al. 2022). The increasing amount of corporate misbehavior as well as widely discussed scandals are leading to more intense discussion on how firms’ ethical behavior is shaped (Frisch and Huppenbauer 2014). In this vein, firms’ ethical behavior is reflected in their strong adherence to honesty, transparency and fairness when dealing with stakeholders (e.g., Astrachan et al. 2020; Chan et al. 2022; Crossan et al. 2013). Family firms, which are widely acknowledged as a particularly value-driven form of organization (Astrachan et al. 2020; Sorenson 2014) are thus especially interesting for studying firms’ ethical behavior. While the literature agrees that family firms’ ethical behavior differs from that of non-family firms (e.g., Adams et al. 1996; Cruz et al. 2014; Dick et al. 2021; Reck et al. 2022; Vazquez 2018), findings on how such behavior is actually shaped in family firms remain scarce (Litz and Turner 2013; Sharma and Sharma 2011; Vazquez 2018). Hence, there have been several calls to analyze what drives family firms’ ethical behavior in more depth (Adams et al. 1996; Astrachan et al. 2020; Reck et al. 2022).

One driver of family firms’ ethical behavior that has recently gained attention in the literature is religion, in particular family firm owners’ religiosity (Astrachan et al. 2020; Barbera et al. 2020; Carradus et al. 2020; Dieleman and Koning 2020; Kavas et al. 2020; Sorenson and Milbrandt 2023). A promising approach to study how religion helps shape family firms’ ethical behavior was put forward by Astrachan et al. (2020) and Fathallah et al. (2020), namely, analyzing how multiple institutional logics interact and may compete with each other. The premise of the institutional logics perspective is that these dynamics and thus family firms’ ethical behavior are embedded in broader institutional setups (Thornton and Ocasio 2008; Thornton et al. 2012). Hence, a family firm’s institutional context can be expected to have a strong influence on how it draws on various institutional logics and how such logics compete with each other (e.g., Min et al. 2022; Soleimanof et al. 2018; Welter 2011). The institutional logics literature has shown that in addition to family, business, and community logics, religion logic can significantly impact decision-making. These multiple logics may influence each other, be compatible, or compete with each other, creating tensions and resulting in conflicts (Greenwood et al. 2011; Thornton et al. 2012). The limited research on institutional complexity, including religion logic within family firms, suggests that religion logic plays a significant role. It can dominate (Fathallah et al. 2020), drive (Sorenson and Milbrandt 2023), or shift (Vu et al. 2024) the focus towards market, family, or community logics. However, besides these more recent additions to the literature, research on the effects of religion and other logics on family business decision-making remains scant.

In addition, there are stark differences between countries and regions in terms of the extent to which religion logic shapes the everyday lives of people and firms (Berger 1999; Bizeul 2014; Ponomareva et al. 2022). So far, the empirical literature on how religion contributes to shaping family firms’ ethical behavior is mostly based on countries in which large parts of the population can be regarded as highly religious and where religion, politics and the state are closely intertwined (e.g., Fathallah et al. 2020; Kavas et al. 2020). By contrast, findings on the relevance of religion logic in family firms situated in environments in which religion, politics and the state are less intertwined are scarce. Western Europe is particularly interesting in this regard, as it “turned out differently from other places with respect to its religiosity—or, more directly, its secularity” (Torpey 2012, p. 280). This region is characterized by lower religious participation in society and a fundamentally different social understanding of the role of religion (Davie 2006a; Torpey 2012). Consequently, we could assume that religion logic also features less prominently in family firms. At the same time, survey evidence shows that even in Western Europe, religiosity continues to impact several actors’ reliance on ethical criteria for economic decision-making (e.g., Gutsche 2019; Parboteeah et al. 2015). Hence, how religion logic interacts with other institutional logics in shaping family firms’ ethical behavior in this strongly secularized context remains an open question.

