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

Transgenerational orientation and the longevity of family businesses are discussed in different streams of literature: (a) from the perspective of the transgenerational entrepreneurship paradigm (Habbershon and Pistrui 2002; Nordqvist and Zellweger 2010; Zellweger et al. 2012b) and (b) as a constitutive part of the “familiness” of family businesses (Frank et al. 2016). The former stream of literature differentiates between the entrepreneurial orientation of the business (Sieger and Zellweger 2013; Zellweger and Sieger 2012) and the entrepreneurial orientation of the family (Sieger and Zellweger 2013; Zellweger et al. 2012b; Zellweger and Kammerlander 2014) with both orientations acting as key drivers for transgenerational entrepreneurship in family businesses.

In contrast to the transgenerational entrepreneurship paradigm, transgenerational orientation (TGO) does not emphasize the development of entrepreneurial mindsets within the family (Habbershon et al. 2010), but rather “represents a decision premise that frames decisions regarding the long-term survival and success of the business and intrafamily succession” (Frank et al. 2016, p. 22). Whilst not all family businesses can be said to be entrepreneurial, intra-family succession is frequently seen as crucial to preserving the family business status across generations (Frank et al. 2016). As such, TGO does not primarily emphasize the entrepreneurial spirit of business families, but constitutes an integral part of the “familiness” concept (Chrisman et al. 2005; Frank et al. 2016) which holds great potential to explain large parts of the distinctiveness and uniqueness of family businesses (Zellweger et al. 2010).

Furthermore, the transgenerational entrepreneurship paradigm is rooted in the resource-based view and focuses on “processes through which a family uses and develops entrepreneurial mindsets and family influenced capabilities to create new streams of entrepreneurial, financial and social value across generations” (Habbershon et al. 2010, p. 1). TGO, however, is anchored in new systems theory (Luhmann 1995). As a decision premise, TGO expresses the family’s expectations towards the business and manifests itself in decision-making processes within the family business (Weismeier-Sammer et al. 2013). Hence, decision premises are neutral by definition and may not necessarily constitute a resource. However, they can lead to a competitive advantage for the family business if they meet the VRIN criteria (Frank et al. 2016).

New systems theory (nST) does not focus on persons, but on communication as the constitutive element of a social system (Luhmann 1995). It looks at the processes by which elements of communication are connected to one another, the underlying expectations and the inherent structures which shape these patterns (von Schlippe and Frank 2013). This approach diminishes complexity levels, since it is easier to understand the rules of the game rather than individual players and their relationships within a social system (Simon 2012). New systems theory (Luhmann 1995; von Schlippe and Frank 2013) conceptualizes the family business as a social system consisting of at least two structurally coupled systems – the family and the business system. As a theory of great reach, it enables a comprehensive understanding of the particularities and complexities of family businesses, thus it helps to cope with the present fragmentation of the field (von Schlippe and Frank 2013). From an nST point of view, a family business is defined as “a communication system incorporating the decision premises shaped by a family” (Frank et al. 2016, p. 4). In a similar vein, a business family is defined as the communication system of a self-defined group of the family that is involved in business-related communication and capable of influencing the decision premises in the business. This business-related communication within the family system strongly shapes the family’s self-perception of being (or not) being a business family. This self-perception is established in business-related communication within the family system. Family governance measures constitute communication forums for the family which serve the creation of self-descriptions as a business family and the establishment of decision premises regarding the family’s relation to the business. Self-descriptions generally exceed self-observations and hence represent a specific accomplishment of the family as a social system (Frank et al. 2016; Seidl 2003).

According to Luhmann (1995), social systems such as family businesses are autopoietic, self-referential and operationally closed. This means that the system’s environment cannot directly affect the system (Maul 1993). Any external impact is processed by system-inherent meaning structures that demarcate the system from its relevant environment (von Schlippe and Frank 2013). Meaning structures within a system evolve with communicated decisions which are based on former decisions, creating so called “decision premises” that provide a framework for numerous future decisions in an organization (Luhmann 2011; Seidl 2005). These decision premises are usually long-lasting. They provide stability to the system (Luhmann 2011) and reduce the complexity of decision-making (Luhmann 1995; Seidl 2005). A TGO often represents a central decision premise in a family business context (Frank et al. 2016) as well as a pre-condition for succession. However, family businesses do not necessarily need to have experience with succession to build a TGO. Rather a TGO focuses on the future and serves as a “higher-order heuristic that, in matters of intertemporal choice, provides a dominant logic for decisions and actions” (Lumpkin and Brigham 2011, p. 1149). Therefore, a transgenerational orientation has emerged as a dominant distinctive feature of family businesses (Chua et al. 1999; Habbershon et al. 2003; James 1999; Lansberg 1999; Lumpkin et al. 2010; Lumpkin and Brigham 2011; Ward 1997; Zellweger et al. 2010) and understanding how a TGO develops is of central relevance to family business research.

