scholarly journals When do family firms consider issuing external equity? Understanding the contingent role of families’ need for control

2019 ◽  
Vol 9 (3) ◽  
pp. 271-296
Author(s):  
Martin Kupp ◽  
Bianca Schmitz ◽  
Johannes Habel
Keyword(s):  
Decision Making ◽  
Empirical Research ◽  
Family Firms ◽  
Family Firm ◽  
Equity Financing ◽  
Content Type ◽  
Financing Decisions ◽  
Firm Owners ◽  
Insight Into ◽  
External Equity

Purpose Prior research has argued that family firms are reluctant to consider external equity as a source of financing because they fear a loss of control, which would limit their socioemotional wealth. However, prior empirical research has neglected potential contingencies that determine whether family firms’ need for control affects their equity financing decisions. The purpose of this paper is to provide first insight into this research void. Design/methodology/approach The paper builds on rational choice theory and a logit regression using secondary data. Findings The study shows that the effect of family firm owners’ need for control on their consideration of external equity depends on the extent to which owners expect investors to interfere with management and the extent to which decision making is affected by emotions. Hereby, the present study provides evidence that family firm owners’ decisions to use external equity are more complex than previously presumed. Research limitations/implications This study has several limitations that provide fruitful avenues for further research. Overall, the authors list and detail seven different limitations in the paper, e.g. the narrow focus on equity financing, the use of a partial model, the fact that the authors did not conceptualize differences between different types of investors (such as high net worth individuals, private equity firms and venture capital firms) in the model and further more. Practical implications The study shows that investors need to understand the complex interplay among family firms’ need for control, expected investor interference and emotional decision making, to correctly assess their chances of success when approaching family firms for equity. Originality/value Prior empirical research has neglected potential contingencies that determine whether family firms’ need for control affects their equity financing decisions. The present paper provides first insight into this research void.

Innovation in family firms: an empirical taxonomy of owners using a mixed methods approach

2019 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Udeni Salmon ◽  
Kurt Allman
Keyword(s):  
Mixed Methods ◽  
Family Firms ◽  
Family Firm ◽  
Policy Advice ◽  
Social Implications ◽  
Data Set ◽  
Content Type ◽  
Mixed Methods Approach ◽  
Innovation Approach ◽  
Firm Owners

Purpose The increasingly competitive manufacturing sector has made innovation crucial for the continued survival of family-owned SMEs. However, family firm owners are highly heterogenous and their diverse characteristics influence their approach to innovation. The purpose of this paper is to provide solutions to two heterogeneity related innovation problems: first, the failure of generic innovation policy advice to address the specific types of family firm owners; and second, the difficulty for owners in understanding how their innovation approach compares to their competitors. The solution is to create a taxonomy of family firm owner-innovators which creates innovator types. This taxonomy addresses these two problems: first, the taxonomy enables policy advice to be tailored to a particular innovator types; and second, the taxonomy allows owners to understand the strengths and weaknesses of their particular approach to innovation. Design/methodology/approach The approach is to develop a taxonomy through exploratory factor analysis (n=1,284) and firm owner interviews (n=27) in a mixed methods study. Socio-emotional wealth theory interprets the findings. Findings The findings present a taxonomy of family firm innovators which contains five types: the spontaneous radical, the statist altruist, the patient opportunist, the curious traveller and the insular denier. Research limitations/implications There are two major limitations: first, a taxonomy is static and does not include the temporal dimension of innovation which can change according to the firm lifecycle stage and, by implication, the changing preferences of a maturing firm owner; and second, the mixed methods approach of using two data sets which themselves used differing definitions of “family firm” has introduced the possibility that the constructs developed from the quantitative study may not have the precision or clarity of a study that uses a single data set with a single definition. Practical implications The practitioner implications from the research stem from the diagnostic potential of the taxonomy. SME family firm owners can establish their innovation approach by using the taxonomy to decide which type of innovator they are and by adopting an innovation approach that counterbalances the weaknesses of their type. Social implications The social implications are to improve the innovation potential of the family firm community by offering practical support to their innovation activities. Originality/value The originality of the research is in its contribution to knowledge on the role of ownership type in directing the innovation approach of SME family firms. The value of the research is in offering a theoretically informed original taxonomy that is of both academic and practical value.

