Chapter 11 - 11 Sharma Et Al

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DOI: 10.1111/j.1741-6248.1997.00001.x 1997; 10; 1 Family Business Review

Pramodita Sharma, James J. Chrisman and Jess H. Chua Future Challenges

Strategic Management of the Family Business: Past Research and

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Strategic Management of the FamilyBusiness: Past Research and FutureChallenges

Pramodita Sharma, James J. Chrisman, Jess H. Chua

This article reviews the literature on family business from a strategic man-agement perspective. In general, this literature is dominated by descriptivearticles that typically focus on family relationships. However, the literaturedoes not usually address how these relationships affect the performance of afamily business. Taking a strategic management perspective, we outline anew set of objectives for family-business research. We also identify some of thekey issues and gaps that should be explored in future studies if research is tocontribute to improving the management practices and performance of fam-ily firms.

Introduction

Currently, family-business research is largely descriptive rather than pre-scriptive. Most of the literature that has taken a prescriptive approach hasdone so from the perspective of how to improve family relationships ratherthan business performance. While a better understanding of the family inthe family-business dyad is valid and useful, there are other goals that de-serve to be pursued as well.

There have been a number of recent review articles on family business byscholars such as Friedman (1991), Handler (1989), Marshack (1993), andWortman (1994). These reviews, while aware of the literatures orientationtoward family rather than business issues, have largely taken the literature asis. In this article we review the family-business literature from a strategic man-agement perspective with the purpose of examining the extent to which thisliterature deals with issues that might lead to improvements in the manage-ment practices and performance of family firms. Recent work has indicated aneed for such a perspective (Harris, Martinez, and Ward, 1994; Wortman,1994).

In this article we attempt to identify, as comprehensively as space allows,the important issues and directions in which future research can prove espe-cially useful in strategic management. Since most of the research has not been

1FAMILY BUSINESS REVIEW, vol. 10, no.1, Spring 1997 Family Firm Institute, Inc.

A R T I C L E S


2conducted from the strategic management viewpoint, many studies fit onlyloosely into our framework. Unfortunately, with this extent of coverage, it isnot possible to explore each topic in detail and do justice to all the researchersand theorists who have made contributions. For example, we exclude topicssuch as taxation, health, and family foundations. We include, however, somearticles that deal with the relation between family and work, recognizing thatthese relations can have an important influence on the strategic managementprocess in family firms. Thus, what follows is a discussion of the family-busi-ness literatures progress in strategic management issues rather than a reviewthat analyses the contents and methodologies of relevant articles.

The next section provides a definition of family business and discusses aframework steeped in the paradigm of strategic management by which, webelieve, progress in the field of family business toward improving family-firmperformance can be judged. We then use this framework to discuss the family-business literature and present an agenda for future research. We provide ourconclusions in the final section.

The Strategic Management Process

Before describing the strategic management process and evaluating the litera-ture on family business from this perspective, it is important to define what wemean by a family business. Following Chua, Sharma, and Chrisman (1996),we define family business as a business governed and/or managed on a sustain-able, potentially cross-generational, basis to shape and perhaps pursue the for-mal or implicit vision of the business held by members of the same family or asmall number of families. This definition is important from a strategic man-agement perspective because it implies that there are goals being pursued, astrategy designed to fulfill those goals, and mechanisms in place to implementthe strategy and control the firms progress toward the achievement of its goals.This is what strategic management is all about.

It is important to point out that this definition is based on behavior in-stead of a list of components. It encompasses the nuclear-family-controlledfirm and even the publicly held firm that is shaped and managed by two ormore generations of a family that might not hold controlling interest in thefirm. Therefore, a large number of shareholders, which is the legal criterionfor classifying companies as publicly held, does not automatically disqualify afirm as a family firm. Consequently, we only discuss family versus non-familyfirms instead of family, closely held, or privately held versus publicly held firms.While this definition explicitly allows for multiple-family ownership, for ex-pository convenience throughout the rest of this article we refer to the con-trolling family in the singular.

The basic strategic management processes for both family and non-fam-ily firms is similar in the sense that a strategy, whether implicit or explicit,must be formulated, implemented, and controlled in the context of a set of

Sharma, Chrisman, Chua


3goals. In this sense, even performance is similar, since it should be measuredwith respect to achieving a set of goals. The differences are in the set of goals,the manner in which the process is carried out, and the participants in theprocess. For example, in family firms, the owner-family is likely to influenceevery step of the process (Harris, Martinez, and Ward, 1994), whereas in non-family firms, family influences are at best (or worst) indirect.

These similarities and differences hold substantial opportunities for fam-ily-business studies. The similarities provide the field with a general workingmodel of the factors that should affect a family firms performance. The differ-ences, or possibility of differences, suggest that each aspect of the strategicmanagement process in family firms needs to be carefully explored and com-pared to the processes used in other family firms and in non-family firms.Such comparisons promise to improve the management practices in both typesof firms, since the cross-fertilization of ideas cannot proceed effectively with-out an understanding of what those differences are, why they have occurred,and their results.

Strategic Management of the Family Business

Environmental opportunities & threatsOrganizational resources & skills

Managerial valuesSocial reponsibilities

Family interests

GoalFormulation

Financial returnsMarket Share

RiskGrowth

Social goalsFamily goals

StrategyFormulation

Strategic planningprocess

Strategy contentSocial issuesSuccession

StrategyImplementation

Corporate governanceOrganizational structure,

evolution, and changeFamily business culture

Inclusion of family membersIntergenerational issues

Sibling relationships

OrganizationalPerformance

With Respect To:

Financial, market, growth,and social goalsFamily goals

Strategy Evaluation and Control

Family cultureFamily members involved

Non-family managers involved

*Family influences appear in boldface italic

Figure 1. The Strategic Management Process*


4The strategic management framework with which we review the litera-ture is based on a simplified model of the strategic management process(Andrews, 1971; Hofer and Schendel, 1978; Schendel and Hofer, 1979). Fig-ure 1 provides a schematic diagram of this model. As the figure shows, theprocess is dynamic and interactive. Goals must be selected, strategies formu-lated to achieve those goals, and the chosen strategy implemented. Further-more, at all stages it is necessary to select and evaluate alternatives, make deci-sions, and ensure that effective control processes are in place in order to makeadjustments where needed. How well an organization accomplishes these tasksin light of the opportunities and threats in its environment, the resources itpossesses or can procure, and the values and noneconomic responsibilities heldby its managers, determine its performance.

Within this framework, the family business may differ from non-familybusinesses because the controlling familys influence, interests, and values haveoverriding importance. How this concentration of control, influence, and val-ues affects the strategic decisions and performance of family firms should be ofgreat interest to family firms, but has not yet been adequately explored. Usingthis model to set the agenda, we see that for future research to improve family-business management, it must help managers do one or more of the following:more accurately define problems and opportunities concerning the environ-ment or organizational capability; refine goals and objectives; generate betterstrategic decisions; improve the implementation of strategies, policies, proce-dures, and tasks; or facilitate the evaluation and control process.

This does not mean that we necessarily subscribe to what Hollander andElman (1988) characterize as the rationalist approach to family-businessmanagement. Proponents of this approach (Cohn and Lindberg, 1974;Levinson, 1971) advocate the excision of family considerations from the busi-ness system. They argue that the two subsystems of family and business are sodifferent that they cannot possibly co-exist except in the most unusual situa-tions. In contrast, as shown in the bolded and italicized text in Figure 1, ourapproach accommodates family influences in various forms and in all parts ofthe process. Family interests and values are incorporated into the goals andobjectives set for the firm. Family relationships influence the strategies con-sidered. Succession within the family can be one of the most important strat-egies determining the longevity of the firm. Decision criteria are affected byfamily considerations built into the firms goals and the choice of alternativesto consider. Family involvement in implementation creates its own dynamics,politics, and possibilities. Finally, family relationships and how the family per-ceives the role of non-family managers can make it easier or harder to con-structively evaluate or control decisions and actions.