Against this backdrop, we aim to complement the literature on religion in family firms by specifically analyzing how religion logic shapes family firms’ ethical behavior in a more secularized context. Moral frameworks provided by faiths, such as Christian ethics (Melé 2018) and the Islamic ethos (Fakhry 1991), offer distinct guidelines for religious individuals. These frameworks may guide family firms with religious leaders to adhere more strongly to religion logic, resulting in them displaying more ethical behavior than their non-religious counterparts. In particular, we focus on family firms’ ethical behavior towards their employees, who are among the most important and closest stakeholders of any firm, without whose support firms are doomed to fail (Abid 2023; Drnovšek et al. 2024; Sun et al. 2023; Westermann-Behaylo et al. 2014). Furthermore, many world religions specifically address the ethical treatment of employees in their ethical frameworks (see Sect. 2.3), making them particularly interesting to study within the context of institutional logics. To summarize, in this study, we address the following research question:

How is the ethical behavior of family firms towards their employees influenced by religious and other institutional logics in a secularized context?

To answer this research question, we draw on the institutional logics perspective and a cross-sectional field study conducted in Austria, Germany and Switzerland, three Western European countries that are widely acknowledged as more secularized than most other regions of the world (Andersen et al. 2008; Bizeul 2014). Our field study is based on semi-structured interviews with controlling family members and archival data from 23 family firms.

Our study contributes to the literature in two primary ways. First, we contribute to the literature on religiosity in family firms (e.g., Astrachan et al. 2020; Sorenson and Milbrandt 2023) by developing a more fine-grained typology that moves beyond the dichotomous distinction between religious and non-religious family firms. By analyzing family firms in a more secularized context, our study complements earlier qualitative studies of religiosity in family firms that drew on data from less secularized and more religious countries (e.g., Fathallah et al. 2020; Kavas et al. 2020; Sorenson and Milbrandt 2023). Our study thus responds to the recent call by Fathallah et al. (2020, p. 658), who demanded more research to identify “different types of religious family businesses”. We identify three types of family firms in this secularized context (namely Integrator, Separator and Secular family firm) and explain why some of these firms might refrain from including religion logic in the business sphere. These three types of family firms contribute to the increasing literature on family business heterogeneity (Calabrò et al. 2023; Chua et al. 2012; Jaskiewicz and Dyer 2017; Pütz and Werner 2024; Reay et al. 2015) by adding a further typology and source for such heterogeneity (cf. Neubaum et al. 2019; Wu et al. 2022). Second, we contribute to the scant literature on institutional logics in family firms (e.g., Reay et al. 2015) by showing that these logics are mobilized in different ways in a secularized context compared with more religious contexts. In line with the earlier literature on institutional logics in family firms (e.g., Fathallah et al. 2020; Jaskiewicz et al. 2016; Reay et al. 2015), we focus on the logics applied at the firm level to explain family firms’ ethical behavior and not those logics that may govern the controlling family’s private life. To the literature on institutional logics in family firms, we add a further way of how multiple institutional logics may interact: substitution. While we also find indications of complementary and conflicting institutional logics (cf. Reay et al. 2015), we identify one type of family firm in which religion is the most prominent and which shows a substitution pattern between institutional logics. In this type of family firm, religion logic substitutes family logic, which is clearly present in the other types of family firms, as the dominant logic shaping family firms’ ethical behavior towards employees in conjunction with business logic and—to a lesser extent—community logic. Ultimately, our findings reveal secularization trends in recent decades, implying that the activation of logics may change over time.

This study examines how religious and other institutional logics shape family firms’ ethical behavior towards their employees in a secularized context. We found three types of family firms (Secular, Separator and Integrator) that can be distinguished by the religiosity of the controlling family and the extent to which it keeps this religiosity as an individual private matter or integrates religiosity into the family firms’ dominant institutional logics. Secular family firms primarily depend on family and business logics. Separator family firms also rely on these, but with some integration of religion logic. Integrator family firms, on the contrary, prioritize religion alongside business logics. However, the ethical behavior towards employees of the three types differed little, which we refer to as equifinality. At the same time, the three types of family firms showed different modes of interaction between the dominant institutional logics. While we saw some complementarity between family and business logics in Secular family firms, we found conflict between business and religion logics in Separator and Integrator family firms. However, their coping mechanisms differ. Separator family firms use an avoidance strategy (Pache and Santos 2010), that is, they separate religious beliefs—as part of the private sphere—and business logic—as the dominant logic in the family firm. Integrator family firms however, use a compromise strategy (Pache and Santos 2010) and try to balance both demands. Consequently, we saw that in the family firm type in which religion logic is the most prominent (i.e., Integrator family firms), the controlling family members experienced the highest level of personal conflict when they needed to make ethically challenging decisions about employees. In addition, when comparing this Integrator type of family firm with the other two types, we found that family logic prominent in the Secular and Separator types of family firms was not referenced in the Integrator type when explaining their ethical behavior towards employees. Finally, the businesswomen and -men interviewed also report secularization trends in recent decades, which are visible in a wide variety of actions.