The hidden role of owners' spouses in family firm innovativeness: a dynamic managerial capabilities perspective

2020 ◽  
Vol 15 (5) ◽  
pp. 707-726
Author(s):  
Neringa Gerulaitiene ◽  
Asta Pundziene ◽  
Egle Vaiciukynaite
Keyword(s):  
Emotion Regulation ◽  
Conflict Resolution ◽  
Family Firms ◽  
Family Firm ◽  
Content Type ◽  
Firm Innovativeness ◽  
Dynamic Managerial Capabilities ◽  
Managerial Capabilities ◽  
Firm Owners

PurposeThe purpose of this paper is to investigate the effect of the dynamic managerial capabilities (DMC) of the spouse (either working or non-working) of a family firm owner on firm innovativeness. This paper assesses the role of three elements of the DMC of owners' spouses (emotion regulation, conflict resolution and networking capabilities) that are bridged by familiness on family firm innovativeness.Design/methodology/approachThis paper presents the results of a multiple case study. Twelve cases were selected: six innovative and six non-innovative family firms in Lithuania. The study design enabled a comparison not only of innovative and non-innovative family firms but also of non-working and working spouses of family firm owners.FindingsThe findings show that family firm owners' spouses contribute to firm innovativeness through their DMC in terms of emotion regulation, conflict resolution and networking capabilities.Research limitations/implicationsThis research focused on a sample of firms in Lithuania. Future studies should broaden the research to other countries.Originality/valueThis research provides empirical evidence of the hidden role of the DMC of family firm owners' spouses and their contribution to firm innovativeness. This paper extends the application of DMC to family business research.

Financing family firms in the Middle East: the choice between Islamic and conventional finance

2018 ◽  
Vol 24 (4) ◽  
pp. 842-865 ◽  
Author(s):  
Rima Bizri ◽  
Rayan Jardali ◽  
Marwa F. Bizri
Keyword(s):  
Middle East ◽  
Significant Influence ◽  
Family Firms ◽  
Economic Factor ◽  
Family Firm ◽  
Motivational Factors ◽  
Structured Interviews ◽  
Content Type ◽  
Financing Decisions ◽  
Personal Attitude

Purpose The purpose of this paper is to investigate the role of non-economic factors on the financing decisions of family firms in the Middle East. To contextualize the study, the authors steer away from the traditional capital structure debate toward the choice of financing paradigm: conventional vs Islamic. Design/methodology/approach This study uses Ajzen’s theory of planned behavior due to its ability to delineate the influence of non-economic motivational factors on the financing decisions of family firms. This study also examines the influence of “familial stewardship (FS),” another non-economic factor which is highly relevant in a collectivistic context. The authors initially use SEM with Amos to analyze 115 surveys of family firm owner-managers. For deeper probing, the authors undertook an additional post hoc qualitative analysis of six case studies using semi-structured interviews. Findings The findings of this study suggest that owner-managers’ attitude toward Islamic finance plays a primary motivational role in influencing their intentions to use it. More importantly, the findings depict a significant influence of “FS” and subjective norm on the attitudes of owner-managers. This implies that financing decisions which involve religious beliefs are directly influenced by the decision maker’s personal attitude, which, in turn, is significantly influenced by familial and social pressures. Originality/value This study fills a gap in the family-firm financing literature by suggesting that when choosing religion-related financial products, attitude plays a far more significant role than other motivational factors. This study also contributes to the “familiness” area of research by empirically demonstrating that FS has a significant influence on owner-managers’ attitude toward financing choices.