The key is to understand these influences and how to harness the poten-tial strengths they convey, and to deal with the weaknesses with which theyencumber the firm. In this sense, our view is closer to systems theorists suchas Barnes and Hershon (1976), Hollander and Elman (1988), and McCollom



5(1988), who recognize the importance of both subsystems and seek ways toeffectively integrate them. What we most want to accomplish with this ap-proach is to connect studies of family businesses with the achievement of theirgoals and objectives, whether those goals be family-oriented or business-ori-ented.

As implied above, to gain a better understanding of how to improve theperformance of a family business, two kinds of research are key. First, it isnecessary to find out how a family business differs from a non-family businesswith respect to the strategic management process. Isolating these differencesmakes it possible to determine the reasons for them. Where differences affectperformance positively, research should be targeted toward strengthening orexploiting them fully. Where they have a negative impact, research should bedirected toward minimizing or eliminating their negative influences. As anadded benefit, comparative research of this type allows researchers, consult-ants, and practitioners to appreciate the extent to which knowledge concern-ing business in general applies to family businesses in particular, and the rea-sons why it will or will not apply.

Second, studies that compare and contrast more and less successful familybusinesses are also essential. Comparative studies of this type will contributefurther to our understanding of the familys influences on the strategic man-agement process, how differences in those influences affect performance, andthe coping mechanisms used by high- and low-performing firms.

We also recognize that not all family businesses, or non-family businesses,are alike, nor should they be. Thus, we realize the need to acknowledge thelegitimate contingencies that cause one family firm to act differently from an-other. However, what we propose is nothing more than good science, becausethe classification and investigation of homogeneous populations of family firmsis essential for progress in the field (cf. Chrisman, Hofer, and Boulton, 1988;McKelvey, 1982).

In all, we reviewed 204 family business related articles appearing in 32journals from 1980 to 1994. Only about 37% (77 out of 204) of these articlesare based on empirical research. They are catalogued in Appendix 1. Familyfirms penchant for privacy and the early stage of the fields development couldexplain the relative paucity of empirical studies (Davis, 1983; Ward, 1987).The small number of empirical studies clearly emphasizes the need for moreresearch.

Goals and Objectives

Due to family involvement, the goals and objectives of a family business arelikely to be quite different from the firm-value maximization goal assumed forpublicly held and professionally managed non-family firms. However, veryfew attempts have been made to identify these differences. Some authors be-lieve that the family firms goals could be family or business centered (Singer

Myths and Realities: Family Businesses Contribution to the US EconomyStrategic Management of the Family Business


6and Donoho, 1992). Other researchers see the goals as changing through theinteraction of the needs of the family and the firm (Danco, 1975; Davis andTagiuri, 1989; McGivern, 1989).

For example, Ward (1987) proposes a three-stage development model ofthe family business. In the first stage, the needs of the business and the familyare consistent; the owner-manager makes all decisions. Although families arenot necessarily monolithic units, at this stage of a family businesss develop-ment, research on the motivations and characteristics of the founder can beparticularly useful in providing some indication of the goals of family enter-prises (Hollander and Elman, 1988). The current stream of research in thisarea (e.g., Dyer, 1986; Malone and Jenster, 1992) runs parallel to studies of theentrepreneurs characteristics, except that the entrepreneurship literature con-centrates on the early life of the firm and the family-business literature dealswith a firm in its later stages, especially when succession is imminent. Thus, acareful examination of entrepreneurial research may yield additional insights.

In the second stage, the owner-manager remains in control, but the growthand development of the familys children are of primary importance to the family.As a consequence, the goals of the family firm are likely to change, reflecting thegreater importance of finding a place and securing a future for sons and daughters.

In the last stage, business and family needs can come into conflict. Thebusiness can become stagnant, in need of regeneration; the owner-managercan become bored or retire; and maintenance of family harmony can becomethe primary family goal. Again, business goals can change as a result of familyneeds or a desire to achieve a turnaround in the firms economic performance.

The point of all this is that it is necessary to understand what the businesssgoals are, who sets them, and why the business selects particular goals. Re-searchers should also be cognizant of the differences in goals of family firms inthese stages and avoid lumping such firms together for study. Otherwise, find-ings about behaviors, based on averages, represent none of the firms.

An indication of how a family firms goals can differ and affect decision-making can be gleaned from certain ethnic studies. In studies of immigrantChinese and African-American family businesses, researchers (Dean, 1992;Wong, McReynolds, and Wong, 1992) found that succession is not a priority,because families view their firms as the means to prepare children for a profes-sional career, not as a family legacy. Even though some family firms might notseek continuation of the business through succeeding generations, around aquarter of the articles we surveyed discuss succession.

It is unclear to us whether succession is a goal or a means to a goal. Anempirical study on the goals of family business by Tagiuri and Davis (1992)found the following to be the six most important goals: to have a companywhere employees can be happy, productive and proud; to provide financialsecurity and benefits for the owner; to develop new quality products; to serveas a vehicle for personal growth, social advancement, and autonomy; to pro-mote good corporate citizenship; and to provide job security. It is interesting



7that none of these goals, and only one of the 74 goals included in that study,are directly concerned with the next generation. Extrapolating from this study,succession could be, in some circumstances, a strategy for achieving one ormore goals rather than a goal itself. However, we must make such extrapola-tions with caution. Since 86% of Tagiuri and Daviss sample consisted of CEOsand 60% consisted of founders, a different sample composed of potential suc-cessors, spouses, other family members, or non-family managers could yieldquite different results. Nevertheless, their findings underscore the importanceof identifying and considering the goals of family firms before attempting tomake prescriptive statements about how they should be managed.

It is clear from this discussion that a family business is more likely to havemultiple, complex, and changing goals rather than a singular, simple, and con-stant goal. The paucity of research in this area indicates that the potentialcontribution of studies on goals and objectives could be substantial. Researchthat compares the goals and the manner in which they are formulated in fam-ily and non-family businesses or between those of family firms that are high-or low-performing, large or small, young or old, run by the founder or by alater generation, in service or manufacturing industries, and so on, is clearlyneeded. It would also be useful to know how the goals that are chosen affectdecision making and economic performance. Furthermore, we do not yet knowwhether family firms perform better in the traditional goals and objectives ofnon-family firms, or in the unique goals and objectives of family businesses.Nor do we know the extent to which family and business goals are compatible,when they are or are not, and why. There are also many questions on theinfluence of various family and non-family members, family relationships, andfamily objectives that deserve consideration. Finally, there may be a need todistinguish between the goals that the family harbors for itself and those thatthey hold for the family business, since the latter will likely incorporate con-siderations for customers, suppliers, and non-family employees.

Strategy Formulation and Content

Although more attention has been paid to the process of strategy formulationand the content of strategy in family businesses, we still know relatively little.Here too, the interaction of family and business makes strategy formulation adynamic process, not amenable to simple or across-the-board solutions. Forexample, Post (1993) suggests that for family firms to remain successful, theymust generate a new strategy for every generation that joins the business. Thisprovides autonomy for the newly joining family members, thereby aiding themaintenance of good work relationships. Strategies recommended include start-ing a new venture or division of the business (Barach, 1984), internationaliz-ing (Gallo and Sveen, 1991), and helping successors acquire skills that otherfamily members do not possess (Wong, 1993). On the other hand, research onnon-family businesses suggests that corporate entrepreneurship (Biggadike,



81979), first diversification (Hofer and Chrisman, 1989), and strategic changein general (Hannan and Freeman, 1989) can be risky. Family-business research-ers have not yet come to grips with the problem of how a family should deal,simultaneously, with the possibly conflicting strategic needs of the family andthe business. From a strategic management perspective, families are both aresource and a constraint. The literature is silent on the appropriate businessstrategies for different family configurations and dynamics, as well as for dif-ferent business situations.

Strategic planning process. Family-business researchers who have focusedon the strategic planning process espouse the benefits of strategic planning(Barry, 1975; Jones, 1982; Ward, 1988) and offer opinions on how it should bedone. However, since the benefits of planning are by no means proven, re-search in this area would be valuable. There is much we do not know. Weknow little about how family firms scan their environments, assess their capa-bilities, or search for and evaluate alternative strategies; how the strategy for-mulation process is influenced by family considerations and interests; whetherthe alternatives considered are many or few, or better or worse than thosegenerated by non-family firms; how the dynamics and politics of decisionmaking are different in the family business; and which types of family influ-ences are advantageous and which deleterious to the process.

