Family firms offer valuable lessons for businesses: Beedie research

Feb 05, 2012

New research from the Beedie School of Business at Simon Fraser University is shedding light on how businesses generally can learn more about themselves through observing family firms. Defined by Entrepreneur Magazine as business entities “that are owned or managed by more than one member of the same family”, family businesses significantly represent roughly half of all private Canadian businesses.

Published in the Journal of Management, the article is entitled The Adolescence of Family Firm Research: Taking Stock and Planning for the Future. The research was authored by Beedie strategy professor Eric Gedajlovic, along with colleagues Michael Carney (Concordia University), James J. Chrisman (Mississippi State University and University of Alberta School of Business) and Franz W. Kellermanns (University of Tennessee and Otto Beisheim School of Management).

Family business scholars now regularly contribute interesting and thought-provoking work to top-tier management, entrepreneurship, and finance journals. In this review article, the authors documented the growing maturity of research into family businesses, and promote its integration into broader streams of inquiry in the realms of business and management theory.

Research into family firms is significant, argues the article, because it sheds light on a myriad of business issues, such as why some firms are more profitable than others. The area holds great promise moving forward in terms of understanding management through observing family firms. In turn, research specialists in family firms, argues Gedajlovic and colleagues, will need to broaden their research for a more mainstream audience.

Despite the growing presence of family firm research in leading journals, as well as the ubiquity and practical significance of the family firm as an institution, this body of work has not yet garnered mainstream attention in the organizational sciences.

Family  firms  represent  a significant social and economic institution in both emerging and advanced economies and account for approximately 90% of all firms worldwide. Many are small, but family firms are also well represented among medium- and large-sized organizations. Altogether, 44 percent of publicly listed firms in Europe are family  controlled , and  in  the  United  States,  families control about 33 percent of the S&P 500.

“The relative neglect of family firms in mainstream management research is unfortunate, not simply because it means that our theories and empirical findings have been largely developed without reference to the world’s most common organizational form, but also because family firms are theoretically interesting and unique,” said Gedajlovic.

Reflecting upon the research, he notes that “it becomes apparent that the field of family business research is at a pivotal moment in its development. Like an adolescent, it is replete with promise and is well poised to give back to those that have supported its emergence and growth. At the same time, much of this promise has yet to be fulfilled.”

An important  area  in  which  family-firm-based  research  has contributed  to  mainstream inquiries  in  the  organizational sciences  pertains  to  how  scholars  engaged  in  corporate governance research  have  framed  their  inquiries  and  explored the  precedents  and consequences of corporate governance practices.

This research has shifted  the primary corporate governance conversation away from issues related to the separation of ownership and control toward the costs and benefits of unified ownership and control. As a result, our theories of governance now have greater realism and practical relevance for managers, investors, and policy makers.

Despite broad acceptance that behavior in organizations is driven by mixed motives, management researchers have often adopted the simplifying assumption that  managers are  singularly  motivated  by  the  desire  to  maximize  economic returns. By contrast, as is evident in the term family business, researchers studying these firms take  it  as  axiomatic  that  executives  in  family  firms  are motivated by  both  noneconomic (“family”) and economic (“business”) considerations.

As a consequence, much work in the area of family business has been devoted to exploring the organizational antecedents and consequences of mixed managerial motives (i.e., economic and noneconomic), which has been an area of relative neglect in the mainstream literature. In this regard, family firms offer strategy and entrepreneurship scholars an opportune context in which to develop and test  their  theories  of  how  executives  manage  the  trade-offs between  multiple  and  mixed goals and also how they identify, evaluate, and marshal resources to exploit opportunities in pursuit of those goals.

The researchers conclude with the view that “future progress in the field will require important contributions from both family business “specialists” as well as “generalists” from traditional disciplines in the organizational sciences. For family business specialists, the primary challenge will be to widen their focuses to address questions that range beyond the narrow confines of the field as it is presently constituted.”

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