Is It Better to Govern Managers Via Agency or Stewardship?

[We’re pleased to welcome author Albert E. James of Dalhousie University, Canada. James recently published an article in the Family Business Review entitled “Is It Better to Govern Managers via Agency or Stewardship? Examining Asymmetries by Family Versus Nonfamily Affiliation,” which is currently free to read for a limited time. Below, James reflects on the inspiration for conducting this research:]

fbra_30_2.coverThe research is based upon the first author’s dissertation. It is the result of his effort to understand the many different behaviours and outcomes that he witnessed during his 20-year career working as a non-family employee for various family firms—particularly his desire to understand why and how some families’ businesses seem to be more successful than others. It is also the result of a PhD supervisor’s determination to see her student succeed as an academic and her willingness to let him follow his passion and research questions.

The most challenging aspect of this process has been finding the way to tell the story of the research project. What is published here is the result of many re-writes, iterations, and direction changes. It was challenging to adapt concepts and measures to the particularities of the family business field. And it was challenging to make full use of the reviewers’ and editor’s advice. All in all, though, the challenges were an opportunity for a new academic to learn many things about rigorous research and publishing. Without the patient work, extensive knowledge and leadership of the co-authors, none of the challenges would have been overcome.

One of the study’s most surprising findings is the high level of positive work outcomes exhibited by both the family and non-family managers in the sample. Sometimes family business managers—of either type—are portrayed with at least a hint of negativity. Those in our sample, however, tended to score highly on behaviours and attitudes that are normally considered beneficial to organizations (i.e., job performance, organizational identification and affective commitment). As for the anticipated impact of our research, we hope that it will become known for providing empirical evidence that challenges commonly held assumptions regarding the attitudes and behaviours exhibited by non-family versus family managers and the mechanisms by which each group should be governed.

The advice I would give new scholars is to be willing to re-work the story you wanted to tell to your chosen audience. No matter how interesting you believe your research to be, you have to be willing to find the right way to tell the story. You need to tell the story in a way that fits your audience’s conversations. It is not easy to let go of parts of your research that were highly motivational for you. As hard as it is upon a first read, don’t take the reviewer and editor comments personally. Instead, take your time with the comments, let your reactions cool, and then find the nuggets and gems within them. Don’t be afraid to ask for help. This research started off as a study of non-family manager turnover intentions and became a story of the governance mechanisms used in family businesses. It is important to keep your eye on your end goal. If you can’t tell the entire story this time around, tell what you can, save the rest, add what you learned from the current round, and mix it into your next project.

Stay up-to-date with the latest research from the Family Business Review and sign up for email alerts today through the homepage!

The Mind-Set of Editors and Reviewers

Get the latest insight on what editors are looking for in your submitted manuscript! SAGE Publishing is proud to feature the latest editorial from Family Business Review, entitled, “The Mind-Set of Editors and Reviewers.” This editorial is co-authored by James J. Chrisman, Pramodita Sharma and Jess Chua, and is currently free to read for a limited time.

Below, please find an excerpt from the editorial, shedding light on the necessary steps an author must face when preparing a manuscript that stands out:

The formula for getting a manuscript published seems deceptively simple, with an emphasis on deceptively. For family business research, the four-step process starts with authors coming up with interesting research questions, that when addressed, will change scholarly understanding of the motivation, behavior, or performance of family firms. As elaborated in the editorial by Salvato and Aldrich (2012), while there are many sources of inspiration for generating interesting research questions, in professional fields like family business studies, researchers with closer linkages to practice and/or prior literature are better positioned to identify questions that lead to usable knowledge that is not only published but also well-read and cited (cf. Lindblom & Cohen, 1979). Objectives such as simply “getting published” may be more dominant in earlier career stages. Over time, however, most scholars hope to make a difference in the mind-sets of other researchers and ultimately practitioners (Vermeulen, 2007; Zahra & Sharma, 2004). But, this does not always happen.

Click here to read the full article. Don’t forget to sign up to receive email alerts so you never miss the latest research from Family Business Review!