Strategy content. There have been several comparative studies of the strat-egies and policies adopted by family and non-family firms (Covin, 1994;Doeringer, Moss, and Terkla, 1992). Trostel and Nichols (1982) discover nodifferences in the management processes or styles of publicly held and privatecompanies, but the latter do have a higher rate of sales growth, place greateremphasis on asset utilization, charge lower prices, and employ accounting poli-cies that help reduce taxable income. Unfortunately, since ownership is notnecessarily the single feature distinguishing the family firm from the non-familyfirm, it is difficult to gauge the implication of these results for family-businessresearch. For example, Kleinsorge (1994) found that family nursing homesprovide a higher level of care but are less cost-efficient, have fewer assets,more liabilities, and lower occupancy rates than non-family nursing homes.Other studies find that family firms emphasize personal values over corporatevalues in customer service policies (Lyman, 1991), place more emphasis ongrowth potential than on short-term sales growth, and pay higher wages toemployees (Donckels and Frohlick, 1991; Trostel and Nichols, 1982). On theother hand, other studies find little difference in the location preferences offamily and non-family firms (Kahn and Henderson, 1992). These results areinteresting, but we do not know what they mean in terms of achieving thegoals of family and non-family firms.

The literature is by no means consistent on what strategies will be mosteffective for family businesses. For example, Gallo and Sveen (1991) and Swinthand Vinton (1993) arrive at opposite conclusions on the possible success offamily businesses in global markets. Gallo and Sveen believe that family busi-



9nesses are less globally oriented because of their slowness in making structuralchanges and their strong local orientation. Swinth and Vinton, on the otherhand, believe that family firms share some important values across culturesand that these values should enable family firms to bridge cultural barriersmore effectively than non-family companies. While both of these argumentshave intuitive appeal, neither has been tested empirically.

In terms of strategic management, there is much that the results above donot tell us. We do not know if family firms follow different corporate, business,or functional level strategies from non-family firms in the same industry. Nei-ther do we know whether these differences are justified by differences in re-sources, skills, or cultures; whether family firms are more or less likely to adoptinnovative strategies; or whether differences in strategies between family andnon-family firms lead to differences in profitability, growth, and survival.

Strategies and social issues. On the basis of a case study, Post (1993) ar-gues that family businesses are more likely to get involved in environmentallyfriendly strategies because of their local orientation. Unfortunately, there isnot enough empirical evidence to generalize this conclusion.

With social issues, we need to know if the ethics and values of family-business managers are similar or dissimilar to those in non-family businesses;what social policies are followed; how socially responsive family firms are; andwhether it is easier or harder to implement socially responsible policies inthese firms. How social responsibility, social responsiveness, and economicperformance relate in family firms is another area worth investigating.

Succession. As we argued earlier, for some families, succession appears tobe a strategy for achieving one or more goals rather than a goal itself. Handlerand Kram (1988), Welsch (1993), and Handler (1994) have reviewed the lit-erature on family business succession, so we limit our discussion to successiontopics that have received the most attention in the literature.

The major portion of the family-business literature on succession has fo-cused on the succession process. Subtopics include succession planning, suc-cession timing, interest of the next generation, and who should choose thesuccessor. The successors characteristics have been studied mainly from thepoint of view of what they are rather than what they should be.

Managing the transition from one generation to another is a difficult pro-cess (Handler and Kram, 1988). Writers such as Ayers (1990) and Lane (1989)consider it the most important issue in family-business management, althoughthis issue could occur only once in a few decades. In spite of this, successionplanning seldom occurs in family businesses (Lansberg, 1988; Rosenblatt,deMik, Anderson, and Johnson, 1985). The reasons for this could include thereluctance of founders to let go, hesitancy to make possibly divisive decisions,or a perceived or real absence of a relationship between succession planningand goal achievement (e.g., Firnstahl, 1986; Levinson, 1971; Perrigo, 1975).Since business continuity is largely under the control of the current owner-manager (Lansberg, 1988; Malone, 1989), a large portion of the literature has



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focused on ways that individual can effectively plan and manage the process.Issues in succession planning that need to be addressed by all owner-man-

agers include ownership continuity or change, management continuity orchange, power and asset distribution, and the firms role in society (Beckhardand Dyer, 1983). These basic decisions help determine the degree and patternof involvement for both family and non-family members (Barry, 1975; Weiser,Brody, and Quarrey; 1988). However, it is uncertain at this point what factorscan contribute to the effectiveness of these options, let alone their relativeimportance or how they might work in combination.

Another vital issue in the succession process is the timing of succession.Davis and Tagiuri (1989) find that the life-stage combination of the father andson can either facilitate succession or aggravate the tensions that accompanyit. This suggests that succession planning can help make succession smoother.It is conceivable, however, that a smooth succession, especially if it yields acompromise candidate, can have both positive and negative effects on the eco-nomic performance of a family business, but this is by no means established. Itis also unclear whether results such as these can be generalized to situationsinvolving female owners or successors (Dumas, 1989). Both Post and Robins(1993) and Lansberg (1988) believe that succession timing can be affected bythe founders inner circle if the people in that circle perceive leadership con-tinuity to be in their best interest. How to mobilize this inner circle for thegood of the firm is a question still waiting for an answer.

A third issue related to succession is concerned with making sure that thenext generation is both interested in joining the family business and capable ofmanaging it. Some research has been done, opinions are varied, yet there ismuch we do not know. For example, Ambrose (1983) suggests that early inclu-sion of potential heirs in the business helps develop their interest and increasestheir likelihood of joining. But when is the time appropriate for the businessor the heirs career development? How will this affect the potential heirs rela-tionships with non-family managers? Ambrose also argues that the time de-mands of business leaves founders with less time to build relationships in thefamily and get the next generation interested in the business. It is unclear,though, how this will affect the performance of the family business. To take astrategic management perspective, researchers need to remove themselvessomewhat from family considerations, unless, of course, they affect the perfor-mance of the business. Thus, when Beach (1993) observes that children aresocialized into home-based businesses at a very young age, we must ask howthis affects the childrens attitudes or aptitudes and, ultimately, the businesssperformance.

The fourth issue addresses who should choose the successor. The recom-mendations vary from the founder, who knows the business best, to the family,the board of directors, outsiders on the board, and outside consultants.

Certain characteristics of a successor are believed to affect the smoothnessand efficacy of a succession. These include sensitivity to the founders needs



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(Lansberg, 1988), patience and diplomacy (Jonovic, 1989), understanding theorganizations intricacies and culture (Horton, 1982), and congruence betweenthe successors power in the family and the business (Holland and Boulton,1984). A strategic management perspective should lead us to wonder whenand under what conditions these traits and behaviors of a successor translateinto making more effective decisions and achieving family business goals.

The succession literature has paid more attention to the succession pro-cess than the successor. We might conclude from this that some researchersbelieve the process is more important than the outcome, or that a good pro-cess always leads to a good outcome. No one appears to have investigated howmuch of the subsequent performance of a family business is determined by thesuccession process and how much by the successor. In family-business research,this issue seems to be too important to be left as an assumption.

Within the strategic management framework, the prime objective of man-aging the succession process is to choose the best successor. This requires adefinition of the best successor. It appears to us that best will depend on thegoals of the family firm. If the family firm is most concerned with family har-mony, then the successor who will contribute the most toward that goal is thebest. On the other hand, if the family firms goal is growth and profitability,another candidate might be preferable. Since the current literature on family-firm succession does not explicitly tie prescribed actions and processes to theachievement of clearly stated goals, the prescriptions might not be well-founded.

Strategy Implementation

For successful strategy implementation, family businesses need to effectivelyhandle two key sets of relationships that generally do not affect non-familybusinesses: those among family members and those between family membersand professional managers (Horton, 1986). The emphasis here has been onthe nature of these relationships and how to handle them. There needs to besome emphasis on connecting these observations with the performance of thefamily business.