Family influenced decision premises such as a TGO can manifest themselves in documents such as family constitutions. This is illustrated in the following example, taken from a family constitution: “The extended family is seen as the root of the business. For the founder, but also for his sons, it is of great importance that the lifework persists and that the entrepreneurial spirit also continues and grows in the subsequent generations. The involvement of qualified and willing persons from the extended family in the business, therefore, needs to be actively promoted”. ¹ The overarching decision premise in this example is to preserve the family’s influence in the long run (thus to maintain a TGO) and to pursue the founder’s entrepreneurial spirit.

Social identity theory has its origins in the actor-centered theories of sociology and psychology and has been elaborated and extended to groups, social categories and organizations (Whetten et al. 2014). According to social identity theory, identity can be seen as an individual, relational or collective construct (Waldkirch 2015). In general, it refers to how persons, social groups or organizations define “who” they are (Albert and Whetten 1985). Social identity theory is based on the assumption that persons identify with the social groups they belong to and act in favor of their “in-groups” (Tajfel et al. 1971; Turner et al. 1979). The degree of “belongingness” to or “oneness” with groups such as organizations, religious institutions or football clubs is expressed through the concept of social identification (Ashforth and Mael 1989). Identification with a group requires three components: (a) a cognitive component, i.e. being aware of group membership, (b) an evaluative component, i.e. attaching value to group membership and (c) an emotional investment component with regards to awareness and evaluations e.g. experiencing the group’s success or failure as a personal one (Tajfel 1982). The higher the degree of an actor’s identification with a social group or organization, the stronger the bonds of attachment and commitment to that group tend to be (Whetten et al. 2014).

Social identity theory represents a “refreshing alternative to established theorizing” (Reicher et al. 2010, p. 61) and emerges as a useful theory for the explanation and prediction of group behavior (Waldkirch 2015). With regards to family businesses, social identity theory provides a way of capturing and explaining “the meaning structures of the family and business component of a ‘family business’” (Whetten et al. 2014, p. 480). Current research emphasizes that family businesses are hybrid identity organizations (Whetten et al. 2014) which indicates a need to differentiate between a business family identity and a family business identity (Frank et al. 2016). This article focuses on the business family’s identity which is associated with a decision-making premise that aims to safeguard the family’s identification with the business. This business family identity is a form of sense-making for the family, “a more or less shared conception of ‘who we are’” (Whetten et al. 2014, p. 483), which is nurtured by the business as a source of sense-making. The beliefs and values within the business family are continuously expressed in the course of communication and communication in turn provides an interpretive belief system to the business family and its members (Gioia 1998; Zellweger et al. 2010). Family governance measures constitute forums for enhancing communication within the business family (Brenes et al. 2011; Gilding 2000; Martin 2001; Mustakallio et al. 2002), for enabling family participation in the business and for aligning family beliefs and values with regards to business continuity. As such they foster the family’s identification with the business and contribute to maintaining the business family as a cohesive entity that describes itself as an integral part of the business (Baus 2013).

“Governance structures are the engine of continuity for family companies” (Lansberg 1999, p. 282). Governance practices in family businesses differ from those employed in non-family businesses (Bammens et al. 2008; May 2012; Siebels and Knyphausen-Aufseß 2012). In family businesses, the success of the business depends to a large degree on the associated family (James 1999); the way the family organizes itself and its relation to the business (Olson et al. 2003). Therefore, successful family businesses often complement their business governance through the development of FGM (Koeberle-Schmid et al. 2012). While business governance (i.e. the top management team, the board of directors and the shareholder meeting) serves the operating firm through the organization of administration, the control of management and the provision of advice (Gallo and Kenyon-Rouvinez 2005), family governance serves a different function in family businesses (Gersick and Feliu 2014). Family governance aims to strengthen family cohesion, channel the family’s influence on the business and develop joint expectations and plans for the future of the business (Mustakallio et al. 2002). Family governance can thus be seen as an integral part of the family business governance system in family businesses (Klein 2009; Siebels and Knyphausen-Aufseß 2012). As a kind of informal form of governance, it supplements and complements contractual family business governance mechanisms (Calabrò and Mussolino 2013; Poppo and Zenger 2002). However, not all types of informal governance mechanisms may purposefully be considered as family governance. Trust or relational norms, for instance, play an important role in almost any transaction and in the governance of any organization. As such, they may also be important antecedents for the development of FGM (Martin 2001), however they are not primarily designed to fulfill the classical functions of family governance, i.e. fostering cohesion, coordinating the family’s influence on the business and planning the future of the business.