These findings provide insights into how family firms in a secularized environment see themselves and the role of religion. When Separator and Integrator firms made ethical decisions about employees, we found that the controlling family’s private religious beliefs were often in conflict with the family and business logics in the firm. The family firms we studied dealt with these conflicts differently. The Separator family firms did not seem to see religion as a competitive advantage. Press reports on some of the Separator firms (e.g., FF13, FF18) and associated statements suggest that the Separator firms decided to separate private religious beliefs from the business to resolve conflicts between religion logic and family and business logics. The owners of Separator family firms wanted to keep religion out of the family firm because of the disadvantages associated with it. Furthermore, the controlling families in Separator firms analyzed in our study increasingly kept their religious beliefs private to not deter current and potential future employees who might not share the controlling family’s religious beliefs. By contrast, the owners of the Integrator family firms interviewed in our study did not regard religion as a competitive disadvantage, but as something that must also be preserved in the business sphere. For instance, they noted that religion logic guided how the family firm should look after its employees properly. Still, the owners of such Integrator firms did also experience contradictions between religion logic and family/business logics. Their business owners suffered strongly personally when conflicts arose, potentially due to the visibility of their religious beliefs and reliance on religion logic in the business. Different to Separator firms, these conflicts did not lead them to keep their religious beliefs private, but they retained religion logic in the business and tried to balance both interests.

Furthermore, we found that Integrator firms’ ethical behavior towards employees does not rely on family logic, in contrast to earlier research on institutional logics in family firms (e.g., Fathallah et al. 2020; Jaskiewicz et al. 2016; Reay et al. 2015), which ascribed an important role to family logic in such firms. Besides complementarity and conflict, our study highlights a third type of interaction between institutional logics in family firms: substitution. While existing research has highlighted family logic as a typical and ubiquitous element of the institutional logics of most family firms (e.g., Fathallah et al. 2020; Reay et al. 2015), our study shows that in one type of family firm, namely, Integrator family firms, family logic is not mobilized, but is substituted by religion logic when shaping the family firm’s ethical behavior towards employees. That is, these logics do not stand side-by-side as has previously been found by studies highlighting the conflict or complementarity between logics (e.g., Jaskiewicz et al. 2016; Signori and Fassin 2023). While not viewing this dynamic as “substitution”, earlier research on the role of religion in family firms reported a similar dynamic. For example, Fathallah et al. (2020) noted that religion logic took over family logic in some of the Muslim family firms they analyzed, which reinforces the idea that substitution is another form of interaction between institutional logics in family firms. This substitution can be interpreted as religious interests now replacing family interests. Naturally, however, the question arises as to what implications this has for family firms if there is now no longer any family logic? This question could be the starting point for further research.

Eventually, it must be noted that we find little difference in the ethical choices, we called it 'equifinality', i.e. “one behaviour predicted by more than one dispositional motive” (Aspden et al. 2010, p. 468). In any case, further research is needed to shed more light on the motives and sources of values of religious and non-religious businesswomen and -men. This equifinality presented here might not be present in other entrepreneurial decisions. However, a contrasting explanation for this equifinality might be that no specific religion-based ethic exists. Instead, as De George (1986, p. 430) suggests, “there is only one ethics or morality.” This perspective could explain both the equifinality in ethical decisions and the substitution of family logic with religion logic, as it implies that replacing logics does not necessarily imply a different ethical framework.

These observations must be interpreted with the strongly secularized context of our study in mind. Western Europe is a region in which “religion died out […] while remaining furious in the manifestly modern United States and even more so in other modern or modernizing places” (Torpey 2012, p. 280). Apparently, the perception and role of the church and religion in Western Europe are different to those in most other countries (Davie 2006a; Torpey 2012). These considerations have led to the concept of “vicarious religion” in Western Europe, that is “the notion of religion performed by an active minority but on behalf of a much larger group” (Davie 2006a, p. 24). In this case, the minority practice their religion, communicate it openly and see it as a competitive advantage, similar to our interviewees from the Integrator family firms. Many others, including our interviewees from the Separator family firms, consider themselves to be religious or religiously socialized, but reduce the visibility of and reliance on religion logic in the business sphere (e.g., CEO of FF10: “[that] has nothing […] to do with the company at all”). As also argued by Davie (2006a), such behavior seems to be practiced by the passive majority in Western Europe.