An image theory of strategic decision-making in family businesses

2019 ◽  
Vol 9 (4) ◽  
pp. 451-467
Author(s):  
Christopher Penney ◽  
James Vardaman ◽  
Laura Marler ◽  
Victoria Antin-Yates
Keyword(s):  
Decision Making ◽  
Family Firms ◽  
Family Firm ◽  
Family Businesses ◽  
Strategic Decision ◽  
Image Theory ◽  
Strategic Decision Making ◽  
Screening Criteria ◽  
Business Decision ◽  
Content Type

Purpose Research suggests family businesses often pursue risky or aggressive strategies despite the desire to preserve socioemotional wealth (SEW), which is thought to lead to conservativism in family firm strategic decision making. The purpose of this paper is to resolve this apparent contradiction by presenting a model that describes the screening criteria used by family business decision-makers when evaluating strategic opportunities. Design/methodology/approach The conceptual model relies on insights derived from image theory to resolve apparent contradictions inherent in the SEW perspective’s implications for family firms’ risky strategic decisions. Findings The proposed model suggests new strategic opportunities in family firms are evaluated through an unconscious, schema-driven decision process and that the preservation of SEW does not preclude risky strategic directions, but instead serves as an unconscious screening criteria for strategic opportunities. Originality/value This paper contributes to the literature by expanding the understanding of family-firm strategic decision-making to include considerations of the decision’s fit with the family’s principles, goals and strategic plan rather than solely to overall risk to SEW. Thus, the paper presents a detailed model of family-firm strategic decision-making that relies on insights from image theory.

scholarly journals The role of dyadic interactions between CEOs, chairs and owners in family firm governance

2021 ◽  
Author(s):  
Hanna Maria Sievinen ◽  
Tuuli Ikäheimonen ◽  
Timo Pihkala
Keyword(s):  
Decision Making ◽  
Cognitive Conflict ◽  
Family Firm ◽  
Dyadic Interaction ◽  
Dyadic Interactions ◽  
Board Processes ◽  
Governance Process ◽  
Back Stage ◽  
Firm Owners

AbstractThe objective of this case-based study is to understand how the dyadic interaction between the key governance actors can influence the decision-making aimed at directing and controlling a family firm. The study provides evidence that dyadic interaction at the back stage of the formal governance process can offer a privileged position for the family firm owners who serve on the board, and the non-family member Chair of the Board, to influence decision-making before, after and between board meetings. The cases studied suggest that dyadic interactions can serve as preparation for formal board processes and complement and clarify them, yet they also have the potential to conflict with them. Dyadic interaction is also shown to offer important relational and emotional benefits that may not necessarily be achieved through larger group interaction. The findings suggest that although the actors can self-regulate their behaviour through informal rules, the rules may imperfectly address one risk of dyadic interaction—the reduced cognitive conflict among the board.

“We are a family firm”

2018 ◽  
Vol 8 (1) ◽  
pp. 2-21 ◽  
Author(s):  
Claudia Binz Astrachan ◽  
Isabel C. Botero
Keyword(s):  
Family Business ◽  
Family Firms ◽  
Family Firm ◽  
Business Owners ◽  
Public Companies ◽  
Content Type ◽  
Brand Building ◽  
Depth Interview ◽  
The Family ◽  
Family Associations

Purpose Evidence suggests that some stakeholders perceive family firms as more trustworthy, responsible, and customer-oriented than public companies. To capitalize on these positive perceptions, owning families can use references about their family nature in their organizational branding and marketing efforts. However, not all family firms actively communicate their family business brand. With this in mind, the purpose of this paper is to investigate why family firms decide to promote their “family business brand” in their communication efforts toward different stakeholders. Design/methodology/approach Data for this study were collected using an in-depth interview approach from 11 Swiss and German family business owners. Interviews were transcribed and coded to identify different themes that help explain the different motives and constraints that drive their decisions to promote the “family business brand.” Findings The analyses indicate that promoting family associations in branding efforts is driven by both identity-related (i.e. pride, identification) and outcome-related (e.g. reputational advantages) motives. However, there are several constraints that may negatively affect the promotion of the family business brand in corporate communication efforts. Originality/value This paper is one of the first to explore why family businesses decide to communicate their “family business brand.” Building on the findings, the authors present a conceptual framework identifying the antecedents and possible consequences of promoting a family firm brand. This framework can help researchers and practitioners better understand how the family business nature of the brand can influence decisions about the company’s branding and marketing practices.