Business families often make use of their own, unique set of FGM attuned to family values, the stage of business development and degree of family complexity (Jaffe and Lane 2004). One of the most widely spread forms of FGM are informal and formal family meetings (Neubauer and Lank 1998; Martin 2001) which are essentially recurring assemblies in which the business family meets to discuss business issues (Habbershon and Astrachan 1997; Neubauer and Lank 1998) and to plan for the future of the business. The family council as a select group of the business family (Berent-Braun and Uhlaner 2012) provides a structured forum that enables the family to express its values and expectations for the business in order to develop strategies that protect the family’s long-term interests in the business (Gersick et al. 1997). The family constitution can be described as a normative agreement of fundamental guidelines and principles (i.e. decision premises) according to which the business family organizes its relation to the business (Berent-Braun and Uhlaner 2012, Neubauer and Lank 1998). In this regard family constitutions assist the business family in formalizing its expectations regarding responsibilities and rewards related to business membership (Botero et al. 2015; Fuetsch and Frank 2015).

From a theoretical perspective, FGM serve as communication forums to manage the family’s influence over the business. Within these forums, the business family develops rules for the family’s involvement in the business. When approaching the succession phase, families increasingly turn to FGM to determine their current position, to formally structure areas of family influence and to assign basic rules for task fulfillment (Froschauer and Lueger 2015). The need for family governance is increasingly common in mature family businesses as the number of active and passive owners tends to increase with every succession (Hack 2009; Lansberg 1999). The larger the number of family members and family generations (Brenes et al. 2011) the more complex communication and decision-making processes become (Hack 2009). Non-active family members frequently feel estranged from the business due to a lack of communication (Mustakallio et al. 2002). Therefore, more complex business families tend to have a greater need for information, coordination and establishing joint expectations about central business goals (Fahed-Sreih and Djoundourian 2006; Habbershon and Astrachan 1997; Suáre and Santana-Martín 2004). In this respect, FGM can provide helpful structures to enhance communication within the business family (Brenes et al. 2011; Gilding 2000; Martin 2001; Mustakallio et al. 2002). Open communication within the business family is essential to facilitate the development of joint expectations about the future of the business (Gilding 2000; Habbershon and Astrachan 1997; Jaffe and Lane 2004; Mustakallio et al. 2002). Regular communication through FGM makes the business family more likely to develop a sense of commitment and responsibility for the continuity of the business (Blumentritt et al. 2007).

Initial empirical evidence with regards to family councils indicates that their use is positively associated with succession planning (Blumentritt 2006) and that family businesses which use family councils tend to enjoy improved succession performance (Chittoor and Das 2007; Craig and Moores 2002). In a similar vein, less formal FGM such as family meetings can play a pivotal role when it comes to conveying a feeling of responsibility for the business family (Aronoff and Ward 2011). Furthermore, family meetings tend to be positively associated with the longevity of the business (Astrachan and Kolenko 1994). This is in line with studies which conclude that business families which use family governance tend to see improved prospects for the survival of their business (Fahed-Sreih 2009). Business families that make use of different forms of FGM might therefore be more likely to develop a TGO for the business which is summarized in the following hypothesis:

Hypothesis 1: A stronger presence of family governance measures positively affects the transgenerational orientation of the family business.

The development of a TGO depends largely on the business family which is the decisive point of reference for family business continuity. While some business families can be a source of great strength for the business, others can be a potential weakness (Baus 2013). Therefore, understanding how a TGO develops requires examining the family’s identification with the business and how FGM can contribute to strengthening this identification.

Generally, the identity of a social system is based on self-descriptions and captures the collective self-conception of a system (Seidl 2003). In a family business context, business family identity is achieved if family members develop an emotionally-tied self-concept of being part of a business family (von Schlippe et al. 2009) that identifies itself with the business. Such self-descriptions emerge from communication processes (Luhmann 1984, 1995). They go beyond self-observations (Luhmann 1984; Seidl 2003) and entail expectations (Luhmann 1995). Communicated expectations related to membership in a social system increase the understanding of values and norms (Smidts et al. 2001) which may in turn strengthen the group members’ involvement and sense of belonging to the group (Lawler 1989).

FGM can be understood as communication forums that support the family in generating and aligning expectations and formulating decision premises with regard to the business system (Mustakallio et al. 2002). Therefore, business families which communicate and exchange information on a regular basis are more likely to develop a common point of view regarding the business (Sorenson et al. 2009). Indeed, open communication about business issues, participation in decision-making and reflections on the joint history can foster the family’s commitment to and identification with the business (Smidts et al. 2001; von Schlippe et al. 2009). Furthermore, shared narratives can contribute to imprinting the family’s entrepreneurial legacy on to the next generation and to make it survive far beyond the founder generation (Jaskiewicz et al. 2015). Family meetings are a way of expressing shared beliefs in the family (Habbershon and Astrachan 1997; Mussolino and Calabrò 2014). Especially next generation family members will develop a better understanding of business activities and give meaning to the continuity of the business (Jaskiewicz et al. 2015). In a similar way to other FGM, family meetings enable the participation of a wider group of family members in business matters and align family beliefs and values with regards to business continuity. Being part of a business family can be a source of sense-making (Whetten et al. 2014) that is frequently related to the family members’ self-esteem (Dyer and Whetten 2006). By creating joint stable reference points for the family, FGM might therefore strengthen the family’s commitment to and identification with the business. As such FGM can contribute to establishing and strengthening a self-concept as a business family that defines itself as an integral part of the business (Labaki 2011; Pieper and Astrachan 2008; Süss-Reyes 2015). It stands to reason that business families that use different forms of FGM are more likely to possess a stronger business family identity (von Schlippe et al. 2009) and attach a higher importance to maintaining the family as an integral part of the business which is summarized in the following hypothesis:

Hypothesis 2: A stronger presence of family governance measures positively affects the business family’s identity.