Corporate governance. In a family business, the family and the businessare so entangled that emotions are unavoidable (Alderfer, 1988). Consequently,family firms are often advised to appoint outside board members. For familyfirms that are not large enough to attract outside board members, family coun-cils (Lansberg, 1988; Ward, 1987), review councils (Jonovic, 1989), or advi-sory councils (Tillman, 1988) are recommended.

Proponents argue that outside board members bring fresh perspectivesand new directions (Jain, 1980); monitor the progress of the family businessand act as arbitrators (Lane, 1989; Mace, 1971); help in the succession processby providing support for the newly elected leader (Harris, 1989); analyse per-ceived strengths and weaknesses more objectively (Mathile, 1988); help re-duce the loneliness of the owner-manager (Gumpert and Boyd, 1984; Mathile,



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1988); and act as catalysts for change (Mueller, 1988), sounding boards for theowner-manager (Heidrich, 1988), and low-cost consultants (Heidrich, 1988).

In contrast, Ford (1988) and Jonovic (1989) perceive outside directors ashaving less value. They cite reasons such as lack of knowledge about the firmand its environment, lack of availability, and a lack of authority and definableshareholder interest. Some argue that outside directors are obligated to theowner-manager and are therefore not free of political pressure (Alderfer, 1988).Furthermore, professional management teams, effective financial planning andcontrol systems, and strategic planning efforts can significantly diminish theneed for outsiders on the board (Jonovic, 1989).

Clearly, the issue of outside board members is much more complex thanwhat the general statements convey. Studies (Jonovic, 1989; Harris, 1989; Wardand Handy, 1988) find that the type of board formed (outside, inside, or token)depends on the age, size, type, and complexity of the business; the nature ofownership; and the personality and experience of the CEO. In turn, the type ofboard formed will determine its role and functions. It seems likely that this con-tingency perspective also applies to the relation between governance and per-formance, although in the absence of empirical studies it remains speculative.

Family business culture. Dyer (1988) identified four types of family-firmcultures that provide a framework for analyzing relationships between familymembers and non-members. Dyers classification of paternalistic, laissez-faire,participative, and professional cultures is based on different assumptions abouthuman nature, relationships, and the environment. What is still needed, how-ever, is research that identifies the cultures associated with superior perfor-mance in different situations, how to recognize when a firms current culture isinappropriate, and the best mechanisms available to family businesses for mov-ing from one type of culture to another.

Reiss (1982) uses a classification that concerns itself with the relationshipamong family members. This classification recognizes three types of families:consensus-sensitive, interpersonal distance-sensitive, and environment-sensi-tive. Davis (1983) suggests that excessively consensus-sensitive families be-come enmeshed under stress, making individual decision making and ac-tions difficult. On the other hand, the connections between family membersare so loose in the interpersonal distance-sensitive family that they cannot actin concert. Therefore, he and Hoffman (1981) conclude that the environmen-tally sensitive family is ideal. In her research on three department stores, how-ever, McCollom (1988) concludes that we must be cautious about suggestingan ideal relationship for family businesses because families can adopt differentrelationships at work and at home to achieve stability. We would go further instating that it is unlikely that any one type of relationship among family mem-bers is ideal in all situations from the perspective of the business, even if rela-tionships at home and at work are similar. Again, there are so many variablesand so many contingencies involved in influencing the performance of a fam-ily business that it is exceedingly risky to assume that ideal patterns of family



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relationships can be found. Research could make more progress, we believe, ifit identifies these contingencies and takes them into account in family-busi-ness studies. Also, from a strategic management perspective, we are concernedmore with the trade-offs that the family firm encounters in the different pat-terns of family relationships and how they affect the firms short- and long-term performance.

Ethnic studies underscore the impact of culture on the way strategies areimplemented in family businesses and the need to take a contingency perspec-tive in research. Ethnic groups that have been studied include Chinese (Chau,1991; Wong, McReynolds, and Wong, 1992; Wong, 1993); Japanese (Wong,1993); Latin Americans (Lansberg and Perrow, 1991); Jewish (Rothstein, 1992;McGoldrick and Troast, 1993); Italians, African Americans, Irish, Germans,and Anglo Saxons (Dean, 1992; McGoldrick and Troast, 1993; Salomon andLockhart, 1980); and Native Americans (Stallings, 1992). These studies sug-gest that methods of conflict resolution and the importance attached to educa-tion, value systems, and the participation of women vary widely among differ-ent ethnic groups. Differences among family businesses in terms of their cul-ture and decision making can exist according to their size, age, generation incontrol, type of business, and so on. These differences need to be investigatedand accounted for. More importantly, from a strategic management perspec-tive, we need to understand how and why culture affects strategy implementa-tion, and the subsequent impact the method of implementation has on theperformance of the family firm.

Inclusion of family members. In implementing strategy, a family firm hasthe choice of using family or non-family members. Lansberg (1983) advisesthat all relatives be given opportunities to learn, but only the most competentshould be taken into the firm. A strategic management perspective could takethis as a starting point, but should also consider the political aspects of theinclusion or exclusion of family members in the business (MacMillan and Jones,1986).

In general, research has found that family members are more productivethan non-family members (Rosenblatt, deMik, Anderson, and Johnson, 1985;Kirchhoff and Kirchhoff, 1987). However, in examining compensation prac-tices, Rosenblatt et al. conclude that family members believe they are over-worked and underpaid, while Kirchhoff and Kirchhoff suggests that familymembers are given higher salaries and perquisites. This contradiction deservesmore study, because if not recognized and dealt with, the apparent discrep-ancy between perceptions and reality can lead to problems in strategy imple-mentation.

By contrast, in a study of home-based business workers, Heck and Walker(1993) discover that family members and unrelated workers are more produc-tive than related workers (e.g., cousins). They warn that relatives who dependon family ties for employment could be the least competent. Although it sug-gests a hiring strategy for family businesses, such research has yet to be repli-



14

cated in larger family businesses. We also know little about the political rami-fications of denying relatives employment opportunities. Since hiring deci-sions are among the most important human resource decisions a firm can make,further studies of this issue, in the context of a firms performance, are clearlyneeded.

From a strategic management perspective, the study of women in familybusinesses is another fruitful area for research. Various studies report thatwomen are not generally considered for the job of chief executive in familybusinesses (Hollander and Bukowitz, 1990; Salganicoff, 1990; Upton and Sex-ton, 1987). Other researchers suggest that female members positions as thecaretakers of family concerns can give them a better understanding of the fam-ily business than the male members have (Hollander and Bukowitz, 1990).Women, for their part, have been advised to acquire appropriate business skills,training, and experience (Salganicoff, 1990). How best to train and deployfemale family members in the business, the political implications of their in-clusion, exclusion, and career opportunities, and the impact of all this on theperformance of family firm, are areas that deserve more attention.

Intergenerational issues. Although they are closely akin to succession, wehave classified intergenerational issues as part of strategy implementation ratherthan strategy formulation because of their potential impact on the day-to-dayoperations of the firm. Much of the research done in this area has been onrelationships between fathers and sons, which Levinson (1971) observes isambivalent at best. Researchers report that founders are generally authoritar-ian, unwilling to share power (Birley, 1986; Donckels and Frohlick, 1991;Geeraerts, 1984), and strategically conservative (Levinson, 1974). On the otherhand, sons are generally impatient for strategic change, personal independence,and an opportunity to prove their worth (Seymour, 1993). Most of the family-business literature seems to assume that conflict is unhealthy and disruptive.This may be true. However, conflict can also be a driving force for change.Before passing judgment, research from a strategic management perspectivecould examine the extent and types of conflicts that occur in the context ofboth family and business situations. More importantly, such research couldinvestigate the impact of conflicts on strategy implementation and firm per-formance.

