Why I Wrote, “Stewardship Theory: Realism, Relevance, and Family Firm Governance,” An Unapologetic Confession

[We’re pleased to welcome author James J. Chrisman of Mississippi State University and the University of Alberta. He recently published an article in Entrepreneurship Theory and Practice entitled “Stewardship Theory: Realism, Relevance, and Family Firm Governance,” which is currently free to read for a limited time. Below, he briefly describes the motivation and impact of his research.]

Given stewardship theory’s popularity, especially in family business, some might be surprised that anyone would dare to critique it. However, there are some issues associated with stewardship theory that need to be aired and resolved. That’s what I attempted to accomplish in my editorial. My basic position is that in spite of its positive features, stewardship theory is too extreme in its depiction of human nature and is missing several elements that are necessary for it to be realistic and relevant. Since much of my research is devoted to family business studies, and since stewardship theory is frequently used in that literature, I thought it appropriate to comment on the limits of stewardship theory as it is currently conceived, and to make some suggestions on how the realism and relevance of the theory could be improved. What follows is a brief summary of some of the issues that I have with stewardship theory that are discussed in my editorial, and my unapologetic confession of what led me to buck the conventional wisdom that stewardship theory is good and agency theory is bad.

My Confession

First, I admit that I believe that most individuals behave as stewards some or even most of the time and in this sense stewardship theory makes an important contribution to knowledge. However, I strongly dispute any inferences that all people can be induced to behave as stewards all of the time. I also take issue with the idea that people are not inherently self-interested, or that self-interest is a bad thing.

Second, I have serious doubts that an effective governance structure for an organization can be designed that does not include systems for monitoring and incentivizing the behaviors of individuals. Indeed, I do not believe an organization can long function without such systems since these are primary means for communicating goals and strategies and coordinating actions.

Third, in my view, perhaps the most important factors overlooked by stewardship theory are how to ensure that an organization will attract qualified individuals who will fit its goals and culture (potential stewards, if you will) and how to screen out unqualified or ill-fitting individuals before they become part of the organization (potential opportunistic agents, so to speak).

Postscript

Finally, it is important to acknowledge that when working on my editorial I noticed that several of my concerns about stewardship theory were already discussed by the two main conceptual works on the topic. Although I attempted to take the discussion a step further, it did not escape my attention that the qualifications they made to their arguments seem to have been lost over the years. In my experience, this is not uncommon in the literature, whether in respect to stewardship theory or some other subject. Indeed, a lesson that (junior) scholars can learn from my editorial is that focusing too much on ideal types can cause one to lose sight of reality in the attempt to simplify it.

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It’s All About the Emotions

[We’re pleased to welcome authors Alexandra Bertschi-Michel of the University of Bern, Nadine Kammerlander of WHU – Otto Beisheim School of Management, and Vanessa M. Strike of the University of British Columbia. They recently published an article in Entrepreneurship Theory and Practice entitled “Unearthing and Alleviating Emotions in Family Business Successions,” which is currently free to read for a limited time. Below, they briefly describe the motivation and impact of their research.]

In Switzerland, where our cases are located, family businesses increasingly fail to solve their own succession challenges. This leads to the fact that frequently such domestic family businesses providing local jobs are sold to large foreign companies that then often just transfer the family businesses specific knowledge while integrating those into their existing business and closing down the local business areas. These external circumstances motivated us doing research on how family businesses can be supported and guided by an external source of advice throughout the succession process in order that they increasingly find internal solutions.

When then observing five family businesses in their succession processes, we initially focused mostly on technical challenges where an advisor can provide support, such as for example, the initiation of the process, the evaluation for a successor, the training of the successor or eventually, the handover of management and ownership responsibility. However, during the different process stages, repeatedly the emotions of the incumbent and successor emerged as the crucial factor determining how both actors feel and whether they continued the process or got stuck. Thus, we shifted our focus from a pure task oriented study to the emotional aspects laying in between. Thereby, we found that aspects related to emotions affect role adjustment appear of the two actors that ultimately fosters individual-level satisfaction. This encouraged us to further investigate how emotions emerge during the process as well as how they can be guided into a positive direction.

We thereby found that an advisor providing an external perspective plays a crucial role. In particular, the advisor needs at several points during the process to unearth latent emotions in order that both actors even become aware of and openly speak about them. In subsequent step, the advisor then has to engage in alleviating mechanisms in order to calm down the emotional tensions that the process can advance. Thus, this iterative process of emotion unearthing and alleviating speeds up role adjustment and fosters satisfaction.

