Abstract

     The aspiration to thrive in the long run is among the most distinctive traits of family firms. On the one hand, a long-term view can spur the family firm to plan and secure its human resources (HR), thereby attracting local employees seeking stability, and retaining them for decades. On the other hand, low employee turnover can be a barrier to innovation, which is needed to survive and compete in the long run. Nevertheless, numerous family firms are renowned for being simultaneously excellent employers and outstanding innovators. Therefore, how can a long-term oriented family firm nurture its employees while pursuing innovation? We conducted a longitudinal case study on Carl Schlenk AG, a fourth-generation family firm consistently awarded for both its HR management (HRM) and innovation initiatives. Our investigation led us to identify distinct family firm characteristics of credibility, solidarity, and loyalty which engender a unique virtuous cycle of reciprocal reinforcement between sophisticated HRM and innovation practices, ultimately fostering mutual gains for the family firm and its employees. We offer contributions to HRM and innovation management research in the context of family firms and beyond.

Introduction

One for all, all for one” – that is not just a slogan for us but a living corporate culture (Schlenk Corporate Communications)

     Human resource management (HRM), i.e. “all management decisions and activities that affect the nature of the relationship between the organization and its employees – the human resources” (De Leede & Looise, 2005, p.109), is acknowledged as a critical success factor for family firms to enhance performance, attract new talent, improve employee attitudes and behaviors; hence a source of long-term competitive advantage (Hoon et al., 2019). Strategic HRM research increasingly focuses on understanding the performance effects of systems of HR practices (Boon et al., 2019) and the mutual gains or shared benefits for employees and firms, despite their divergent interests (Cullinane, Bosak, Flood, & Damerouti, 2014). Although research has examined the systems of ability- (A), motivation- (M), and opportunity-enhancing (O) HR practices (AMO model) (Appelbaum et al., 2000), their empirical investigation has mostly focused on ability and motivation, leaving the opportunity-enhancing practices as well as the integration of the three dimensions scantly addressed (Boxall et al., 2016). The family business context stimulates the creation of strong, lasting, and bonding social capital among employees, fostering cohesiveness, coordination, and decision-making effectiveness (Arregle et al., 2007). While mutual gains are likely to emerge for the family firm and its employees, from planning security for the former to job security for the latter, they potentially lead to overinvesting in loyal, stable, and long-term HR (Bassanini et al., 2013), at the expense of an inflow of new knowledge and ideas, ultimately detrimental to innovation.

Conclusion

     Family business long-term orientation influences both HRM and innovation management practices, leading to a tension between low turnover and innovation. Investigating Carl Schlenk AG, a German Mittelstand multigenerational family firm, we built a process model that explains how the family business essence, consisting in family business characteristics that shape a trust-based environment, allows the family firm to engender a virtuous cycle between HRM and innovation practices, ultimately leading to mutual gains for the family firm entity and its employees that can last and accrue over multiple generations. In so doing, we unpacked the family firm HRM framework by examining how the family firm/owning entity, HR systems, and employees interact, shedding light on the influence of family firm characteristics on innovation management, considering its intertwined relationship with HRM.

1- Introduction

2- Why family business should matter in economics

3- Method

4- Results

5- Introducing family business into economic discourse

6- Concluding remarks

References

Abstract

Family firms account for a substantial share of economic activity and deviate from standard economic assumptions on firm behavior. However, little is known about how these firms are represented in economic theory. This article examines the inclusion of family business in the curricula of economics doctoral programs in the United States and Sweden as well as professors’ and textbook authors’ views and research on family business. Textbooks, articles and course offerings used in doctoral programs are considered to indicate the state of established knowledge in the field. The findings show that family business is not included in the examined curricula. Furthermore, professors and authors do not publish research on family business and generally do not see a need to incorporate it into economic theory. This article concludes that family business is excluded from ‘core’ economic theory due to a lack of paradigmatic pluralism, axiomatic incompatibility, path dependency, institutional bias and data constraints. Lastly, it is speculated that integration of family business theory into standard economic modeling is likely to occur outside prestigious universities due to path dependency in research.