Introducing the Editor-Elect for Family Business Review

We are excited to announce the new incoming editor for Family Business Review, Dr. Tyge Payne. Dr. Payne graciously provided some information regarding his education, career, and experience in the management field:

Dr. Payne is the Georgie G. Snyder Professor of Strategic Management and a Jerry S. Rawls Professor at Texas Tech University (TTU). He returned to TTU in 2006 after four years as an Assistant Professor at the University of Texas at Arlington. He holds a PhD in Strategic Management and an MBA, both from Texas Tech University. He also has a BS in PharmaPayne_RCOB_1.jpgcy from Southwestern Oklahoma State University and has been a registered pharmacist since 1994. Dr. Payne’s research interests include configurations, family business, organizational ethics, multi-level methods, social capital, and venture capitalism. He has authored or co-authored over 60 peer-reviewed publications, which appear in such outlets as Business Ethics Quarterly, Entrepreneurship Theory and Practice (ETP), Family Business Review (FBR), Group & Organization Management, Health Care Management Review, Journal of Business Ethics, Journal of Management (JoM), Journal of Management Studies (JMS), Organizational Research Methods, Organization Science, and Strategic Entrepreneurship Journal (SEJ), among others.

Dr. Payne is currently an Associate Editor (AE) for FBR and was recently selected to take over FBR as Editor-in-Chief beginning on January 1, 2018.  This appointment follows extensive editing experience including serving four years as AE at FBR and as a Special Issue Editor on various topics, including 1) Social Capital and Entrepreneurship (2013) in ETP, 2) Process and Variance Methods in Family Business Research (2017) for FBR, 3) Reviews on Family Business (2018) for FBR, and 4) Market Entry: The Who, Where, What, How and When (2018) for the JMS.

Family Business Review  provides a scholarly forum to publish conceptual, theoretical and empirical research aimed to advance the understanding of family enterprise around the world. FBR publishes insightful articles that address issues at the interface of family and business systems. It is not tied to any particular discipline, methods, or topFBR_72ppiRGB_powerpoint.jpgics.

Published since 1988, Family Business Review is an SSCI listed refereed journal devoted exclusively to exploration of the dynamics of family enterprise. Its interdisciplinary forum captures the insights of professions from diverse fields such as accounting, behavioral sciences, entrepreneurship, finance, management, family business and family wealth consulting, law and public policy.

 

Don’t miss the latest research from FBR, and sign up for email alerts through the homepage here

Family Firms and the Impact of Incentive Compensation

[We’re pleased to welcome authors James Chrisman of Mississippi State University, Srikant Devaraj of Ball State University, and Pankaj Patel of Villanova University. They recently published an article in Family Business Review entitled “The Impact of Incentive Compensation on Labor Productivity in Family and Nonfamily Firms.” From Chrisman, Devaraj, and Patel:]

 Family firms are thought to face a managerial capacity constraint owing to the preference of hFBR_72ppiRGB_powerpoint.jpgigh-ability job candidates from outside the family to seek employment with non-family firms, which usually offer higher compensation and more lucrative career opportunities. In our paper, we theorize that incentive compensation can ease this constraint by signaling the attractiveness of working in family firms, thereby increasing the average ability of a family firm’s workforce. We therefore hypothesize that incentive compensation will reduce the productivity gap between family firms and non-family firms.

We are interested in this topic because much of the focus in the literature on non-family employees in family firms deals with issues associated with alignment of interests after workers have been hired. Few studies deal with the pre-employment problem of adverse selection, which is primarily (but not entirely) an issue of worker ability rather than worker effort. We also wanted to emphasize that if job candidates seek employment with firms that are compatible with their self-interest, adverse selection can exist even in the absence of an opportunistic pursuit of self-interest (or in the presence of stewardship motives).

Bounded rationality and information asymmetry make judging the ability of potential employees difficult for the owner-managers of both family firms and non-family firms (and even for the potential employees themselves). However, when the labor pool available to family firms becomes attenuated because high-ability workers self-sort according to a preference to work in non-family firms, the adverse selection problem facing family owner-managers becomes even greater.