“When a family makes the business its central priority, its identity as a family becomes enmeshed with that of the business. The notion that the business is more important than anything else gets carried into the future.” (Ward 2004, p. 57).

Family governance measures create structures within the business family that strengthen the family’s identification with the business (Baus 2013). When family members draw affective significance and value from membership in the business family, they may go great lengths to retain the business in family hands. They feel that they share a joint responsibility for the continuity of the business and this may enhance their motivation to contribute to the business (Zellweger et al. 2010). A strong BFI is one of the utmost competitive assets of well-functioning family businesses. Consequently, successful family businesses are aware that it is crucial to invest efforts to ensure the business family’s continued commitment to and identification with the business in order to develop and sustain a family legacy (Lansberg 1999). Family members only identify with the business if it creates meaning for them and when they perceive a feeling of belonging. The family members’ sense of belonging to the business usually reaches beyond formal business-related duties (Thoits and Virshup 1997) and often extends beyond purely financial benefits (Wimmer et al. 2005) towards creating a sense of shared destiny. This sense of belonging and shared destiny builds a mutual basis that leads family members to perceive the fulfillment of business obligations as a source of pride (Sundaramurthy and Kreiner 2008).

Generally, social identification favors actions that are in line with identity and encourages support for groups sharing this identity (Ashforth and Mael 1989). In this way, identity provides a shared understanding for behavioral norms concerning group behavior and makes group behavior predictable (Ravasi and Schultz 2006). In the case of business families, a TGO is a way for the family “to maintain a stable self-concept of the family over time” (Zellweger et al. 2011, p. 8). Thus, keeping the business in family hands constitutes an expression of making the family an enduring component of the business and reflects a coherent past, present and future appearance as a business family (Zellweger et al. 2011). If family governance is functional, it strengthens the family members’ emotional investment in the business. This way, family members see the business as an extension of themselves and perceive its successes as personal success whilst also suffering from business defeats (Deephouse and Jaskiewicz 2013). A strong BFI contributes to imprinting the family legacy on to the next generation of family members and to fostering family loyalty towards the business. Family governance is a valuable means of strengthening the BFI. However, if FGM fail to fulfill this function, they remain “empty” structures or purely formal acts that do not contribute to the family members’ emotional investment in the business. Thus, if the family does not achieve the development of a joint identity as a business family that feels loyal to the business and works together to realize common goals, FGM remain ineffective (or even dysfunctional) and it is unlikely that a TGO will develop. This absence of a joint business family identity can encourage feelings of estrangement, disengagement, opportunistic behaviors and family conflicts which affect the long-term success and sustainability of the business (Kidwell et al. 2012). The case of the Gucci family, mentioned at the beginning of this article, provides an illustrative example of how such behaviors not only harm family cohesion, but can also put business continuity at risk. In contrast, if FGM are effective and contribute to the family members’ identification with the business, the family shares a sense of responsibility for the future development of the business and questioning the TGO might seem inappropriate or even heretical (Lansberg 1999). Hence the presence of a BFI is likely to transfer into a common understanding with regards to business continuity resulting in a TGO for the business. Consequently, this means that FGM can only foster the TGO for the business if they are supported by the business family and help to strengthen the family’s identity as a business family. In other words, FGM only nurture a TGO if they help to enhance the BFI. BFI is therefore assumed to mediate the relation between FGM and TGO which is summarized in the following hypothesis:

Hypothesis 3: The relation between family governance measures and the transgenerational orientation of the family business is mediated by the business family’s identity.

The survey was conducted on a random sample of family businesses. This sample was extracted from an Austrian online database and consists of businesses that employed five or more persons in 2012 and were founded prior to 2008 (in order to exclude family businesses that are still confronted with start-up challenges). Out of these 51,129 businesses, a random sample of 5500 firms was taken. As databases listing family businesses were not available, data collection was arranged in two steps to ensure an acceptable response rate: (1) Telephone interviews were conducted with the 5500 businesses in early summer 2013. In total 4153 businesses were reached over a period of five weeks. Out of these 1674 businesses (40 %) were family businesses (according to a self-assessment of the telephone partner) and accepted the request to participate in the online survey. (2) The online tool LIMESURVEY was used to distribute the survey. Following the initial telephone interview, each business received a link to the online questionnaire. Reminders were sent after one week (1333) and after two weeks (887). In total, 612 questionnaires were returned, corresponding to a response rate of 34 % (Frank et al. 2016). The questionnaire was only completed by family members, in most cases the owners (79 % of the final sample; multiple answers were possible) and/or the managers of the family business (48 % of the final sample).