Introduction

Family firms are of significant economic importance and exhibit different behavioral characteristics from non-family firms (e.g., Astrachan & Shanker, 2003; Bennedsen & Foss, 2015; Donckels & Fröhlich, 1991). Family business could therefore be expected to be an integral part of economic analysis. Nevertheless, there is currently little knowledge on the representation of family business in economic theory. However, although economics has traditionally been concerned with firm, industry and market dynamics, the authors of this paper have long noted a disproportional absence of family business research in the field, compared to its neighboring disciplines of business administration and finance. Given the economic significance of family business, this omission is likely to be detrimental for our understanding of economic activity (e.g., Andersson, Johansson, Karlsson, Lodefalk, & Poldahl, 2018a; Astrachan & Shanker, 2003; La Porta, Lopez-de-Silanes, & Shleifer, 1999). Hence, in order to further current economic discourse, it is vital to further explore the use of family business concepts in economics. The purpose of this study is twofold. First, it aims to examine the prevalence of family business within doctoral programs in economics. Second, it aims to analyze the views among teaching professors and textbook authors regarding the role of family business in economic theory, as well as whether they have published peer-reviewed articles on this topic. Doctoral programs are used as indicators of the current state of established knowledge in the field, as they reflect what is regarded as necessary knowledge in order to participate in the academic discussion. In practice, this implies the study of neoclassical, or “mainstream”, economics as it dominates research and education.1 This study concerns the academic year 2014–2015 and covers the top ten doctoral programs in economics in the United States (U.S.) and all universities in Sweden that offer a full doctoral program in economics. The analysis covers the syllabi of micro- and macroeconomics courses, as well as courses in industrial organization. Concepts that are central to theory are expected to be included in textbook indices; many references to a key word indicates that the term is considered to be of relative importance in the presented theory, while missing keywords indicate that the topic is not covered to a significant extent.

1- Introduction

2- Literature review and theoretical framework

3- Methodology

4- Findings

5- Discussion and conclusions

6- Contributions, limitations, and avenues for future research

References

Abstract

Little attention has been given to the role of interpersonal relationships in building the leadership skills of next-generation successors, with most literature focusing on the development of their business and technical skills. Drawing on Leader-Member Exchange (LMX) theory, we qualitatively explore how high-quality relationships develop between next-generation leaders and family and non-family stakeholders and how they impact leadership development. Findings from interviews with 24 next-generation leaders of family businesses in India show that high-quality relationships develop through mutual respect, trust, early affiliation with the business, mentoring, and mutual obligation. By exploring how high-quality relationships develop between next-generation family business leaders and family and non-family stakeholders, we contribute to a finer-grained understanding of successful intergenerational succession in family businesses. We also contribute to LMX theory by considering networks of relationships (and not just dyadic relationships) and by identifying two antecedents that are specific to family businesses (early affiliation with the business and mentoring) to the previously identified ones (trust, mutual respect, and mutual obligation).

Introduction

The effect of intergenerational succession on family business survival and performance has historically spawned much debate in extant literature (e.g., Calabrò, Minichilli, Daniele, & Brogi, 2018; Daspit, Holt, Chrisman, & Long, 2016). For every study outlining the benefits of succession for family firms’ prosperity across generations (Royer, Simons, Boyd, & Rafferty, 2008), there are others showing that family firms underperform with family leadership beyond the founding generation (Bennedsen, Nielsen, Perez-Gonzalez, & Wolfenzon, 2007; Chittoor & Das, 2007) or even disappear (Le Breton-Miller & Miller, 2015). A plausible cause is that next-generation successors are not always adequately prepared to assume the leadership role, making leadership development of the successor one of the critical determinants of family firm sustainability across generations (Daspit et al., 2016; Kansal, 2012; Sharma, Chrisman, & Gersick, 2012). Previous literature has traditionally focused on the development of the business and technical skills of successors (Deans, Oakley, James, & Wrigley, 2006; Dhaenens, Marler, Vardaman, & Chrisman, 2017; Ferris et al., 2009), with gradual expansion to investigating the role of high-quality relationships in developing leadership of next-generation family members (Sharma et al., 2012). Particularly, developing high-quality relationships between the successor and various stakeholders in the family business has been intricately linked with preparing next-generation successors to succeed in their leadership role (Bika, Rosa, & Karakas, 2019; Le Breton-Miller, Miller, & Steier, 2004; Mokhber et al., 2017). For example, Raaja Kanwar, Vice Chairman and Managing Director of Apollo International Limited – a family business operating in India – attributes a large part of his success as a leader to the high-quality relationships he built with his father and with other family and non-family stakeholders who provided much needed guidance and support when he assumed the leadership role (PwC, 2019).