Incentive compensation will be more valuable for high-ability job candidates than it will for low-ability job candidates because the former are most likely to benefit from it. Thus, incentive compensation signals performance will be rewarded, which may help alleviate the adverse selection problem facing family firms. Our empirical analysis of a matched sample of over 200,000 small and medium-sized firms obtained from a U.S. Census survey supports our contentions. Findings indicate that the productivity of family firms that provide incentive compensation increases at a greater rate than the productivity of non-family firms that provide incentive compensation (compared, respectively, with family and non-family firms that do not offer incentive compensation).

We hope that our paper will inspire further work on the adverse selection problem facing family firms. We also hope that our paper will lead researchers to focus more on how bounded rationality and information asymmetry, rather than simply opportunism or the lack thereof, influences the behavior and performance of non-family employees in family versus non-family firms.  In this respect, we suggest that the presence of bounded rationality and information asymmetry make incentive compensation and monitoring valuable tools in family firms regardless of the composition or proclivities to behave opportunistically of the workforce.

Sign up for email alerts so you never miss the latest research. 

Small Family Firms: How Knowledge is Shared

One could imagine that every small family firm has their particular habits when knowledge sharing, especially when the success (or failure) of the business relies on effective communication.

A recent study published in Family Business Review analyzes the different leadership approaches to knowledge sharing, and we are pleased to welcome one of the authors, James Cunningham, who reflects on the foundation and findings of the research. The paper, entitled “Perceptions of Knowledge Sharing Amongst Small Family Firm Leaders–A Structural Equation Model,” is co-authored by Claire Seaman and David McGuire. From Cunningham:]

Family firms are known for the unique ways in which they view and run their business. This has led many to believe that firms with a family influence behave differeFBR_72ppiRGB_powerpoint.jpgntly to their non-family counterparts. While a lot of research focuses on the many implications of this difference for the economic impact family firms, in terms of strategi
c direction, longevity, etc., we were more curious to know how the influence of family impacts what it is like inside the firm.

In this respect, knowledge is increasingly becoming the most important internal resource for a competitive organisation in the contemporary business environment. Integrating and exploiting the knowledge of people in the business has become one of the key activities of the modern business leader. The impact of leadership on how the firm manages knowledge is long established in the broader management literature, but our instincts would tell us that family firms will have their own way of approaching and managing knowledge. In this article, we uncover the different leadership behaviours played out in small family firms and how these behaviours are related to the leader’s perception of knowledge sharing in the firm. Essentially, we ask the question, does family influence help or hinder the development of a knowledge resource?

Unsurprisingly, we found a variety of leadership behaviours employed by family firm leaders. We present a choice in how the family firm views its knowledge resource. We suggest that a greater level of family influence implies more guidance-based leadership when it comes to knowledge. Knowledge here is considered a quality the family leaders have, which must be ‘distilled’ to other organisational members. While, the alternative is a participative approach to knowledge in the firm, one more accepting of input from others, but with the potential to reduce family control.

This choice of leadership approach is important for family business leaders to consider, as there are important implications for the development of their knowledge resource. We see these findings as part of a research direction which moves away from viewing family firms as a homogenous group, subject to the overbearing influence of family. Instead, we present the behaviours inside these organisation as choices, and these choices at the most basic level represent the business intentions of family firm leaders.

Never miss new research published from FBR; sign up for email alerts through the journal homepage. 

Incumbents’ Attitude Toward Intrafamily Succession

[We’re pleased to welcome author Alfredo De Massis of Free University of Bozen-Bolzano, who recently published an article in Family Business Review entitled “Incumbents’ Attitude Toward Intrafamily Succession: An Investigation of Its Antecedents,” co-authored by  Philipp Sieger, Jess H. Chua, and Silvio Vismara. From De Massis:]

  • WFBR_72ppiRGB_powerpoint.jpghat inspired you to be interested in this topic?