Dumas (1989) concludes that the father-son relationship cannot be gener-alized to the father-daughter dyad. She suggests that the father-daughter rela-tionship is more harmonious and different in nature. Daughters willingly as-sume the role of caretakers, both of the father and the business. As a conse-quence, they are less likely than sons to be in conflict with their fathers overthe issues of power and control. This insight is very important because it pro-vides a basis for comparative research on intergenerational relationships. Isor when isconflict or accommodation preferable in the context of strategyimplementation? By careful matching father-son and father-daughter situa-tions in similar businesses, research may be able to answer such questions.



15

When a leader does let go, departure styles may vary. Sonnenfeld andSpence (1989) identify four departure styles of leaders: monarchs, generals,governors, and ambassadors. They suggest that the best departure style for afamily business leader is that of the ambassador, who leads the organization tomoderate levels of growth, recognizes the time to step down, and maintainscontact with the organization as advisor. While the ambassador style can ap-pear to be conceptually superior, this has not been empirically proven. Andwhether it is or not, the existing literature provides few clues as to how a de-parting leader can be persuaded to follow the appropriate departure style, orhow successors can minimize the deleterious effects of a leader who cannot beso persuaded.

Sibling rivalry. Friedman (1991) argues that although competition forparental love and attention spurs sibling rivalry, it is the parents response thatis the major influence on the childrens relationships with one another. Sug-gestions to resolve dysfunctional sibling relationships include encouraging opencommunication and discussions among the siblings about the roots of theirrivalries, establishing empathy by inviting them to imagine their roles reversed,and encouraging them to redefine current relationships (Friedman, 1991;Lundberg, 1994). From the point of view of a familys business, however, wedo not know if or when sibling rivalry is dysfunctional for the family business.Researchers have assumed that what is good for family harmony is good forthe business, but this is not necessarily the case. While understanding what isgood for the family is important, family businesses also need to understand thetrade-offs involved in maintaining family harmony. This is where the strategicmanagement perspective comes in. For example, Levinson (1971) suggests thatif children are each provided with an operation to lead, sibling rivalry can beabated. This may or may not work, because the success or failure of each op-eration depends on more than family harmony. For example, if location is thekey to success, sibling rivalry can increase as a result of the competition to bein charge of the operations with the best locations. The fragmentation of op-eration and control or the diversification of a family business can also impactthe firms profitability and competitiveness.

Organizational structure, evolution, and change. Research suggests thatthe family business is less horizontally differentiated and more reliant on in-formal controls than non-family firms (Daily and Dollinger, 1992; Geeraerts,1984). As a result, the family firm can be more successful in businesses thatrequire a lean and responsive structure (Harris, Martinez, and Ward, 1994).Most of the studies on the family firms organizational structure, evolution,and change, however, are concerned with the transition to professional man-agement.

Hollander and Elman (1988) identify three different approaches adoptedby researchers to formulate evolutionary models. The first approach relatesthe firms developmental stages to the familys generational progression (e.g.,Barnes and Hershon, 1976). The second focuses on the interaction between



16

the firms needs and the life stages of individuals crucial to the firm (Danco,1975; Davis and Tagiuri, 1989; McGivern, 1989). The third views the interac-tion of three sets of life cycles: firm, family, and key individuals (Ward, 1987).In an empirical study of 41 businesses, Holland and Oliver (1992) find supportfor the three-stage model proposed by Ward (1987). The underlying theme inall these models is that the delegation of responsibility and power to non-family members varies significantly in the different stages.

A family business could need to professionalize and delegate authoritybecause of growth, lack of management skills within the family, preparationfor succession, or to change the norms and values of the business (Matthews,1984; Dyer, 1989). However, owner-managers could be reluctant to delegatecontrol because of a lack of formal training, insufficient knowledge of man-agement techniques (Dyer, 1989), fear of losing control (Perrigo, 1975), or abelief that professionalization is an unnecessary, expensive overhead. A strate-gic management perspective could lead to other questions and avenues forresearch. For example, if some family firms lack the skills or the will to suc-cessfully make the transition to professional management, should they eventry to do so? Are there other alternatives, and if so, what are they? Also, whenbusiness needs and family desires conflict, which is more important for theshort- and long-term performance of the firm?

Summary. As the discussion above clearly illustrates, the family-businessliterature describes the influences of family on strategy implementation. Un-fortunately, however, it stops short of showing how a particular family influ-ence helps or hinders the firms achievement of its goals and objectives. Forexample, we do not know if family firms with outside board members actuallymake betteror even differentstrategic decisions than those without them.Since experience has shown that life-cycle models do not apply to every busi-ness (Dhalla and Yuspeh, 1976), we need to understand the conditions thatcause differences in family firms evolutionary patterns and which of theseconditions has the greatest implications for organizational performance. Studiesalso need to be directed toward understanding from the perspective of thebusiness how effective the intervention strategies suggested actually improvesibling relationships are, and if there are gender differences. Despite the be-havioral orientation of much of the literature, we still know too little abouthow family dynamics impact non-family members of the business, or if thesepressures act as contributors or constraints to the effective implementation ofstrategy. Studies that chronicle the authoritarian system of the founder-man-aged family business could make a more significant contribution if they alsoshowed us when the authoritarian system is effective or dysfunctional, andwhether these instances differ for the family business and the non-family busi-ness. In sum, more work is required before we will know what kind of organi-zation structures, systems, and processes are likely to be most effective forfamily businesses, and whether these differ according to the situation.



17

Strategy Evaluation and Control

Besides making strategic decisions and implementing them, an organizationmust also set up appropriate administrative and operating mechanisms to con-trol and evaluate its performance vis--vis its goals and objectives. If familybusinesses have goals, strategies, and structures that are different from thoseof non-family businesses, they are also likely to evaluateor will need to evalu-ateperformance differently. However, the literature tells us very little aboutwhether strategic decisions and performance are evaluated and controlled dif-ferently in the family firm, or if such differences are justified. The notableexception in this regard is in the area of financial control, where tax minimiza-tion is the guiding principle (Trostel and Nichols, 1982). Articles by rational-ists that address this issue argue for the separation of the family and the busi-ness, thus recommending that family firms use the same set of evaluation andcontrol systems employed by non-family firms (Levinson, 1974). Unfortu-nately, we do not know the answers to the following vital strategic manage-ment questions: Are there differences in the types and use of strategic evalua-tion and control systems between high- and low-performing family businesses?Are the predominant systems similar or different from those used by non-family businesses? How important are the differences, if any? How do familymembers influence the design and use of strategic evaluation and control sys-tems? Is the influence positive or negative?

Conclusion

In this review we have attempted to describe, from a strategic managementperspective, the issues that currently dominate the study of family businesses.As this review shows, many studies have concentrated on issues that have amajor impact on family relationships but an unclear impact on the perfor-mance of the business.

Our objective is to outline an alternative direction for family-business re-search. Using the concept of strategic management, we detail some of the keyissues that must be resolved if we are to achieve the primary goals of businessresearch: the improvement of management practice and organizational per-formance.

To date, it appears that the knowledge accumulated about family busi-nesses has made relatively little progress toward achieving these goals. Specifi-cally, questions that remain to be answered include those that ask what are thegoals, strategies, and implementation methods of family businesses? How dothese compare with those of non-family businesses and among high- and low-performing family businesses?

In finding the answers to these questions, researchers should first keep inmind that family businesses are not a homogeneous group. What works forone family in a specific situation will not necessarily work for another family in



18

a different situation. Therefore, it is important to make it clear what types offamilies, businesses, and business environments are being studied. Second, re-searchers should also recognize that family and business goals, and the strate-gies needed to achieve these goals, are not always compatible. As a conse-quence, family firms are confronted with implications and trade-offs that mightnot be readily apparent. Studies that identify these trade-offs and inform fam-ily-business managers about their implications can make a great contribution.

A third, related, point is that family-business research needs dependentvariables. Whether these be family harmony, economic performance, or goalachievement matters less than the identification, explicit recognition, and in-clusion of these variables to measure the outcomes of decisions and actions. Itappears to us that investigations of goals and objectives and the determinantsof performance hold the most promise for contributing to the advancement ofthe field, if for no other reason than that these topics have not received suffi-cient attention in the past.