1- Introduction

2- Literature review

3- Methodology

4- Findings and discussion

5- Conclusions

References

Abstract

Although the internationalisation of family businesses (FBs) has received increasing attention in recent years, much remains to be learned about how FB internationalisation unfolds as a process. Our review of 172 empirical studies from the period of 1991–2018 indicates that only 25 studies included both longitudinal data and strong process theorising, even though internationalisation is inherently processual, and FBs are longitudinal in nature. We acknowledge that both variance- and process-based theorising are needed to build an understanding of the FB internationalisation process. We contribute to the field by building an FB internationalisation process model based on a review analysis. Within the model, process-based internationalisation pathways are combined with variance-based capabilities (positive influences) and liabilities (negative influences) that affect internationalisation, with economic and non-economic goals viewed as driving the various internationalisation processes. On the basis of the model, we suggest that future research could adopt more longitudinal and individually focused approaches, as a means to understand the FB internationalisation process in various FBs and contexts, over various time periods, life cycles, and FB generations.

Introduction

Family businesses (FBs) possess some distinctive features, being passed on from generation to generation, with constant triggers for change stemming from the interaction of family, business, and ownership (Gersick, Davis, Hampton, & Lansberg, 1997). Non-economic, family-related goals often intertwine with economic, business-related goals and strategies (e.g. Berrone, Cruz, & Gomez-Mejia, 2012). Hence, the particular nature and extent of FB internationalisation has attracted increasing attention (see e.g. Arregle, Duran, Hitt, & Van Essen, 2017; Pukall & Calabrò, 2014). Taking into account Melin (1992) call for longitudinal perspectives on internationalisation, our claim is that FBs possess special features for process theorising due to the multigenerational influence and non-economic goal orientations. The evolving FBs and their internationalisation are well suited to process research, which ‘focuses empirically on evolving phenomena and […] temporal progressions of activities as elements of explanation and understanding’ (Langley, Smallman, Tsoukas, & Van de Ven, 2013, p. 1). However, as we see it, the full potential of such an approach has yet to be realised.

We investigate the comparative effectiveness of board independence in constraining Real Earnings Management (REMs) in family and non-family firms in the context of corporate governance reform in Bangladesh. In contrast to the pre-reform period, we find that independent directors are more effective in restricting REMs in family firms compared to non-family firms, post reform. Further, we find that the relationship between family ownership and REMs varies significantly between strong and weak corporate governance firms during the post-reform period. This nuanced impact of regulation extends the literature and may be generalised to similar domains with weaker institutions and investor protection.

Introduction

We examine the comparative effectiveness of board independence in restraining REMs in family and non-family firms in an emerging economy, Bangladesh. Bangladesh has its legal origin in common law, but the country suffers from relatively poor enforcement of the legal codes (Rashid, 2011; Siddiqui, 2010). It provides an appropriate setting as family ownership remains a dominant form of ownership in Bangladesh with family firms making up around 64% of the economy (Muttakin et al., 2011). This context also provides us a unique opportunity since Bangladesh has changed its corporate governance regulation in 2012 to a stricter “comply” basis from its earlier “comply or explain” basis (Bangladesh Securities and Exchange Commission, 2012). One of the conditions imposed in the notification is that the minimum proportion of independent directors on the board has to be at least one-fifth (1/5) that doubled the previous requirement of a minimum one-tenth (1/10) of the board (Bangladesh Securities and Exchange Commission, 2012; Bangladesh Securities and Exchange Commission, 2006). This exogenous shock offers a unique opportunity to investigate the effectiveness of family firm boards’ independence in an emerging economy during the pre-reform and post-reform periods. Of the different features of corporate governance, board independence is one important aspect that has drawn significant attention with regard to its effectiveness in ensuring higher quality earnings (Davidson et al., 2005; Peasnell et al., 2005; Xie et al., 2003). The presence of independent non-executive directors on the board wielded a significant influence in reducing the magnitude of earnings management (Davidson et al., 2005; Peasnell et al., 2005). In addition to the board’s independence, Xie et al. (2003) examine the effectiveness of other board characteristics, i.e. number of board meetings, CEO and chair duality, size of the board, etc., and find that board independence has a significant restraining impact on firms’ earnings management.