In order to specify the sample of analysis, a family business was defined as a business of which the family holds more than 50 % of the ownership. This ensures sufficient voting rights and the potential to shape the transgenerational orientation of the business (Chua et al. 1999). After filtering out businesses with less than 50 % family ownership and cases with missing data on the variables of interest, a sample of 510 family businesses was available for further analysis. In this sample, 84 % were small, 8 % medium-sized and another 8 % were large businesses (according to the categorization of the European Commission 2003). The average business age was 50 years (median: 42). Accordingly, 34 % of the businesses were in the first, 32 % in the second, 24 % in the third and 6 % in the fourth generation of the family. Another 4 % stated that they were in their fifth generation or beyond. In terms of the ownership distribution in the sample, a mean of 99 % of the shares (median: 100 %) are family-owned. In 67 % of the businesses, only one generation holds ownership. In 31 % of the businesses, two generations, and in 2 % even three generations are owners of the business. In 63 %, only one generation is active in the management of the family business, whereas in 35 % and 2 % of the businesses, two and three generations, respectively, manage the business together. With regards to the main industries represented in the sample, the businesses specified that 33 % are predominantly active in the manufacturing industry, 64 % in services and 41 % in trade (multiple answers were possible).

Dependent variable: Transgenerational orientation (TGO) was measured by the subscale “transgenerational orientation” taken from the “Family Influence Familiness Scale (FIFS)” (Frank et al. 2016). While Berrone et al. (2012) also provide a measure for the “renewal of family bonds through dynastic succession” (p. 267) that is similar to TGO, the scale provided by Frank et al. (2016) is more concise. Furthermore, Berrone et al. (2012) root their scale in a “socioemotional wealth” framework which constitutes an extension of the behavioral agency theory, whereas the scale by Frank et al. (2016) is consistent with the theoretical framework of new systems theory used in this article. Therefore, the scale developed by Frank et al. (2016) was chosen to measure TGO. This scale comprises three items that were introduced by the question “How do the following statements apply to your family business?” and followed by the introductory statement “In our family business we take great care…”. This wording was designed to address the conditions that frame decisions, i.e. decision premises. The item set included “…to think in generations”, “…to avoid selling the company to non-family members”, and “…that the company can be passed on to the next generation”. Respondents had to rate the items on a 6-point Likert scale ranging from (1) “does not apply at all” to (6) “completely applies”. The aggregated result of all items representing TGO in the form of the calculated mean was used for analyses. Reliability analysis indicates a good internal consistency of the scale, with a Cronbach’s alpha of 0.85.

Mediator variable: Similar to TGO, business family identity (BFI) was developed in the context of the “Family Influence Familiness Scale (FIFS)” (Frank et al. 2016). This scale comprises five items that were introduced by the question “How do the following statements apply to your family business?” and followed by the introductory statement “In our family business we take great care”. The item set included “…that the family is emotionally tied to the company”, “…that family members stick together”, “…to spend enough time as a family also outside the company”, “…to act as one family in public”, “…that all family members working in the company give their best”. Respondents had to rate the items on a 6-point Likert scale ranging from (1) “does not apply at all” to (6) “completely applies”. The aggregated result of all items representing BFI in the form of the calculated mean was used for analyses. Reliability analysis indicates a good internal consistency of the scale, with a Cronbach’s alpha of 0.81.

Independent variable: Family governance was measured by a slightly adapted version of the scale developed by Mustakallio et al. (2002) which comprises four variables: informal family meetings, formal family meetings, family council and family constitution. For each of these aspects, respondents were asked to indicate whether they use this measure or not (0 = no, 1 = yes). In a similar way to the study conducted by Mustakallio et al. (2002), all four family governance measures (FGM) were combined by building a sum score. This approach was chosen, because the total number of different FGM is an indicator for the degree of institutionalization of family governance. An institutionalized family governance consisting of various measures is likely to have a greater effect on the family and the business than single random measures alone.

Control variables: Multiple control variables were used to ensure a correct model specification. First, business size and business age were controlled for, as recent evidence (Brigham et al. 2014) indicates that both variables positively correlate with the existence of a TGO of the business. Business size might be an especially relevant factor for predicting TGO due to the fact that larger family businesses tend to possess more employment facilities for the next generation of family members (Zellweger et al. 2011). To measure business size, the natural logarithm of the number of employees working for the business in 2012 (the year prior to the survey) was used in order to provide a more linear sample distribution. In a similar vein, for business age, the natural logarithm of the number of years since the business was founded for the first time (to avoid confusion in case of business reorganizations) was calculated.