In our opinion, with our research we address the interdisciplinary fields of both, family business research and psychology. We believe that such interdisciplinary studies hold a lot of potential for future research. Especially in the context of family businesses, emotions and thus aspects from psychology seem to be a driving factor explaining various behaviors and processes within family businesses. Hence we encourage researchers to follow up this study by conducting further studies on emotions and emotional processes in family businesses.

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Undergraduate Student-Run Business Development Services Firms

[We’re pleased to welcome authors Peter G. Delaney of Washington University in St. Louis, Ken Harrington of the Bayberry Group, Emre Toker of Arizona State University. They recently published an article in Entrepreneurship Education and Pedagogy entitled “Undergraduate Student-Run Business Development Services Firms: A New Educational Opportunity and Growth Alternative for Small and Medium Enterprises,” which is currently free to read for a limited time. Below, they discuss the inspirations and findings of this research.]

Growth of alternative work arrangements comprised 94% of jobs created in the US since 2005, indicating an unprecedented shift in workforce composition away from traditional work arrangements. This shift is characteristic of the expansion of the gig economy and requires innovative teaching models to prepare undergraduate students for the changing scope of work to come, as young people face the prospect of “portfolio” careers, including periods of paid employment, non-work, and self-employment.

In an attempt to catch up to changes in the workforce, colleges and universities are expanding entrepreneurial education programs across the country focused on innovation and entrepreneurship (I&E) but are hamstrung by doing so in extremely structured environments. Colleges and universities are not grooming students for uncertainty while relying on a “causation model” that teaches goal-driven, deliberate models of decision-making.

But who can fault them? Students paying tuition expect to be guaranteed learning experiences and therefore do not have to face the uncertainty of entrepreneurial experiences when they are presented with well-coordinated, faculty-directed programs. Authentic exposure to the market is limited, student expectations are misguided, and an ability to tolerate risk is underdeveloped, suggesting classroom environments may not be the best place to learn entrepreneurship. A “causation model” of decision-making stands in contradiction to the hard reality students face after graduation.

Principles based in “effectuation theory,” first introduced by Saras Sarasvathy in 2001, are more appropriate in settings characterized by greater levels of uncertainty, like job markets for recent graduates. Importantly, effectuation teaches students to begin with general aspirations and subsequently satisfy them using resources at their immediate disposal, like their knowledge and connections. Without clearly envisioned steps toward a solution, students remain flexible and can take advantage of “environmental contingencies” as they arise, a particularly useful skillset for students beginning careers.

This paper integrates effectuation-driven educational opportunities to propose how students can gain valuable work experience prior to graduation, not through university skills courses, but as participants in the new workforce through the Bear Studios model working with small and medium enterprises, supporting the development of a new pedagogy of entrepreneurship education. As a learning innovation, this paper describes how to structure the firm in the space between students, the university, and the regional community.

Bear Studios, an undergraduate-run firm, is exclusively student-directed and has been able to provide talented undergraduates with opportunities to freelance and provide startups and small and medium enterprises business, design, technology, and accounting services and solutions. Clients have included major universities and national healthcare systems, regional software and biomedical companies and nonprofits, as well as small and medium enterprises. Students must manage business relationships, without university administrative coordination, leveraging students’ innovative mindsets and diverse skillsets to give clients a cost-effective alternative to the traditional consultancy, design, development, or accounting firm. In turn, students experience and adapt to a wide variety of diverse businesses at different stages in their life cycles, and through this exposure learn flexibility. These immersive, authentic experiences prepare undergraduate students for the future, preparing them for post-graduate life in a rapidly changing workforce and world.

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The Heptalogical Model of Entrepreneurship

[We’re pleased to welcome authors Patrick J. Murphy of the University of Alabama at Birmingham, Anthony C. Hood of the University of Alabama at Birmingham, and Jie Wu of the University of Macau. They recently published an article in Entrepreneurship Education and Pedagogy entitled “The Heptalogical Model of Entrepreneurship,” which is currently free to read for a limited time. Below, they discuss the motivations and innovations of this research.]

What motivated you to pursue this research?

It all began in 2003, when I taught my first entrepreneurship courses. I designed my early courses based on textbooks, cases, and published research, but it was difficult for me to deliver high-impact, transformational lessons that way. Students would launch new ventures (or join existing ventures) and we would notice disconnections between what they had learned and what they eventually experienced. Excellent entrepreneurship courses must prepare learners to perform in jobs, vocations, occupations and other contexts that have literally never existed before. How does one do that? This question originally motivated me to pursue this research.