Insofar as family-business consultants and family-business managers areconcerned, our review of the literature from a strategic management perspec-tive suggests several implications. First, the family-business literature has beenvery good about identifying and diagnosing family problems, and quite infor-mative about how these problems either originate in, or spill over to, the busi-ness. It is replete with solutions for dealing with family problems, and some ofthose solutions seem quite reasonable. What the literature has not dealt withis how those problems and their solutions affect the strategic managementprocesses of a family business, its economic performance, or the achievementof its goals and objectives.

Second, although the family-business literature acknowledges that the fam-ily business is a system composed of a family and a business, it has not yetcome to grips with the trade-offs involved in dealing with the needs of the twosubsystems. The working hypothesis appears to be that what is good for thefamily is good for the business, but the hypothesis has never been tested.

Third, although the field recognizes that different types of families exist,not much has been done to determine which differences really matter, or whatthey imply, in terms of effective family business management. Thus, our ad-vice to consultants and family-business managers is to proceed with cautionwhen applying the findings of previous research. Do not assume that what wasa problem for one family business will be so in another, or that what worked inthe past will work in the future. Instead, use the literature as a guide to prob-lem diagnosis, as an aid for understanding why a particular solution worked,and how the solution can or cannot be adapted to fit a particular set of needs.Do not assume that what is good for a family is good for its business, or viceversa; instead, realize that there are usually trade-offs between the needs of thefamily and the needs of the business that are involved in any decision, and seekto understand them in order to make decisions that are most likely to result ina desirable outcome mix.



19

In sum, the message of this article can be stated as follows: While theimportance of the family cannot be denied, the business is no less important.How the family affects the operation and management of the business andhow the influence of the family can be directed toward more productive andprofitable outcomes are certainly research objectives worth pursuing. To achievethese objectives, researchers need to take a strategic management perspective,concentrating on comparative studies that will eventually lead to prescriptionrather than description. Until such a refocusing takes place, progress in thefield will continue to be confined to the family in the family-business dyad.



20

Aut

hor(

s) a

nd D

ate

Sam

ple

(Res

pond

ents)

Stu

died

and

Key

Fin

ding

Res

pons

e R

ate

(Whe

n A

vaila

ble)

App

endi

x. S

umm

ary

of E

mpi

rica

l Art

icle

s R

evie

wed

Tagi

uri &

Dav

is(1

992)

Am

bros

e(1

983)

Bar

nes

(198

8)

Bar

ry(1

975)

Bea

ch(1

993)

Cov

in(1

994)

Dav

is(1

968)

524

part

icip

ants

(86%

CE

Os,

nea

rly

60%

foun

ders

)in

Sm

alle

r C

ompa

ny M

anag

emen

t Pro

gram

at

Har

vard

Bus

ines

s Sc

hool

86 b

usin

esse

s te

rmin

ated

bet

wee

n 19

76 &

198

1;53

ow

ners

& 3

3 ch

ildre

n

Seve

ral h

undr

ed p

artic

ipan

ts o

f Ow

ner/

Pre

side

nt M

anag

emen

t Pro

gram

at

Har

vard

Bus

ines

s Sc

hool

25 fi

rms

in B

ritis

h pr

intin

g in

dust

ry

31 fi

rms

(6 fa

mily

day

-car

e pr

ovid

ers,

10

shoe

stitc

hers

, 15

fam

ilies

of h

ome

wor

kers

)

223

stud

ents

(115

und

ergr

adua

tes

and

108

grad

uate

s)

25 fi

rms

in M

exic

o

Goa

ls a

nd O

bjec

tive

sSi

x m

ost i

mpo

rtan

t goa

ls o

f fam

ily fi

rms

are

havi

ng a

com

pany

whe

re e

mpl

oyee

s ca

n be

happ

y, p

rodu

ctiv

e, a

nd p

roud

; fin

anci

al s

ecur

ity a

nd b

enef

its fo

r th

e ow

ner;

dev

elop

ing

new

and

qua

lity

prod

ucts

; a v

ehic

le fo

r pe

rson

al g

row

th, s

ocia

l adv

ance

men

t, an

dau

tono

my;

goo

d co

rpor

ate

citiz

ensh

ip; a

nd jo

b se

curi

ty.

Stra

tegy

For

mul

atio

n an

d C

onte

ntTo

incr

ease

the

chan

ces

of a

n ef

fect

ive

tran

sfer

of b

usin

ess

to th

e ne

xt g

ener

atio

n, th

ech

ildre

n sh

ould

be

invo

lved

whe

n th

ey a

re y

oung

.

Dea

ling

with

inco

ngru

ent h

iera

rchi

es (w

hen

a da

ught

er o

r yo

unge

r so

n ta

kes

over

as

CE

O o

f fam

ily fi

rms)

invo

lves

a m

ajor

shi

ft in

exp

ecta

tions

, per

cept

ions

, and

beh

avio

r of

fam

ily m

embe

rs a

nd e

mpl

oyee

s. R

estr

uctu

ring

is ti

me-

cons

umin

g an

d on

ly d

ay-t

o-da

yac

tions

and

beh

avio

rs c

an b

ring

the

two

hier

arch

ies

into

line

.

Fam

ily-b

usin

ess

owne

rs h

ave

four

opt

ions

: con

tinui

ng b

oth

owne

rshi

p an

d m

anag

emen

t,re

tain

ing

owne

rshi

p bu

t let

ting

go m

anag

emen

t, ab

ando

ning

ow

ners

hip

and

reta

inin

gm

anag

emen

t con

trol

, and

evo

lvin

g as

a m

ore

bure

aucr

atic

firm

.

Fam

ily a

cts

as a

filte

r af

fect

ing

the

oper

atio

n of

hom

e-ba

sed

busi

ness

es. C

hild

ren

may

be

invo

lved

at f

our

diffe

rent

leve

ls: p

lay,

wat

ch, a

nd h

elp;

ass

ista

nce

with

sim

ple

task

s; r

egul

arun

paid

ass

ista

nce;

and

reg

ular

pai

d as

sist

ance

.

Fam

ily fi

rms

perc

eive

d as

com

petit

ive

as n

on-f

amily

firm

s. L

ack

of fo

rmal

izat

ion

perc

eive

d as

maj

or w

eakn

ess.

Gra

duat

e st

uden

ts v

iew

ed c

aree

r in

fam

ily fi

rms

less

favo

rabl

y th

an u

nder

grad

uate

s. G

ende

r no

t a s

igni

fican

t inf

luen

ce o

n pe

rcep

tions

.

Thr

ee p

atte

rns

of e

ntre

pren

euri

al s

ucce

ssio

n w

ere

obse

rved

: str

ong

fath

er, w

eak

son;

cons

erva

tive

fath

er, p

rogr

essi

ve s

on; b

ranc

hes

of a

fam

ily, e

ach

with

dis

tinct

cha

lleng

es.



21

Aut

hor(

s) a

nd D

ate

Sam

ple

(Res

pond

ents)

Stu

died

and

Key

Fin

ding

Res

pons

e R

ate

(Whe

n A

vaila

ble)

Doe

ring

er, M

oss,

& T

erkl

a(1

992)

Gol

dber

g &

Woo

lrid

ge(1

993)

Han

dler

(199

2)

Hol

land

&B

oulto

n(1

984)

Jone

s(1

982)

Kah

n &

Hen

ders

on(1

992)

Fish

ing

crew

and

cap

tain

s at

2 N

ew E

ngla

nd p

orts

254

CE

Os

32 n

ext-

gene

ratio

n fa

mily

mem

bers

Firm

s (n

umbe

r no

t men

tione

d) in

food

pro

cess

ing

indu

stry

69 fi

rms

Res

pons

e ra

te 3

4.5%

(69

out o

f 200

)

990

firm

s (4

35 fa

mily

& 5

55 n

on-f

amily

firm

s)R

espo

nse

rate

44%

Stud

y ex

amin

es tw

o sy

stem

s of

em

ploy

men

t and

pay

ki

nshi

p an

d ca

pita

list.