Second, family businesses that employ a larger number of family members may exhibit higher levels of TGO, e.g. due to altruism in the business family whose members want to safeguard jobs and income deriving from ownership shares in the long run (Schulze et al. 2001). Therefore, the naturally logarithmized number of family members working in the business (in order to provide a more linear sample distribution) was also taken into account for regression analyses. Third, the presence of multiple generations of family members in the business typically reflects the business family’s inclination to think long term (Brigham et al. 2014) and thus might be positively related to the TGO of the business. This assumption was controlled for by the number of family generations involved in business management and the number of generations holding business ownership. Both controls were operationalized through a categorical variable (ranging from one to three generations) which was transformed into a dummy variable for regression analysis. These transformed variables indicate whether only one generation (coded 0) or more than one generation (coded 1) was involved in business management or ownership respectively.

The detailed operationalization of all variables can be found in “Appendix”.

Table 1 displays the means, standard deviations and the bivariate correlation coefficients between all variables included in the analysis.

The majority of businesses implemented at least one family governance measure (FGM). Informal family meetings were the most common measure. These were in use in 98 % of the family businesses, whereas only 45 % of the businesses hold formal family meetings. Family councils and constitutions were less common with 10 % and 9 % of the businesses respectively having them. Taking all FGM under research together, they can be seen to positively correlate with transgenerational orientation (TGO; r = 0.16, p < 0.01) and with business family identity (BFI; r = 0.15, p < 0.01). Considering that FGM are used for multiple purposes (e.g. for managing family conflicts, channeling the family’s influence on the business, strategic planning) and that the respondents were not asked for the specific purpose of their FGM, the moderate level of the correlations seems to be plausible. In other words, although the specific function of the FGM is unknown, they significantly correlate with BFI and TGO. Furthermore, the results indicate that business families with a strong BFI exhibit a higher level of TGO (r = 0.35, p < 0.01).

Since all data was gathered within the same questionnaire, the possibility of common method bias was tested using Harman’s one-factor test (Podsakoff and Organ 1986). For this purpose, all variables under research were entered into an unrotated factor analysis to evaluate the number of factors emerging from the data. Four factors with eigenvalues greater than 1.0 were extracted. Altogether, they account for 66 % of the variance, with the first factor explaining 25 % of the variance. Thus, the results provide support for the conclusion that the variables are separate factors. To detect potential multicollinearity problems, Variance Inflation Factor (VIF) scores were assessed for the main model (model 4; see Table 2). Altogether, the highest VIF score was 1.3 meaning that the independent variables included in the analyses are robust against multicollinearity problems.

According to the requirements for mediation outlined by Baron and Kenny (1986), four conditions need to be fulfilled for mediation: First, the predictor variable (FGM) must significantly predict the outcome variable (TGO) which was tested in model 2 (hypothesis 1). Second, the predictor variable (FGM) must significantly predict the mediator (BFI) which was tested in model 3 (hypothesis 2). Third, the mediator (BFI) must significantly predict the outcome variable (TGO) which was tested in model 4 (hypothesis 3). Fourth, the effect of the predictor variable (FGM) on the outcome variable (TGO) needs to decrease in significance and/or magnitude once BFI is taken into account. To test these assumptions, multiple regression analysis was performed for each model. The results are presented in Table 2.

In model 1, only the dependent variable (TGO) was regressed onto the control variables by considering standardized regression coefficients (β) and the significance of these weights. Business size (β = 0.152, p < 0.001), business age (β = 0.120, p < 0.01), the number of family members working in the business (β = 0.119, p < 0.01), and the number of family generations active in business management (β = 0.217, p < 0.001) proved to be significant. In a next step, hypothesis 1 was tested in model 2. FGM are a positive predictor for TGO (β = 0.100, p < 0.05). This model explains 15.0 % (p < 0.001) of the variance in TGO. In model 3, the effect of the predictor variable (FGM) on the mediator variable (BFI) was evaluated. In this case, none of the control variables were significant. FGM, however, are positively related to BFI (β = 0.144, p < 0.01) which supports hypothesis 2.

To assess whether BFI acts as a mediator between FGM and TGO, model 4 was tested. Full mediation is assumed when the effect of the predictor variable and the dependent variable decreases to a point where it is not significant anymore after the mediator variable has been entered into the analysis. If the effect decreases but remains significant after the inclusion of the mediator variable as an additional predictor, partial mediation occurs (Hair et al. 2010 referring to Cohen and Cohen 1983). As shown in model 4, the effect of FGM on TGO both decreases in magnitude and is ceases to be significant once BFI is entered as a mediator (β = 0.057, p > 0.05). The effect of BFI on TGO, in contrast, seems to be strong and highly significant (β = 0.297, p < 0.001). Thus, according to the above definition, full mediation is supported by the regression analysis. To test for the significance of the mediating effect, a Sobel test (Sobel 1982), including control variables as covariates, was performed. The results confirm the significance of the indirect effect of FGM on TGO via BFI (z = 2.91, p < 0.01). Hence, hypothesis 3 is supported. The final model including control variables, FGM and BFI explained 23.3 % (p < 0.001) of the variance in TGO.