This study examines how family firm incumbent leaders’ attitude toward intra-family
succession is influenced by family traits, firm characteristics, and incumbent leader attribute.Two considerations played an important role when we decided to investigate the incumbent leaders’ attitude toward intra-family succession and designed a survey targeted to Italian family firm incumbents: (i) the family firm intra-family succession process is largely under incumbents’ control; and (ii) without incumbents’ positive attitude, the process is less likely to even begin.

So a clear understanding of the antecedents of the incumbent leaders’ attitude toward intra-family succession is important in order to ensure transfer of leadership from one generation to the next.

  • Were there findings that were surprising to you?

One of the most surprising findings is that, contrary to our hypothesis, our data show that incumbents’ attitude toward intra-family succession is negatively affected by the combination of family ownership duration and firm economic performance. This unexpected finding supports the argument that better economic performance leads to higher firm financial value, which favors the immediate benefits of selling the business over the long-term ones of intra-family succession, while duration of ownership, through professionalization, may make the higher value business more liquid.

  • How do you see this study influencing future research and/or practice?

Next-generation members’ intention for intra-family succession has received considerable scholarly attention, but researchers have so far overlooked that of the incumbents despite recent literature reviews calling for research on intra-family succession intention from incumbents’ perspective. Indeed, most prior studies examining family business succession from incumbents’ perspective have focused on the actual behavior (i.e., intra-family succession) and dealt with the issues and challenges during the succession process, with none of them taking a step back to focus on the intention toward such behavior.

To the best of our knowledge, the only empirical study explicitly focusing on the intention for intra-family succession is the exploratory one by Chua et al. (1999). That study did not probe deeper into the antecedents of intra-family succession intention, so we lack rigorous, systematic, and empirical investigations of the factors affecting this important determinant of family firm behavior.

One of the most important determinants of the intention for intra-family succession is attitude toward intra-family succession. Our study examines how family firm incumbent leaders’ attitude toward intra-family succession is influenced by family traits, firm characteristics, and incumbent leader attribute.

Theoretically, our study contributes toward a more complete understanding of family business succession and, practically, provides suggestions about how to influence incumbents’ attitude toward intra-family succession.

 

Do you enjoy the article? Don’t miss new research and sign up for email alerts today!
Click here to follow Family Business Review on Twitter.

Succession is Key: Studying Successor Team Dynamics in Family Firms

6862116590_53e60358e7_z[We’re pleased to welcome Jim Cater of The University of Texas at Tyler. Jim recently published an article in Family Business Review with co-authors Roland E. Kidwell and Kerri M. Camp entitled “Successor Team Dynamics in Family Firms.” From Jim:]

  • What inspired you to be interested in this topic?

My work in family business studies is inspired by my experience as a third generation successor in our family’s business.  My grandfather and my father worked their entire careers in our retail furniture company in south Florida.  Reportedly, at my birth, my grandfather happily exclaimed, “Now, we have someone to run the business for another generation.”

Family businesses ran from father to son in a straight line or so I thought.  After entering our family business, I found that our competitors in south Florida were mostly family businesses.  Two of the largest competitors had multiple family Current Issue Covermembers involved in each generation.  They had plenty of family members to manage multiple stores, while we had to rely on non-family managers, which proved to be problematic for us.

As the furniture business became more and more competitive, my parents decided to sell our stores so that they could retire and so that I could pursue an academic career.  I felt driven to write my dissertation on successors in family businesses. Here again I encountered large families with teams of successors who were able to share responsibilities and work harmoniously together.

The Successor Team paper is the culmination of years of experience, thought, and observation.

The abstract for the paper:

In a qualitative study of 19 family businesses, we examine the dynamics of successor teams, using insights from the family dynamics and succession literature and teams and conflict theory in family business. In-depth interviews with family firm leaders identified two major successor team performance outcomes, a positive track leading to team commitment and a negative track resulting in dissolution of the team and potentially the family firm. Our findings are encapsulated by 10 propositions and a model of successor team dynamics.

You can read “Successor Team Dynamics in Family Firms,” published in Family Business Review, free for the next two weeks by clicking here. Want to stay current on all of the latest research published by Family Business ReviewClick here to sign up for e-alerts!

*Image attributed to Stefano Lubiana (CC)