Cap

italis

tsy

stem

s re

sem

ble

stan

dard

com

petit

ive

firm

s. K

insh

ip s

yste

ms

are

base

d on

wor

kgu

aran

tees

and

labo

r ad

just

men

ts. F

or la

bor-

inte

nsiv

e in

dust

ry (f

ishi

ng) k

insh

ip s

yste

m is

high

ly e

ffec

tive.

Eff

ectiv

e su

cces

sors

sco

re s

igni

fican

tly h

ighe

r on

sel

f-co

nfid

ence

and

man

ager

ial

auto

nom

y. B

irth

ord

er is

not

rel

ated

to th

e su

cces

s of

suc

cess

ion.

Whe

n ow

ners

lack

conf

iden

ce in

the

succ

esso

rs a

bilit

y or

will

ingn

ess

to c

ontr

ol, t

he r

eluc

tanc

e to

let g

obe

com

es h

ighe

r.

The

stu

dy id

entif

ies

the

vari

ous

fact

ors

that

influ

ence

the

qual

ity o

f suc

cess

ion

of fa

mily

firm

s. T

wo

fact

ors

iden

tifie

d w

ere

indi

vidu

al in

fluen

ces

(incl

udin

g pe

rson

al n

eed

fulfi

lmen

t, an

d pe

rson

al in

fluen

ce) a

nd r

elat

iona

l inf

luen

ces

(mut

ual r

espe

ct a

ndun

ders

tand

ing,

sib

ling

acco

mm

odat

ion,

com

mitm

ent t

o fa

mily

bus

ines

s pe

rpet

uatio

n, a

ndse

para

tion

stra

ins

due

to fa

mily

invo

lvem

ent)

.

Fam

ily fi

rms

can

vary

in te

rms

of s

ize

and

owne

rshi

p-m

anag

emen

t str

uctu

res.

Bas

ed o

nth

e de

gree

of f

amily

invo

lvem

ent,

fam

ily b

usin

esse

s ca

n be

cla

ssifi

ed a

s pr

efam

ily, f

amily

,ad

aptiv

e fa

mily

, or

post

fam

ily. T

he m

anag

eria

l ori

enta

tion

of a

n in

divi

dual

in a

fam

ilybu

sine

ss d

epen

ds u

pon

his/

her

pow

er in

the

fam

ily a

nd in

bus

ines

s.

The

stu

dy c

ompa

res

firm

s en

gage

d in

str

ateg

ic p

lann

ing

to th

ose

that

are

not

. Pla

nnin

gfir

ms

enga

ge in

env

iron

men

t sca

nnin

g, id

entif

y fu

ture

opp

ortu

nitie

s th

roug

h re

sear

ch,

and

invo

lve

a nu

mbe

r of

org

aniz

atio

nal m

embe

rs in

pla

nnin

g ac

tiviti

es. T

hese

firm

s ar

em

ore

succ

essf

ul th

an n

onpl

anni

ng fi

rms.

Com

pari

ng lo

catio

n pr

efer

ence

of f

amily

and

non

-fam

ily fi

rms,

stu

dy fi

nds

mix

ed s

uppo

rtfo

r th

e no

tion

that

fam

ily fi

rms

seek

loca

tions

that

impr

ove

the

fam

ilys

qual

ity o

f life

.N

on-f

amily

firm

s se

ek lo

catio

ns th

at lo

wer

the

cost

of o

pera

tion.

All

firm

s ra

nk th

epr

oxim

ity to

mar

kets

and

cus

tom

ers

as m

ost i

mpo

rtan

t fac

tor

in d

eter

min

ing

loca

tion

pref

eren

ce.



22A

utho

r(s)

and

Dat

eSa

mpl

e (R

espo

nden

ts) S

tudi

ed a

ndK

ey F

indi

ngR

espo

nse

Rat

e (W

hen

Ava

ilabl

e)

Kay

e(1

992)

Kle

inso

rge

(199

4)

Lan

sber

g &

Ast

rach

an(1

994)

Lym

an(1

991)

Pos

t(1

993)

Pos

t & R

obin

s(1

993)

Pri

nce

(199

0)

War

d(1

988)

10 c

ase

stud

ies

34 n

ursi

ng h

omes

(10

fam

ily-o

wne

d an

d 24

non

-fa

mily

-ow

ned)

in O

rego

n

130

indi

vidu

als

from

109

fam

ily b

usin

esse

sR

espo

nse

rate

36%

78 b

usin

ess

man

ager

s an

d 48

fam

ily m

embe

rs in

fam

ily o

wne

d bu

sine

sses

Cas

e st

udy

of B

osto

n P

ark

Pla

za H

otel

40 c

ase

stud

ies

of p

oliti

cal l

eade

rs

18 la

w fi

rms

2,02

0 fir

ms

from

pub

lic d

ata

sour

ces

Stru

ctur

al fa

mily

dyn

amic

s ca

n pl

ace

one

sibl

ing

(usu

ally

you

nges

t son

) in

an o

utsi

der

role

, bec

ause

this

indi

vidu

al is

bro

ught

up

in a

mor

e af

fluen

t env

iron

men

t tha

n ot

her

fam

ily m

embe

rs. T

his

indi

vidu

al is

trap

ped

in b

usin

ess

and

can

disp

lay

a te

nden

cy to

be

defe

nsiv

e. F

amily

mem

bers

feel

obl

iged

to c

arry

him

alo

ng.

Fam

ily-o

wne

d nu

rsin

g ho

mes

pro

vide

mor

e hi

gh-l

evel

car

e bu

t are

less

eff

icie

nt in

prov

idin

g ca

re, h

ave

low

er o

ccup

ancy

rat

es, h

ave

low

er a

sset

s an

d hi

gher

liab

ilitie

s, s

pend

less

on

patie

nt c

are

and

mor

e on

sal

arie

s th

an d

o no

n-fa

mily

-ow

ned

nurs

ing

hom

es.

The

eff

ect o

f fam

ily a

dapt

abili

ty a

nd c

ohes

ion

on m

anag

emen

t suc

cess

ion

plan

ning

and

trai

ning

are

med

iate

d by

the

fam

ilys

com

mitm

ent t

o th

e bu

sine

ss a

nd th

e qu

ality

of t

here

latio

nshi

p be

twee

n th

e ow

ner-

man

ager

and

suc

cess

or.

In te

rms

of th

e di

ffer

ence

s in

cus

tom

er s

ervi

ce a

mon

g fa

mily

-ow

ned

and

non-

fam

ily-

owne

d fir

ms,

stu

dy fi

nds

that

fam

ily-b

usin

ess

man

ager

s ha

ve a

mor

e pe

rson

al o

rien

tatio

n,tr

ust t

heir

em

ploy

ees

to a

gre

ater

ext

ent,

and

show

less

rel

ianc

e on

form

al w

ritt

en p

olic

ies.

Stud

y fin

ds th

at th

e co

mm

itmen

t of t

he to

p m

anag

emen

t tea

m, c

omm

unic

atio

n an

dcr

eativ

e th

inki

ng, a

nd r

ewar

d sy

stem

s ar

e ne

cess

ary

elem

ents

in s

ucce

ssfu

lly m

eshi

ng th

esp

irit

of o

wne

rshi

p w

ith th

at o

f res

pons

ibili

ty.

Whe

n a

lead

er is

take

n ill

, con

trad

ictio

ns b

etw

een

patie

nt c

omfo

rt a

nd th

ose

of le

ader

sco

mpe

tenc

e m

ust b

e m

anag

ed. F

our

fact

ors

that

det

erm

ine

the

rela

tions

hip

betw

een

the

lead

er a

nd h

is in

ner

circ

le a

re fa

ctor

s as

soci

ated

with

the

dise

ase,

lead

ers

reac

tions

to th

eill

ness

, soc

ial a

nd p

oliti

cal e

nvir

onm

ent,

and

med

ical

man

agem

ent o

f the

lead

er.

Thr

ee m

echa

nism

s fo

r re

solv

ing

inte

rper

sona

l con

flict

s w

ithin

the

fam

ily b

usin

ess

incl

ude

litig

atio

n, a

rbitr

atio

n, a

nd m

edia

tion.