This paper contributes to the field of family business research in at least three ways:

First, it adds to the discussion on family business governance, primarily in terms of showing the value of family governance measures for business continuity. To date, family business governance literature has been focused on the contractual governance sphere with an emphasis on board structure and the related impact on business performance. However, scholarly attention addressing the value of family governance remained comparatively scarce (Siebels and Knyphausen-Aufseß 2012). As a kind of informal, legally non-binding form of governance, family governance supplements and complements contractual family business governance mechanisms (Calabrò and Mussolino 2013). The findings of this study confirm the role of family governance measures (FGM) in strengthening the family’s identification with the business and in fostering the transgenerational orientation of the business. Thus this study emphasizes that a sole focus on the proper organization of the business-related, contractual governance may not suffice to safeguard transgenerational business continuity. While business governance ensures performance and competitiveness, family governance serves to enhance the family’s commitment to and identification with the business. Business families that focus solely on professional business governance with a disregard of family governance risk a loss of commitment and continuity in the long run (Gersick and Feliu 2014). Furthermore, the simultaneous fulfillment of family and business governance functions by contractual governance bodies (as for instance the board of directors) may have disruptive effects on the business, as family matters can be time-consuming, time which they may then lack for the fulfillment of other business governance functions including those of ensuring business performance and competitiveness (Koeberle-Schmid et al. 2009).

Second, this study also offers an interesting point of intersection with the transgenerational entrepreneurship paradigm (Habbershon and Pistrui 2002; Habbershon et al. 2010; Nordqvist and Zellweger 2010; Zellweger et al. 2012b). Similar to the concept of transgenerational orientation, this paradigm takes a longitudinal perspective to explain how entrepreneurial, financial and social value is created not only for the current, but also for future generations (Zellweger et al. 2012b). A recent study by Jaskiewicz et al. (2015) on transgenerational entrepreneurship concludes that families who are entrepreneurial across generations keep the entrepreneurial legacy alive through narratives on the family’s achievements in the past. They succeed in imprinting their entrepreneurial spirit to next generation family members and motivating them to continue the history. Furthermore, transgenerational entrepreneurship is nurtured through “strategic education” (training the next generation towards entrepreneurial opportunity recognition), “entrepreneurial bridging” (temporary cooperation of at least two generations to encourage entrepreneurship) and “strategic succession” (arranging succession in a way that resources required for entrepreneurship are protected). In a comparable way to an entrepreneurial legacy, a strong business family identity can be conducive to the transgenerational continuity of the business. Family governance measures provide a framework to foster this identity and to encourage the next generation’s entrepreneurial spirit. Similar to Jaskiewicz et al. (2015), this article emphasizes that business continuity does not happen accidentally, but needs clear and timely governance decisions. Long-lived family businesses tend to integrate children in business matters from early on. They imprint their entrepreneurial spirit, plan the offspring’s education and career strategically and give them enough time to learn on the job before they hand the business over. In this regard, a key function of FGM is to foster the business family’s collective goal orientation, particularly with regards to the entrepreneurial goal of creating value together as a family in the business across generations. As such, FGM increase the effectiveness of the business family and strengthens its transgenerational entrepreneurial effort for the business (Berent-Braun and Uhlaner 2012).

Third, this article also adds to the discussion on “familiness” in family businesses (Frank et al. 2016; Zellweger et al. 2010). The notion of familiness is frequently structured as a three-dimensional concept comprising of a components-of-involvement, essence and organizational identity sphere (Zellweger et al. 2010). In a recent contribution, the familiness construct has also been measured in terms of a multidimensional theory-based scale called the “Family Influence Familiness Scale” (FIFS) (Frank et al. 2016). Explaining how these different familiness dimensions interact, reinforce or hamper each other constitutes an interesting question that may contribute to the understanding of the uniqueness and distinctiveness of family firms (Chrisman et al. 2005). To date, however, evidence on how these dimensions are intertwined is narrative at best. This study takes a first step in addressing this gap by analyzing the relation between business family identity (BFI) and transgenerational orientation (TGO). Referring back to the findings, a strong business family identity is a way of leveraging the TGO as a key aspect of the essence of family influence. Hence, when family members identify strongly with their business, they encourage actions in line with this identity (Ashforth and Mael 1989) and as such leverage the familiness of the business. FGM constitute means of strengthening the business family’s identity and as a further consequence can also foster the familiness of the business.