Strategic outreach and instilling an indelible entrepreneurial mindset in students are hallmarks of excellent entrepreneurship programs. Regarding outreach, one cannot merely make external cases part of a class; one must actually make a class part of those ventures. In other words, one flips the whole scenario so that students are managing real projects that just happen to be coursework. However, two problems with that approach are a lack of conceptual rigor and learning outcomes that are not universal enough. Practice is balanced by a conceptual foundation; a formal entrepreneurial mindset, grounded in the distinct theoretic domain of entrepreneurship. We have designed a framework that synthesizes these two complementary realms.

The Heptalogical Model is the product of applications by many people. It has evolved across contexts and countless trials and errors. In the last five years, as I have moved into various administration and leadership roles, the model has guided the development of a range of courses, curricula, majors, minors, and programs in different countries. These applications generated richer feedback for its evolution. My two co-authors (Anthony Hood and Jie Wu) and I represent diverse cultural backgrounds and they have been extremely helpful in this regard.

In what ways is your research innovative, and how do you think it will impact the field?

We want entrepreneurship educators and scholars to adapt the Heptalogical Model for their own purposes. Modify the labels, redefine the stages, and extend the framework if possible. The model itself is intended to be entrepreneurial.

Problems are not usually regarded as sources of positive value generation. But this model begins with problems. Issues of culture usually emerge when applying such universal concepts, and we designed the framework for relevance across cultural settings. For example, the Chinese word for “problem” (问题) is the same word for “question.” The difference is only in context. Problems call for solutions, questions call for answers. Each of the model’s seven stages is a similarly universal concept and thus amenable to many kinds of entrepreneurial action in many settings.

Our delineation of opportunities and ideas remains relevant throughout the model in a unique way that can affect venture operations even years later. As well, casting a venture’s mission subsequently to its operations is unique. A clear mission might seem to come first but our model, by contrast, takes a “ready, fire, aim” approach. The values implied by the original problem are what actually come first.

What did not make it into your published manuscript that you would like to share with us?

The catalyst for writing this paper came from my assistant. She managed the teaching assistants for a large online graduate seminar based on the model. She told me that the model was exposed to thousands of learners via the university’s online learning partner and that a number of teams were using the model to actively launch new venture projects. I thought that was fantastic. She said, “Yes it’s good, but you should publish this model!” Finally, we have many project examples utilizing the model that go back over a decade, but only a couple are in the paper. The history of application and the model’s evolution are interesting.

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The Enigma of the Family Successor–Firm Performance Relationship

[We’re pleased to welcome authors Jan-Philipp Ahrens of the University of Mannheim, Andrea Calabrò of IPAG Business School, Jolien Huybrechts of Maastricht University, Michael Woywode of the University of Mannheim and the Centre of European Economic Research. They recently published an article in Entrepreneurship Theory and Practice entitled “The Enigma of the Family Successor–Firm Performance Relationship: A Methodological Reflection and Reconciliation Attempt,” which is currently free to read for a limited time. Below, they briefly describe the motivation and impact of their research.]

What motivated you to pursue this research?

The vast majority of firms on the planet are family firms. Often they are the institutionalized ‘Gestalt’ of the family’s or founder’s work, identity, and vision – and are typically managed for the long run so that a unique social constellation wrought by social capital, a vivid culture and a mutual commitment emerges over time. In essence, this includes an aspiration of an intergenerational continuity in family leadership and values, as well as in obligations and in the reciprocity that this entails. Interestingly, this peculiar long run horizon that is very difficult to imitate for non-family firms – as they cannot offer the same continuity in relationships and are more short term oriented – has been found to be a source of competitive advantage. At the same time, quite paradoxically, extant research has frequently documented that choosing a family successor is detrimental to firm performance. Thus – especially because several of us have a family firm background – we thought that there might be more to discover that could help to explain this enigma.

In what ways is your research innovative, and how do you think it will impact the field?

Our article takes a fresh and reconciliatory perspective by re-conceptualizing succession in family firms and, in particular, by making the social individual, i.e. the family successor in his/her social context and the reciprocal human interactions that constitute this group, the unit of analysis. Relying on social exchange theory and its core concepts of generalized exchange, the norm of reciprocity, and extended credit, we develop a new framework that can explain how social capital, values, and identity can be perpetuated across generations which – we argue – is of singular advantage to family successors. And indeed, when we isolate and separate important economic forces on the successor level, we observe that a “family member attribute” of the successor – understood as a CEO attribute – is performance enhancing or put differently: All other attributes equal, the family successor is the superior successor. That in itself has a series of implications for family firm theory. Of course, that is only the cocktail-party-version here, the full arguments are inside the article, which we highly recommend, especially to practitioners. The bottom line is that there is often value in the continuity of family leadership, as garnered social capital, identity, and values are retained.