 Introduction

Entrepreneurial orientation (EO), the firm’s disposition to entrepreneurship, is a key element in businesses’ internationalization process (Jantunen, Puumalainen, Saarenketo, & Kyläheiko, 2005; Javalgi & Todd, 2011; Liu, Li, & Xue, 2011; Ripollés-Meliá, Menguzzato-Boulard, & Sánchez-Peinado, 2007). However, few studies have analyzed factors affecting the relationship between EO and international development in small and medium-sized enterprises (SMEs), and even fewer have analyzed family firms (Calabrò, Campopiano, Basco, & Pukkal, 2017; Hernández-Perlines & Mancebo-Lozano, 2016; Hernández-Perlines, Moreno-García, & Yañez-Araque, 2016), although such firms represent the most common form of business organization in the world (Hiebl, Quinn, Craig, & Moores, 2018). The literature has acknowledged that family firms differ in attitudes and behaviors when internationalizing (Graves & Thomas, 2006) and in internationalization strategies (e.g., Fernández & Nieto, 2006; Boellis, Mariotti, Minichilli, & Piscitello, 2016). Family firms may behave differently depending on the extent of family involvement in the business (Chrisman, Chua, & Steier, 2005; Kellermanns, Eddleston, Sarathy, & Murphy, 2012; Naldi, Nordqvist, Sjöberg, & Wiklund, 2007). Furthermore, family involvement is a variable used commonly to identify the family’s power to shape a firm’s goals, strategies, and behaviors (Deephouse & Jaskiewicz, 2013; Miller, Le Breton-Miller, & Lester, 2013). Decision makers’ characteristics and attitudes are important determinants of family SMEs’ internationalization (Arregle, Naldi, Nordqvist, & Hitt, 2012; Calabrò, Torchia, Pukkal, & Mussolino, 2013; Cerrato & Piva, 2012; Claver, Rienda, & Quer, 2008). However, the relevance of individual managerial levels of knowledge and experience remains largely unexplored in the international business literature (Nielsen, 2010). In family SMEs, there is often an overlap between ownership, the board of directors, and the top management team (TMT), with the same family members involved at all levels (Segaro, 2012). TMT members in family SMEs participate directly in the design and day-to-day implementation of firm strategy (Lubatkin, Simsek, Ling, & Veiga, 2006; Sánchez-Marín & Baixauli-Soler, 2015), and they carry out the entrepreneurship process (Sciascia, Mazzola, & Chirico, 2013). Moreover, it is common for SMEs to have family members in TMT positions (Speckbacher & Wentges, 2012) that can spread the family’s ideas and behaviors, directly influencing strategic choices and decisions. Therefore, the family’s involvement in the firm offers a unique environment in which to analyze whether and to what extent a firm’s family character affects the firm’s internationalization (Fernández-Olmos, Gargallo-Castel, & Giner-Bagües, 2016). The family business literature has overlooked the importance of family involvement in TMT positions despite its relevance (Minichilli, Corbetta, & MacMillan, 2010). Following the upper echelon theory (Carpenter, Geletkanycz, & Sanders, 2004; Hambrick & Mason, 1984; Hambrick, 2007), top managers’ strategic choices are influenced by managers’ cognitive base and values, which influence the decisionmaking process, shaping organizational outcomes. Organizations are reflections of their TMTs, and firm-level decisions, including internationalization, depend substantially on team background, experience, and values (Hiebl, 2014; Tihanyi, Ellstrand, Daily, & Dalton, 2000). Thus, managers should possess knowledge that allows them to analyze and process information efficiently in the complex and uncertain internationalization process (Nielsen & Nielsen, 2011; Ramón-Llorens, García-Meca, & Duréndez, 2017). Previous research has recognized TMT as an important decision-making group in organizations (SánchezMarín & Baixauli-Soler, 2015; Vandekerkhof, Steijvers, Hendriks, & Voordeckers, 2015) and has focused on whether demographic diversity in managerial backgrounds is advantageous for firms, but the results have been inconsistent (Cannella, Park, & Lee, 2008; Rivas, 2012).