With regards to practical implications, this study highlights that FGM can help to strengthen a joint identity as a business family, which in turn fosters the TGO of the family business. As illustrated in the story of the Gucci family at the beginning of this article, a lack of family governance considerations and a lack of a joint identity as a business family can endanger the business family’s long-term commitment to the business. This paves the way for opportunistic behaviors among single family members and can put the long-term continuity of the family business at risk. Therefore, regular communication and governance structures in the business family seem to be vital in order to develop joint expectations and decision premises with regard to the business. Although the family may feel a little uncomfortable when talking about business issues in a family setting in the beginning, family governance can be a valuable means to integrate the next generation early enough, to arouse their interest in business matters and to strengthen their commitment to business continuity (c.f. Jaskiewicz et al. 2015). Hence, FGM are important drivers for a joint identity as a business family and for the transgenerational orientation of the family business.

There are different ways of organizing the family through FGM. The business family may hold regular family meetings as long as the number of family members is still small and subsequently select a family council once the family grows larger. Furthermore, the family may also decide to develop a family constitution as an expression of the family’s values, goals and its commitment to the business (c.f. Suess 2014). The stronger the business family’s emphasis on family governance becomes, the more FGM become institutionalized and a family governance system consisting of multiple measures is likely to have a stronger effect on the family and the business than single random measures alone (see also Mustakallio et al. 2002). To conclude, the efforts invested in the development of FGM may pay off both through financial (cf. Berent-Braun and Uhlaner 2012) and non-financial benefits.

It is necessary to point out that this study is not without limitations. First, FGM were measured through a categorical variable in this study. However, there was no information about the content that business families discuss in the context of FGM. Although the business family’s identity and the transgenerational orientation for the business may be central topics, there might also be other issues of relevance (e.g. conflict management). This needs to be considered when interpreting the results. For future research, it would be fruitful to study both the context in which FGM are developed, as well as the content that is discussed. Case studies might be especially suitable for this purpose, because they allow greater insight into the family system (c.f. Lueger and Frank 2015). Furthermore, a scale development process in the sense of latent variable measurement is timely and relevant to better grasp the implicit principles and rules behind family governance structures. This is also in line with the general demand in family business research that “better measures of relevant constructs are needed as the field of family business continues to mature” (Pearson et al. 2014, p. 568). Therefore, the development of a psychometrically sound and theory-based scale is required in order to facilitate a cumulative progress of knowledge in research on family governance.

Second, the sample consisted mainly of smaller business families that are often involved in the governance of a sole business. Although the sample composition tends to be representative of the majority of business families in Austria, it does not fully account for families that hold ownership in multiple businesses and see themselves as portfolio entrepreneurs. Business families can indeed be multifaceted and may dynamically change over time. Especially larger business families may develop differentiated structures including multiple family branches that each develop their own business family identity. Moreover, in every family there might be a hierarchic differentiation which may not necessarily correspond to the ownership structure, but rather to experience, seniority, gender or other criteria. While part of the family and business complexity has been captured through control variables, this does of course not entirely capture the heterogeneity of business families and their family businesses. Therefore, future research could investigate which FGM are implemented by different types of business families, which identity these different types of business families develop and which effects this can have on TGO.

Third, the sample composition might not be the ideal one for studying family governance. While informal family meetings are used by the majority of business families, formal measures such as family constitutions and family councils might be more common in larger business families who often face a higher level of complexity (Brenes et al. 2011). Therefore, the relations between FGM, BFI and TGO might be even stronger when analyzed in a sample of larger business families with more complex family structures which deserves further attention in future research. Moreover, future research should also account for business families that hold ownership and/or management in multiple businesses and see themselves as portfolio entrepreneurs.

Fourth, TGO as a decision premise appears to be a vital precondition for keeping the business in family hands. Nevertheless, the existence of a decision premise does not imply a logical or causal effect on decisions (Luhmann 2011). This means that a strong TGO does not necessarily lead to successful intra-family succession. There might be other factors, including financial distress, or the absence of a qualified and/or willing successor, that make external succession, business closure or business sale more appealing options. The use of longitudinal data could help to clarify this potential discrepancy between TGO and intra-family succession by investigating how different levels of TGO are actually linked to succession decisions and ultimately to succession performance.

Fifth, the effect of FGM might not only depend on the fact that the business family possesses these measures, but rather on the importance that the business family actually attaches to them. This importance might range from rather insignificant formal acts to fundamental governance instruments that help to manage the family’s influence in the business and strategic business development. However, to be fully effective, FGM need to be brought to life. Hence, future research on family governance might also consider the actual usage of FGM and the relevance that business families attach to these measures. This might also require the development of a scale for measuring family governance which focuses not only on manifest structures, but also on the family’s actual principles and practices concerning family governance. Furthermore, cultural aspects might also play a role when it comes to explaining the dominance of certain FGM. For instance, family governance is more common in the US than in many European countries and also tends to comprise of a broader spectrum of measures, such as different specialist committees (e.g. education committees for the next generation) or websites and newsletters for regular family communication (Baus 2013). Therefore, studying the effects of a broader range of FGM (in a context where these are widely spread) on business continuity constitutes another possibility for future research.