What is the most important/ influential piece of scholarship you’ve read in the last year?

This would be Marcus Aurelius’ “Meditations” (Roman Emperor 161-180). Not only does it directly and in their core reveal the views on the world of the most powerful person of the time, which is entirely breathtaking and inspiring to read, but it is a towering literary monument to governing and human precepts of service and duty.

We hope that our work encourages future researchers to continue to find ways to examine other factors at the individual level that influences family firm outcomes. Only through the continued pursuit of future research at multiple levels within the family firm can we come to a better understanding of why the family firm is the unique environment that it is.

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The Influence of Supervisors on Employee Performance in Family Firms

[We’re pleased to welcome authors Benjamin D. McLarty, James M. Vardaman, and Tim Barnett of Mississippi State University. They recently published an article in Entrepreneurship Theory and Practice entitled “Congruence in Exchange: The Influence of Supervisors on Employee Performance in Family Firms,” which is currently free to read for a limited time. Below, they briefly describe the motivation and impact of their research]

Research on family firms predominantly takes place at the firm-level. Findings suggest that family firms prioritize specific non-economic goals labeled socio-emotional wealth, and that emphasizing socio-emotional wealth drives many strategic decisions in family firms. We were motivated to pursue this research because, although we knew socio-emotional wealth affects how family firms behave, we wanted to know how people in family firms behaved. Specifically, we wanted to explore how the importance that supervisors placed on socio-emotional wealth could impact their employees’ job performance as well as employees’ commitment to the family firm. Here, we reasoned that employees could perceive their supervisors differently based on whether they were a member of the family firm, and if they embraced the firm’s socio-emotional wealth goals. When these factors were in congruence, we surmised that employees would translate their commitment to the family firm into greater job performance (both task and citizenship behavior). When they perceived a lack of congruence in their supervisor, we argue that decreased performance would occur based on a reduced sense of genuineness in the social exchange relationship with their supervisor. Our results supported our hypothesizing and demonstrate that employees seek supervisors in family firms who accurately represent their true interests—i.e., if they are family members they should support the family’s goals, if they are not, they should not.

Our research is innovative in that we take a multi-pronged approach and test a three-way interaction to determine how performance will be impacted by commitment, supervisor familial status, and socio-emotional wealth importance all in concert. Testing three-ways effects is less common in family firm research and provides a unique means for understanding how these factors influence the family firm.

We hope that our work encourages future researchers to continue to find ways to examine other factors at the individual level that influences family firm outcomes. Only through the continued pursuit of future research at multiple levels within the family firm can we come to a better understanding of why the family firm is the unique environment that it is.

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Student Assessment of Venture Creation Courses in Entrepreneurship Higher Education

[We’re pleased to welcome author Helena Wenninger of Lancaster University Management School. Dr. Wenninger recently published an article in Entrepreneurship Education and Pedagogy entitled “Student Assessment of Venture Creation Courses in Entrepreneurship Higher Education—An Interdisciplinary Literature Review and Practical Case Analysis,” which is currently free to read for a limited time. Below, Dr. Wenninger discusses the motivations and impact of this research.]

What motivated you to pursue this research?

Living in the 21st century brings huge opportunities but also responsibilities for today’s graduates. Requirements from employers, quickly changing economic conditions, global competition, and environmental concerns highlight the need for people having a vision, being resilient, and have no fear of making decisions under uncertain conditions. Thus, entrepreneurial skills are more relevant than ever not only for creating a venture but also to contribute to a meaningful business environment and to society as a whole. However, students’ performance is mainly measured and benchmarked by their grade point average, which comprehensively gives assessment high priority in students’ considerations. Based on those observations, the idea was born to investigate how I as an assistant professor teaching e-business venture creation in one of my courses can contribute to a better match of these two aspects and spread the insights.

In what ways is your research innovative, and how do you think it will impact the field?

This research offers insights into student assessment for experiential entrepreneurship education. Entrepreneurship programmes are mushrooming around the world, but research is lacking behind regarding the impact that assessment has on student learning in this area. I hope my work will further direct attention on the importance of assessment methods for students’ experience and learning for action-oriented, experiential, and learning-by-doing approaches.

What advice would you give to new scholars and incoming researchers in this particular field of study?

Drawing from my personal experience as a lecturer in Information Systems, investigating the work from experienced scholars in the Entrepreneurship field, and discussing the topic with colleagues from the Educational Research department of my university was an encouraging and stimulating process for me to develop this work. Thus, I would recommend considering various sources of inspiration across relevant disciplines.

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