1- Women on family business boards: A smart thing to do

2- Family business goals: Beyond economic performance

3- Economic benefits of women in the family business boardroom

4- Women directors and family businesses’ noneconomic goals

5- Why an absence of women on the board can harm the family firm

6- Performance disadvantages of women directors

7- Revisiting the research on performance disadvantages of women directors

8- Measures to encourage the presence of women on family business boards

9- Lessons learned

References

Abstract

The most successful and longest-enduring family firms are progressively encouraging the active presence of women on their corporate boards. Why is the presence of women on boards so important for family firms? And how can policy makers and controlling owners encourage the active presence of women on family business corporate boards? By integrating the literature on women in governance and the goals of family businesses, we take a step toward increasing shareholder awareness of the economic and noneconomic benefits that women can bring to the family business boardroom. Using theory and empirical evidence, we show that the presence of women on corporate boards can be instrumental for the controlling owners of a family business to achieve prosperity and success, to preserve family cohesion, and to improve the reputation of the family and business simultaneously. Furthermore, we discuss the socioemotional and economic ramifications of excluding women from the family business board of directors. We conclude with four practical recommendations for encouraging the active presence of women on family business boards.

Women on family business boards: A smart thing to do

One of the most important institutions determining the success orfailure in organizations is the board of directors. The board of directors sets the strategic direction of the firm and is responsible for maintaining its long-term performance (Judge & Talaulicar, 2017). Particularly in environments where family ownership is ubiquitous, the importance of the board of directors is exacerbated (Bammens, Voordeckers, & Van Gils, 2011; Samara & BerbegalMirabent, 2018; Samara, Jamali, Sierra, & Parada, 2018). If adequately structured, the board of directors can mitigate family-family and family-nonfamily conflicts of interests that typically constrain family business performance (Samara & Berbegal-Mirabent, 2018; Villalonga & Amit 2006). In this regard, the relationship between the presence of women on the board of directors and family business performance has attracted increased attention in the last decade (Campopiano, De Massis, Rinaldi, & Sciascia, 2017), partly because women are expected to gradually become more involved in leadership positions in the near future (Ernst & Young, 2017). Yet, the relationship between the presence of women directors and family businesses’ economic performance remains inconclusive with empirical results reporting both negative (Amran, 2011; Minguez-Vera & Martin, 2011) and positive effects (Cruz, Justo, & De Castro, 2012).

Although the study of non-economic objectives is particularly prominent in family business research, non-family firms set and pursue similar goals. Extant literature also explains why family firms pursue non-economic goals; however, less is understood regarding the ways in which family ownership impacts the outcomes associated with such objectives. Grounded in the ongoing study of family business strategy, this article explores two sets of noneconomic goals – family and community objectives – in SMEs with varying levels of family ownership. Applying goal systems theory to analyze the configurations of goals and means among the SMEs in our sample, we find that family ownership interacts with the presence of non-economic objectives to influence firm performance.

Introduction

The salience of non-economic objectives is an important strategic idiosyncrasy of family firms. Accordingly, non-economic objectives and their impact on firm outcomes are core topics in family business research (Chrisman & Patel, 2012). This research intersects with other discourses on small and medium-sized enterprise (SME) strategy – most notably, social responsibility (Tang, Hull, & Rothenberg, 2012) and social entrepreneurship (Stevens, Moray, & Bruneel, 2015). While noneconomic goals, in general, are not unique to family firms, enterprises typically classified as family businesses tend to pursue objectives specifically benefiting the owning family (Chrisman, Chua, Pearson, & Barnett, 2012). Often, the desire to maximize and preserve the socioemotional wealth (SEW) – the affective endowments derived from firm ownership that benefit the owning family (Gómez-Mejía, Haynes, Núñez-Nickel, Jacobson, & Moyano-Fuentes, 2007) – is conceptualized as a catalyst for many practices, behaviors, and strategies in family firms. The tendency in extant research to use family ownership as a proxy for non-economic family objectives obscures the complex interdependencies between ownership and various organizational goals, including, but not limited to those serving the family.