Birth mode of family firms, family entering time and R&D investment: evidence from China

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Muhammad Zulfiqar ◽  
Shihua Chen ◽  
Muhammad Usman Yousaf
Keyword(s):  
Agency Theory ◽  
Family Firms ◽  
Family Firm ◽  
Research Database ◽  
Content Type ◽  
Firm Birth ◽  
The Relationship ◽  
D Investment ◽  
Moderating Role

PurposeOn the basis of behavioural agency theory and resource-based view, this study investigates the influence of family firm birth mode (i.e. indirect-established or direct-established), family entering time on R&D investment and the moderating role of the family entering time on the relationship between birth mode and R&D investment.Design/methodology/approachThe authors collected 2,990 firm-year observations from family firms listed on A-share in China from 2008 to 2016 in the China Stock Market and Accounting Research database. They used pooled regression for data analysis and Tobit regression for robustness checks.FindingsIndirect-established family firms show more inclined behaviour towards R&D investment than direct-established counterparts. Family entering time positively affects the R&D investment of family firms. Moreover, family entering time plays a significant moderating role in the relationship between family firm birth mode (i.e. indirect-established or direct-established) and R&D investment.Originality/valueTo the best of the authors’ knowledge, this work is a pioneering study that introduced the concept of family firm birth mode (i.e. indirect-established or direct-established) and family entering time. This work is novel because it differentiated family firms according to their birth modes, an approach which is a contribution to the existing literature of family firms. Moreover, the investigation of the moderating role of family entering time has also produced notable results that help understand the impact of family entering time on different types of family firms. The interpretation of outcomes according to behavioural agency theory also produced useful insights for future researchers as well as for policymakers.

Family firm CEOs: human capital and career success

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Maria Rita Blanco ◽  
Miguel Angel Sastre-Castillo ◽  
Maria Angeles Montoro-Sanchez
Keyword(s):  
Human Capital ◽  
Latin American ◽  
Quantitative Methods ◽  
Family Firms ◽  
Family Firm ◽  
American Family ◽  
Graduate Degree ◽  
Capital Theory ◽  
Content Type ◽  
The Way

PurposeThis article explores the influence of education and experience on the time to the top in family and non-family CEOs who work for Latin American family firms.Design/methodology/approachIn order to achieve these objectives, this study draws upon human capital theory as well as career and family firm literature. The careers of 129 CEOs of family firms who form part of the América Economía ranking were analyzed and quantitative methods were used.FindingsIn Latin American family firms, family CEOs reach the top faster than their non-family counterparts. In addition, the influence of human capital variables on the way to the top differs between the two groups. For family CEOs, obtaining a graduate degree delays the way to the top, while for non-family ones, it reduces the time to the top. As regards experience, for promoted family CEOs, the greater the percentage of the career spent in the organization they lead, the shorter the time to the top. No support was found for either the influence of having worked for just one firm or having had elite graduate education abroad, in multilatina CEOs.Practical implicationsIndividual career management suggestions for future CEOs as well as specific guidelines for talent managers are proposedOriginality/valueThis is the first study to explore the influence of human capital indicators on the time to the top in Latin American family firm CEOs.

scholarly journals Individual goals and social preferences in operational decisions