With these findings, we contribute to the literature in two primary ways. First, we contribute to the literature on religiosity in family firms. While this literature has long distinguished between religious and non-religious family firms (e.g., Maung et al. 2020; Shen and Su 2017), our findings show that in a more secularized context, we can distinguish between at least three types of family firms with different characteristics and explain why these types emerged. Hence, our findings preliminarily respond to the call by Fathallah et al. (2020, p. 658) that “future research should identify different types of religious family businesses”. Our study responds to the call by Rovelli et al. (2022) for a deeper exploration of family business heterogeneity, thereby contributing significantly to the existing body of literature in this area (Chua et al. 2012; Jaskiewicz and Dyer 2017; Neubaum et al. 2019; Reay et al. 2015; Wu et al. 2022). Specifically, our research enriches the understanding of the diverse sources of ethical behavior in family firms, an aspect highlighted by Vazquez (2018). We demonstrate that the heterogeneity in ethical practices among family businesses can be further elucidated by examining the controlling family's religiosity, particularly in how it integrates or separates its religiosity from the business. Future qualitative and quantitative research on religion in family firms could build on our three types and more fine-grained differences in religiosity in family firms.

Second, we contribute to the literature on institutional logics in family firms (e.g., Reay et al. 2015; Fathallah et al. 2020; Signori and Fassin 2023). Our results on the interplay between family and business logics are mostly in line with earlier results suggesting that such logics complement each other in family firms (Lee et al. 2003; Miller and Le Breton-Miller 2005; Miller et al. 2017). Likewise, our findings are similar to those of Reay et al. (2015) by confirming that community logic did not play a major role in the family firms we studied. Our study also reinforces the finding by Fathallah et al. (2020) that religion logic is important for explaining differences in family firms’ ethical behavior. However, complementing the findings by Fathallah et al. (2020), our study indicates that in a more secularized context, religion logic is rarely drawn upon in all types of family firms – only in Integrator family firms. It is in Integrator family firms that we could identify a mechanism regarding the interaction between multiple institutional logics in family firms that is novel to the literature. That is, compared with the other two types of family firms, Integrator family firms do not rely on family logic when explaining their ethical behavior towards employees. At first sight, this finding may seem contradictory, as family firms have typically been portrayed in the literature as strongly relying on family logic (e.g., Aparicio et al. 2017; Basco 2019; Fathallah et al. 2020; Miller et al. 2017; Reay et al. 2015; Signori and Fassin 2023). By contrast, our informants from Integrator family firms mobilized religion logic instead of family logic to guide their ethical behavior towards employees. That is, the ubiquitous family logic marked as typical for family firms in the literature (e.g., Fathallah et al. 2020; Reay et al. 2015) was substituted by religion logic in Integrator family firms. By contrast, Secular and Separator family firms strongly relied on family logic and business logic. To summarize, our study provides qualitative evidence that besides the complementary and/or conflicting relationships between institutional logics present simultaneously in a family firm (Aparicio et al. 2017; Fathallah et al. 2020; Reay et al. 2015), a third way of how such logics may interact can be identified: substitution. While such substitution mechanisms between institutional logics are not completely new to the institutional logics literature (e.g., Hadida et al. 2021), they are new to the literature on institutional logics in family firms. Our field study suggests that such substitution between institutional logics occurs when one of the dominant institutional logics guiding family firms’ behavior is substituted by another.

Given the cross-sectional nature of our field study, we cannot ascertain whether Integrator family firms once showed a stronger reliance on family logic and then substituted this logic by religion logic over time. However, the secularization trends reported in Sect. 4.4 allow us to infer that such a substitution of logics may be observed over time, albeit the other way round when it comes to secularization, where religion logic is increasingly substituted by family logic. That is, as secularization progresses, Integrator family firms may make the controlling family’s religiosity increasingly private again. This would in turn result in a lower or non-existent reliance on religion logic in the business, leading to the substitution of the once important religion logic by family or business logics when shaping ethical behavior towards employees.

