Does Growth Represent Chimera or Bellerophon for a Family Business? The Role of Entrepreneurial Orientation and Family Influence Nuances

Abstract

Growth brings lifeblood to sustain longevity across generation, but also critical challenges for family business. Relying on the behavioral agency model and its assumptions on risk-bearing in family firms, we discuss and test the effect of family involvement in the top management team (TMT) on family business growth. We use an inputbehavior-outcome framework based on the mediating role of entrepreneurial orientation. We also consider the moderating role of different ownership structures on the relationship between family involvement in the TMT on entrepreneurial orientation (EO). Results based on survey data collected by the STEP research consortium support the hypothesized negative effect of family involvement in the TMT on growth, fully mediated by EO. We also find that the presence of passive family members as majority shareholders and multigenerational involvement in ownership are important contingencies of the direct effect. Our evidence points to the fact that risk-bearing in family firms is not just dependent on the degree of family involvement in management, but also on the interests of different types of shareholders. We show that the at-times stylized negative traits of family firms are not universally valid, and that a comprehensive view of family influence over the business is needed to ascertain whether and to what extent these firms actually achieve growth.

Family Business Growth Around the World

“…In contrast to private family firms that do not differ in growth from their nonfamily counterparts (Chrisman et al, 2004), our publicly traded family firms have, on average, a 1% higher growth rate than their nonfamily counterparts. Our finding also contrasts with the prior cross-sectional studies on family firm growth by Lee (2006) and Campopiano et al (2019), very likely because our panel data allow us to obtain more accurate estimates of model parameters by observing growth rates over a longer period and covering different stages of the business cycle and of firm development (Evert et al, 2016). In addition, our identification strategy reduces endogeneity concerns via strong and valid IVs (Rose & Stone, 2011), as confirmed by both Kleibergen-Paap and Hansen tests, and it also mitigates survivorship bias (Elton et al, 1996).…”

“…And the empirical findings to date do not help to resolve this debate. For example whereas the cross-sectional analysis of S&P 500 firms by Lee (2006) reveals that family firms on average exhibit higher growth rates than non-family firms, larger cross-sectional studies of family firms from 35 countries by Campopiano et al (2019) and of entrepreneurial firms from 80 countries by Chen et al (2014) report a negative effect of family influence. In other words, "the jury is still out".…”

“…Growth is a key concern given the common view that family firms sacrifice growth in favor of family influencea basis for much of the theorizing on this type of organization . The few studies of growth are crosssectional (Campopiano, Brumana, Minola, & Cassia, 2019;Lee, 2006;McConaughy & Phillips, 1999), and have focused mainly on small and medium-sized entrepreneurial firms (Chen et al, 2014;Chrisman, Chua, & Litz, 2004). We arbitrate between and condition the application of key conceptual perspectives of family firmsprincipal-principal agency theory and the long-term orientation perspective (Miller & Le Breton-Miller, 2005Lumpkin & Brigham, 2011).…”

Corporate Entrepreneurship and Family Business: Learning Across Domains

“…Owners have the ability and discretion to shape decision‐making (Chrisman et al, 2016; Fang et al, 2021), and different types of owners express different (and sometimes conflicting) preferences regarding firms’ entrepreneurial behaviour (De Massis et al, 2018a). Therefore, including non‐family managers (Minichilli et al, 2010) as an executive category in the entrepreneurial behaviour layer and non‐family and family nonexecutive owners (Campopiano et al, 2020) among organizational antecedents seems appropriate.…”

Effect of Entrepreneurial Orientation and Family Involvement on Family Business Performance: Case Study in Hotel Business in Yogyakarta

“…Researchers conceptually agree that entrepreneurial orientation encourages superior business performance [8]. Empirical studies find that entrepreneurial orientation has a positive effect on financial performance and non-financial performance of businesses [15]. Other research states that entrepreneurial orientation has a positive effect on overall business performance mediated by market orientation [17].…”