Introduction

Work and family are intertwined areas of life for most people but they may be especially connected for entrepreneurs, in general (Jennings and McDougald 2007; Hsu et al. 2016), and female business owners, in particular (Loscocco and Bird 2012; Peris-Ortiz et al. 2012; Shelton 2006). Research involving work and family typically draws on the Work-Family Interface (WFI) theory (Jennings and McDougald 2007). Entrepreneurship scholars have recently started to recognize the relevance of the business-family interface or BFI (Jennings and McDougald 2007; Hsu et al. 2016). There are two dimensions within the BFI framework: enrichment-business and family are positive domains, and interference-business and family comprise conflicting spheres. These two dimensions are bi-directional (Greenhaus and Powell 2006), meaning the dimensions are on a continuum from business performance to family interests and vice versa. The family-to-business enrichment construct is further divided into instrumental (organizational, financial) and affective (moral, emotional) family support (Hsu et al. 2016). The enrichment and interference processes may operate simultaneously. This is particularly true for women who fulfil multiple roles and are entrapped between the family and business duties (Rothbard 2001). Therefore, some scholars believe that the two perspectives should be combined into one overall model (Hsu 2016; Jennings and McDougald 2007). They see the processes as competing because each perspective is positive in some respects and negative in others. So far, most of research looks at the two processes separately. For example, Eddleston and Powell (2012), Powell and Eddleston (2013) focus on relationships between family enrichment and business performance. Jennings and McDougald (2007), and Shelton (2006), consider links between family interference and work. The objective of this study is to develop a conceptual model of women’s entrepreneurship that connects the two BFI dimensions and firm performance in a multifaceted, multi-directional, fashion based on the uniqueness of women’s entrepreneurship. To our knowledge, such a comprehensive model is lacking in the literature. This Performance-Interference-Enrichment (PIE) model will be tested based on data from various countries around the world. We will show that the model’s links depend on the country context. Thus, we identify new boundary conditions to the domain of female entrepreneurship that are sorely lacking in the literature. The paper proceeds as follows. The next section provides an overview of the extant literature on the relationships between the BFI dimensions and firm performance. Next, a conceptual model of women’s entrepreneurship is developed and tested. Implementation suggestions are put forth. Finally, we discuss the results, implications, and provide conclusions.

Introduction

Small and medium-sized enterprises (SMEs) contribute significantly to the development of global economies (Cromie et al. 1995; Vachani 2005; Jiang and Li 2010; Cosenz and Noto 2015). Despite their importance, about 15 years ago the management accounting research on SMEs was described as very limited (Mitchell and Reid 2000; Chenhall 2003). Since then, research in the area of SMEs has increased. However, there is no coherent research body, and the research findings are fragmented (Lavia López and Hiebl 2015). Lavia López and Hiebl (2015) see the main reason for this in the dispersal of research findings among various research fields, such as accounting or small business and entrepreneurship. Scanning the existing literature reveals that only a few literature reviews try to summarize and map existing knowledge of SME research (e.g. Garengo et al. 2005; Lavia López and Hiebl 2015). While Lavia López and Hiebl (2015) consider management accounting in SMEs in general, Garengo et al. (2005) discuss characteristics of various PMS models with reference to SMEs. In order to gain a better understanding of the effective implementation and use of PMSs in SMEs, a comprehensive summary of the PMS research could contribute to the development of this research stream. However, such an overview of PMS research in SMEs is still missing. In the past decade, an increasing professionalization of SMEs has been observed. In their review, Garengo et al. (2005) summarize the literature on PMSs in SMEs and focus on the specific characteristics of PMSs in SMEs and their influencing factors. They identify four main factors that boost the implementation and use of PMSs in SMEs. Besides the need for growth in a competitive environment, Garengo et al. (2005) discuss the notable progress in information technology, the increased importance of quality (such as the introduction of norms and standards), and the focus on continuous improvement to reach the strategic objectives that support the implementation and use of PMSs in SMEs. Moreover, increasing internationalization is observed within SMEs (Vachani 2005). There is a broad consensus in the literature that if SMEs grow in size, the necessity of implementing a comprehensive measurement system arises (O’Gorman and Doran 1999; Perera and Baker 2007). However, it is not only increasing complexity in the internal and external environment which leads to professionalized management and control, but also other important factors, such as ownership structure (e.g. Filbeck and Lee 2000; Speckbacher and Wentges 2012; Hiebl et al. 2013). But it is questionable whether the increasing professionalization is reflected in formal control systems with characteristics comparable to those in large firms.