The findings also hold significant practical implications. Policymakers aiming to adjust regulations and standards governing employee relations must consider the diverse motives of companies and recognize the heterogeneity between individual (family) firms. Despite the perception that religiosity plays no role in secularized regions, our results demonstrate the ongoing relevance of religion. This understanding is also crucial in counseling contexts where specific motivations shape decision-making processes. Similarly, external directors and members of a supervising committee should be aware of the logics governing family firms and their decision-making processes. Such increased awareness can help those actors understand and scrutinize family business decisions in a more informed manner and thus provide more targeted recommendations and guidance.

Against the backdrop of our findings, there remain many interesting questions for future research to extend our understanding of the institutional logics in family firms and the specific role of religion logic. Such future research may also help overcome some of the limitations of this study, which need to be acknowledged. First, the motivation for this study lies in the fact that compared with the study by Fathallah et al. (2020), there are differences in religion logic by country and context. We focused on one European region widely acknowledged as relatively secularized. Other economically similar countries, however, show different historical patterns and thus different degrees of secularization (e.g., the US). Our findings are thus bound to the institutional context of Germany, Austria and Switzerland and we call for further research on the relevance of religion logic in family firms in other contexts. We therefore call for a future examination of our categorization of Secular, Separator and Integrator family firms in other settings (e.g., other ethical decisions and other religious contexts such as the US). Relatedly, since the controlling families in these three types of family firms showed different degrees of religiosity, the impact of these different degrees of religiosity on the applied institutional logics in family firms could also be assessed. Second, we applied the institutional logics approach at the organizational level to understand how religion logic interacts with other logics to shape family firms’ ethical behavior towards employees in a secular context. Hence, we did not analyze the interactions between institutional logics at the organizational level, the field level and the political/economic level (Thornton et al. 2012). Future research could more closely investigate how the institutional logics at these macro levels shape the institutional logics at the family business level and vice versa (cf. Reay et al. 2015; Thornton and Ocasio 2008). Third, while our findings are analyzed through the lens of institutional logics theory, future research could benefit from integrating this framework with the socioemotional wealth (SEW) approach (cf. Gerlitz et al. 2023). SEW refers to the non-financial aspects of family firms that satisfy the affective needs of the owning family (Gómez-Mejía et al. 2007). According to this approach, family firms prioritize protecting their socioemotional endowment when making strategic decisions. SEW is multidimensional, encompassing the family's desire to maintain control and influence, preserve family reputation and social networks, ensure the succession of the family firm to the next generation, and uphold the family's emotional attachment (Berrone et al. 2012). Analyzing the dominant institutional logics in family firms from the perspective of the various dimensions of SEW (labeled FIBER) could yield further intriguing insights (cf. Boers et al. 2022). Furthermore, an SEW perspective might also help explain the transitions and changes of family businesses over time (cf. Boers et al. 2017). Fourth, our field study approach was primarily based on information from one senior manager per firm in contrast to Fathallah et al. (2020), who included several respondents per firm. Our study thus adopted a smaller dataset and potentially offered less depth per case. Nonetheless, it deliberately included more cases, which enabled us to tease out more variance in family business cases and in how religion logic shaped ethical behavior towards employees. More in-depth single and/or multiple case studies (cf. Mollet and Kaudela-Baum 2023) including interviews with members of the controlling family as well as other actors in the firm (e.g., employees, non-family managers and directors) could yield additional and rich insights into how religion logic shapes family firms’ ethical behavior (De Massis and Kotlar 2014). Relatedly, as indicated above, our main method of data collection (i.e., semi-structured interviews) may be subject to social desirability bias (Presser and Stinson 1998), although it seems likely that any form of data collection about highly personal topics such as religiosity comes with certain limitations (Brenner 2017). In addition, the timing of our interviews may have influenced our results. Since our interviews were conducted during the COVID-19 pandemic, our open questions on family firms’ ethical behavior towards employees may have been tilted towards questions of layoffs and other cost reductions as well as navigating the subsequent economic turmoil (cf. Agarwal 2021; Boers and Henschel 2022; Chundakkadan et al. 2022; Rossignoli et al. 2024). This limitation may also explain why many of the quotes and examples extracted from the interviews centered on questions of layoffs. Finally, we acknowledge that our findings on secularization trends (Sect. 4.4) are solely based on interviews conducted in 2021 and may thus suffer from biases such as recall bias (Bell 2005). Future in-depth case study approaches could be adopted in which researchers could follow selected family firms over time to complement and extend our findings from this cross-sectional field study.