2019 ◽  
Vol 39 (1) ◽  
pp. 116-137 ◽  
Author(s):  
Nienke Hofstra ◽  
Wout Dullaert ◽  
Sander De Leeuw ◽  
Eirini Spiliotopoulou
Keyword(s):  
Decision Making ◽  
Social Preferences ◽  
Operational Planning ◽  
Future Research ◽  
Monetary Incentives ◽  
Content Type ◽  
Planning Decisions ◽  
Multiple Data ◽  
Human Decision ◽  
Insight Into

Purpose The purpose of this paper is to develop propositions explaining the influence of individual goals and social preferences on human decision making in transport planning. The aim is to understand which individual goals and social preferences planners pursue and how these influence planners’ decisions. Design/methodology/approach Propositions are developed based on investigation of decision making of transport planners in a Dutch logistics service provider using multiple data collection methods. Findings The study shows how decision making of transport planners is motivated by individual goals as well as social preferences for reciprocity and group identity. Research limitations/implications Further research including transaction data analysis is needed to triangulate findings and to strengthen conclusions. Propositions are developed to be tested in future research. Practical implications Results suggest that efforts to guide planners in their decision making should go beyond traditional (monetary) incentives and consider their individual goals and social preferences. Moreover, this study provides insight into why transport planners deviate from desired behaviour. Originality/value While individual decision making plays an essential role in operational planning, the factors influencing how individuals make operational planning decisions are not fully understood.

Does family involvement matter post IPO? Adding value through advertising in family firms

2018 ◽  
Vol 8 (3) ◽  
pp. 218-234 ◽  
Author(s):  
Atanas Nik Nikolov ◽  
Yuan Wen
Keyword(s):  
Firm Performance ◽  
Family Involvement ◽  
Family Business ◽  
Family Firms ◽  
Family Firm ◽  
Family Businesses ◽  
Publicly Traded ◽  
Content Type ◽  
The Public ◽  
The Family

PurposeThis paper brings together research on advertising, family business, and the resource-based view (RBV) of the firm to examine performance differences between publicly traded US family vs non-family firms. The purpose of this paper is to understand the heterogeneity of family vs non-family firm advertising after such firms become publicly traded.Design/methodology/approachThe authors draw on the RBV of the firm, as well as on extensive empirical literature in family business and advertising research to empirically examine the differences between family and non-family firms in terms of performance.FindingsUsing panel data from over 2,000 companies across ten years, this research demonstrates that family businesses have higher advertising intensity than competitors, and achieve higher performance returns on their advertising investments, relative to non-family competitors. The results suggest that the “familiness” of public family firms is an intangible resource that, when combined with their advertising investments, affords family businesses a relative advantage compared to non-family businesses.Research limitations/implicationsFamily involvement in publicly traded firms may contribute toward a richer resource endowment and result in creating synergistic effects between firm “familiness” and the public status of the firm. The paper contributes toward the RBV of the firm and the advertising literature. Limitations include the lack of qualitative data to ground the findings and potential moderating effects.Practical implicationsUnderstanding how family firms’ advertising spending influences their consequent performance provides new information to family firms’ owners and management, as well as investors. The authors suggest that the “familiness” of public family firms may provide a significant advantage over their non-family-owned competitors.Social implicationsThe implications for society include that the family firm as an organizational form does not need to be relegated to a second-class citizen status in the business world: indeed, combining family firms’ characteristics within a publicly traded platform may provide firm performance benefits which benefit the founding family and other stakeholders.Originality/valueThis study contributes by highlighting the important influence of family involvement on advertising investment in the public family firm, a topic which has received limited attention. Second, it also integrates public ownership in family firms with the family involvement–advertising–firm performance relationship. As such, it uncovers a new pathway through which the family effect is leveraged to increase firm performance. Third, this study also contributes to the advertising and resource building literatures by identifying advertising as an additional resource which magnifies the impact of the bundle of resources available to the public family firm. Fourth, the use of an extensive panel data set allows for a more complex empirical investigation of the inherently dynamic relationships in the data and thus provides a contribution to the empirical stream of research in family business.

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