1- Introduction

2- Theoretical bases and hypotheses

3- Methodology

4- Results

5- Discussion

6- Conclusion

References

Abstract

Using a comprehensive database of Taiwanese family-owned business, this study investigates chief executive officer (CEO) selection decisions in family-owned businesses. Our data sample is composed of 129 listed family businesses from 1998 to 2008. By employing theories of family-owned business succession and corporate governance, the study examines the influence of chairman of the board (COB) and CEO duality, current CEO/family relations, and shareholding ratio of outside directors on CEO-selection decisions in family-owned businesses. The results demonstrate that a family-owned business is more likely to select an intra-firm member as the new CEO when the incumbent CEO is a family member. Moreover, a family-owned businesses are prone to selecting new CEOs from external sources when the shareholding ratio of outside directors is greater. Based on the findings, the study can contribute to CEO succession research and family-business research in emerging economies.

Introduction

The objective of business-succession planning aims at a smooth transition in the top management position. Within family-owned businesses, CEO succession planning is complicated due to the intertwining of management and ownership (Sharma, 2004). Benson (1990) also found that only 30 percent of family businesses succeed in subsequent generations. Both the family’s needs and business requirements influence the CEO succession decision. A serious conflict arises when the interests of both parties are not compatible. In addition, the business’s stakeholders also exert a great influence over succession decisions in which the family business is a listed company. This implies difficulty in smooth succession in family businesses. Among the transition of top management positions, the CEO succession decision is pivotal in family businesses. In fact, the process and result of CEO selection is a signal to business stakeholders who are concerned about the stability, competitiveness, and growth of the business. The essential issue for CEO selection is related to the decision of whether candidates will be from inside or outside of the family-owned firm. In other words, a family business may confront a dilemma in deciding to choose from family members or non-family members or an employee promotion or recruited outside the firm when choosing the new CEO to meet both the family needs and business requirements. The reasons for an insider succession decision include an increase in employee loyalty and the board of directors’ acquaintance with the candidates. However, the major reason for an outsider succession decision is the employment of a new leadership style that may lead to transformation for the company. For example, Delta Air Lines, the third largest U.S. airline, recruited Leo Mullins, who has no prior experience in the airline business, to revamp Delta Air Lines. The purpose in making such a decision was the consideration of a new mindset and leadership style introduced into the conventional airline business. Friedman and Singh (1989) and Datta and Guthrie (1994) stated that the new strategic planning, organizational structure, and resources required of an organization may also follow the inauguration of a new CEO.

1- Introduction

2- Conceptual framework: defining family firms

3- Data and identification of family firms

4- The economic contribution of family firms

5- The characteristics of family firms

6- Concluding discussion

References

Abstract

Family firms are often considered characteristically different from non-family firms. However, our understanding of family firms suffers from an inability to identify them in total population data; information is rarely available regarding owners, their kinship, and their involvement in firm governance. We present a method for identifying domiciled family firms using register data; this method offers greater accuracy than previous methods. We apply this method to Swedish data concerning firm ownership, governance, and kinship from 2004 to 2010. We find that the family firm is a significant organizational form, contributing over one third of all employment and gross domestic product (GDP). Family firms are common in most industries and range in size. Furthermore, we find that, compared to private non-family firms, family firms have fewer total assets, employment, and sales and carry higher solidity, although family firms are more profitable. These differences diminish with firm size. We conclude that the term “family firm” includes a large variety of firms, and we call for increased attention to their heterogeneity.