Stu

dy a

rgue

s th

at m

edia

tion

is th

e on

ly e

ffec

tive

met

hod

for

conf

lict r

esol

utio

n in

fam

ily b

usin

esse

s.

Six

inte

rdep

ende

nt st

eps t

hat a

re im

port

ant f

or st

rate

gic

plan

ning

pro

cess

are

an

asse

ssm

ent

of fa

mily

s co

mm

itmen

t to

busi

ness

, bus

ines

s hea

lth, b

usin

ess a

ltern

ativ

es, f

amily

and

pers

onal

goa

ls, s

elec

tion

of b

usin

ess s

trat

egy,

and

fam

ilys

inte

rest

s and

cap

abili

ties.



23

Aut

hor(

s) a

nd D

ate

Sam

ple

(Res

pond

ents)

Stu

died

and

Key

Fin

ding

Res

pons

e R

ate

(Whe

n A

vaila

ble)

Wel

sch

(199

3)

Bar

nes

&H

ersh

on(1

976)

Ber

enbe

im(1

990)

Bir

ley

(198

6)

Bur

ke, W

eir,

& D

uWor

s(1

980)

Cam

brel

eng

(196

9)

Cro

uter

(198

4)

Dai

ly &

Dol

linge

r(1

992)

Dav

is &

Tag

iuri

(198

9)

183

(59

fam

ily a

nd 1

24 n

on-f

amily

) fir

ms

35 c

ompa

nies

(200

par

ticip

ants

)

20 U

.S.,

Lat

in A

mer

ican

, & E

urop

ean

firm

s

61 p

oten

tial i

nher

itors

(MB

A &

BB

A s

tude

nts)

85 s

enio

r ad

min

istr

ator

s of

cor

rect

iona

l ins

titut

ions

Cas

e st

udy

of a

sal

es &

ser

vice

com

pany

55 e

mpl

oyee

s in

a m

anuf

actu

ring

pla

nt

104

smal

l man

ufac

turi

ng fi

rms

Res

pons

e ra

te 2

1%

89 fa

ther

-son

pai

rs

Stud

y fin

ds n

o si

gnifi

cant

diff

eren

ces

in la

rge

indu

stri

al fa

mily

and

non

-fam

ily fi

rms

inte

rms

of th

e ra

tiona

l, po

litic

al, o

r bu

reau

crat

ic d

imen

sion

s of

man

agem

ent s

ucce

ssio

n.

Stra

tegy

Im

plem

enta

tion

Stud

y id

entif

ies

thre

e st

ages

thro

ugh

whi

ch a

com

pany

pas

ses:

ent

repr

eneu

rial

,sp

ecia

lized

func

tions

, and

div

isio

nal o

pera

tions

.

Stud

y de

scri

bes

thre

e st

ages

in th

e tr

ansi

tion

of a

bus

ines

s to

war

ds p

rofe

ssio

naliz

atio

n:co

aliti

on to

est

ablis

h fir

m, a

scen

danc

y to

aut

hori

ty, a

nd fo

unde

rs d

epar

ture

.

Stud

y fin

ds th

at fa

mily

-bus

ines

s ow

ners

ado

pt a

n au

thor

itari

an s

tyle

, and

that

sib

ling

posi

tion

is n

ot c

orre

late

d to

the

will

ingn

ess

to r

etur

n to

fam

ily b

usin

ess.

Gen

der

was

foun

d to

be

rela

ted.

Gre

ater

occ

upat

iona

l dem

ands

can

lead

to le

ss m

arita

l sat

isfa

ctio

n, d

ecre

ased

soc

ial

part

icip

atio

n, a

nd in

crea

se in

psy

chos

omat

ic s

ympt

oms

amon

gst w

ives

of s

enio

rad

min

istr

ator

s.

Cle

ar p

olic

ies

and

open

com

mun

icat

ions

are

use

ful f

or d

ealin

g w

ith th

e pr

esen

ce o

fne

pots

in fa

mily

firm

s.

Fam

ily li

fe in

fluen

ces

the

mor

ale,

sta

bilit

y, a

nd p

rodu

ctiv

ity o

f wor

k fo

rce.

Wom

en w

ithyo

ung

child

ren

repo

rted

hig

h fa

mily

-to-

wor

k sp

illov

er.

Non

-fam

ily fi

rms

are

larg

er, o

lder

, pur

sue

incr

ease

in g

row

th a

nd s

ize,

and

rel

y m

ore

onin

tern

al c

ontr

ols.

Stu

dy fi

nds

no s

tatis

tical

ly s

igni

fican

t diff

eren

ces

in p

erfo

rman

ce o

ffa

mily

and

non

-fam

ily fi

rms.

The

qua

lity

of w

ork

rela

tions

hip

betw

een

fath

er a

nd s

on v

arie

s as

a fu

nctio

n of

thei

rre

spec

tive

life-

cycl

e st

ages

.



24A

utho

r(s)

and

Dat

eSa

mpl

e (R

espo

nden

ts) S

tudi

ed a

ndK

ey F

indi

ngR

espo

nse

Rat

e (W

hen

Ava

ilabl

e)

Dea

n(1

992)

Don

ckel

s &

Froh

lick

(199

1)

Don

nelle

y(1

964)

Dum

as(1

989)

Dye

r Jr

.(1

988)

Ew

ing

(196

5)

Ford

(198

8)

Fran

cis

(199

1)

Gee

raer

ts(1

984)

234

Afr

ican

-Am

eric

an fi

rms

Res

pons

e ra

te 3

4%

1,13

2 sm

all a

nd m

ediu

m b

usin

esse

s in

8 E

urop

ean

coun

trie

s

15 fa

mily

bus

ines

ses

18 fa

mily

bus

ines

ses

in C

alifo

rnia

(40

fam

ily m

embe

rs)

40 fa

mily

bus

ines

ses

918

exec

utiv

esR

espo

nse

rate

34%

35 p

riva

tely

hel

d co

mpa

nies

(325

CE

Os

&91

boa

rd m

embe

rs)

250

larg

e U

.K. f

irm

s

142

smal

l & m

ediu

m D

utch

bus

ines

ses

Afr

ican

-Am

eric

an b

usin

ess

owne

rs a

re p

reoc

cupi

ed w

ith s

urvi

val a

nd m

anag

emen

t iss

ues,

do n

ot b

enef

it fr

om c

omm

unity

ass

ocia

tions

, and

rep

ort l

ittle

fam

ily-w

ork

conf

lict.

Succ

essi

on is

not

a p

rim

ary

conc

ern,

bec

ause

bus

ines

s is

use

d as

a fo

unda

tion

for

prof

essi

onal

izat

ion

of c

hild

ren.

Stud

y de

velo

ps a

hol

istic

mod

el th

at in

clud

es fo

ur s

ubsy

stem

s of

fam

ily, m

anag

emen

t,eq

uity

, and

bus

ines

s. F

amily

firm

s ar

e m

ore

stab

le, p

ay h

ighe

r w

ages

, and

hav

e a

mor

eco

nser

vativ

e at

titud

e to

war

ds b

usin

ess,

than

non

-fam

ily fi

rms.

Fam

ily fi

rms

gene

rally

hav

e va

luab

le r

eput

atio

n, lo

yal a

nd d

edic

ated

fam

ily m

embe

rs, a

ndar

e se

nsiti

ve to

con

tinui

ty a

nd in

tegr

ity. C

halle

nges

incl

ude

nepo

tism

, lac

k of

man

ager

ial

tale

nt, a

nd la

ck o

f dis

cipl

ine.

Pol

icie

s to

reg

ulat

e fa

mily

firm

s ca

n be

hel

pful

.

Stud

y ex

amin

es s

imila

ritie

s an

d di

ffer

ence

s in

pro

blem

s fa

ced

by m

ale

and

fem

ale

inhe

rito

rs in

fam

ily b

usin

esse

s. W

hile

son

s ha

ve

Documents

Chapter 11 - 11 Sharma Et Al