Introduction

Family business has become a substantial field of research over the past two decades (Bird et al. 2002; Colli 2003; Sharma 2004; Poutziouris et al. 2006; Casillas and Acedo 2007; Benavides-Velasco et al. 2013; GarciaCastro and Aguilera 2014; Xi et al. 2015). Empirical studies indicate that concentration of ownership within a family is common among listed firms and predominant among unlisted firms; additionally, family firms contribute substantially to aggregate employment and income (La Porta et al. 1999; Faccio and Lang 2002; Astrachan and Shanker 2003; Morck et al. 2005; Bertrand and Schoar 2006; Bjuggren et al. 2011). Family businesses have also received increased political attention; they are considered the backbone of private industry and a key target for policies aimed at increased employment and economic growth. Consequently, many policies designed to encourage the establishment and growth of family firms have been proposed in both Europe and the USA (European Commission 1994, 2006, 2009). However, some researchers have argued that family businesses are an inefficient way to organize business activities because they put social goals, such as control and nepotism, before economic goals, such as profit and growth. The debate over the efficiency of family ownership is longstanding and remains unsettled (Landes 1949; Chandler 1990; Dyer 2006; Bjuggren 2013; Miller and Le Breton-Miller 2015; Evert et al. 2016). Given the prevalence of family firms, the theoretical and empirical ambiguity regarding their “successfulness” and the political attention they receive, it is crucial to further investigate their economic contributions and the impact of economic policy on family firms’ performance. Both tasks require statistical records of high quality. However, administrative registers generally do not recognize ownership or kinship. Until recently, this fact has made it nearly impossible to use total population data to study family firms, and most family firms have therefore been excluded from research.

Recent academic interest in the organization of management accounting and control systems in family frms has increased considerably (for useful summaries, see Prencipe et al. 2014; Salvato and Moores 2010; Songini et al. 2013). Quantitative studies have found that, on average, family frms—especially smaller ones—make less use of formalized instruments of management accounting and control (García Pérez de Lema and Duréndez 2007; Hiebl et al. 2013, 2015; Speckbacher and Wentges 2012) and less often employ specialized management accountants (Hiebl et al. 2012) than non-family frms. Quantitative research has also shown that the organization of management accounting and control in family frms depends on the extent and type of family infuence (Kallmuenzer et al. 2017; Songini and Gnan 2009, 2015; Songini et al. 2015). At the same time, such studies indicate that family frms tend to professionalize management accounting and control systems alongside growth (e.g., Hiebl et al. 2013; Moores and Mula 2000), presumably to address an increase both in levels of complexity due to larger frm size and in agency conficts due to the increasing involvement of non-family managers and employees (Dekker et al. 2013, 2015; Flamholtz and Randle 2012; Hiebl et al. 2015; Songini 2006; Songini et al. 2015). Such assumptions receive further support from qualitative research. For instance, longitudinal case studies by Amat et al. (1994) and Giovannoni et al. (2011) showed that family frms use increasingly formalized management accounting systems to master growing complexity alongside growing size. Such research also shows that the implementation of management accounting systems requires specifc knowledge; important sources of this knowledge, current literature suggests, are well-educated, non-family experts, such as fnancial controllers, chief fnancial ofcers (CFOs), and fnance directors (e.g., Amat et al. 1994; Giovannoni et al. 2011; Moilanen 2008; Stergiou et al. 2013). For instance, Giovannoni et al. (2011) reported in their case that a university-educated, non-family controller contributed decisively to the establishment of more professional and formalized management accounting systems. Some evidence also suggests that when recruiting fnance and accounting executives, family frms purposefully seek expert knowledge in management accounting systems (Hiebl 2014, 2017). Thus, the current literature seems to suggest that the professionalization of management accounting systems in family frms inevitably includes the employment of non-family experts in fnance and accounting. While such non-family experts may undoubtedly be important sources of management accounting knowledge for family frms, the more general literature on family business has recently included doubts regarding whether the help of nonfamily experts is required for family frms to professionalize (e.g., Dekker et al. 2013; Hall and Nordqvist 2008; Stewart and Hitt 2012). Proposals that family members may be equally capable of driving professionalization are reinforced by recent quantitative fndings that family frms with family CFOs may also have professional management systems in place (Songini et al. 2015).