Enterprise risk management in small and medium family enterprises: the role of family involvement and CEO tenure

Abstract

Taking the right amount of risk is essential for successful business. As a response to the importance of risk management, the effectiveness and implementation of enterprise risk management (ERM) systems are recently discussed in literature. However, smaller firm entrepreneurs often deal with this challenge in practice in a more informal way. Most of these small and medium-sized enterprises (SME) are family firms, where family dynamics further influence their risk behaviour. Addressing the missing implementation of ERM in Small and Medium Family Enterprises (SMFE), we first analyse how ERM influences the performance of SMFE. In a second step, we investigate the impact of CEO tenure and family involvement as moderators on the ERM – performance relationship. Regression analysis on a sample of 116 Austrian SMFE shows that ERM implementation does not directly influence financial performance. CEO tenure and family involvement, however, both show significant moderating effects on the ERM – performance relationship. Adding to current literature on the topic, this study reveals that ERM performance is positively moderated by CEO tenure and negatively by family involvement.

How important is it for family businesses to maintain a strong entrepreneurial orientation over time?

“…on risk-taking (Daniell & Hamilton, 2010). Our study complements previous research, namely that families should maintain entrepreneurial orientation in the business when moving through different generations as generations bring new perspectives to the business (Glowka et al, 2020).…”

Guest editorial

“…Some research has already found such training to be important for applying more sophisticated risk management approaches (Beasley et al, 2015). In addition, there is initial evidence that top manager characteristics such as the CEO's tenure, ownership stake, locus of control and risk-taking propensity, as well as the CRO's education and career trajectory can help explain why some organizations feature more sophisticated risk management systems than others (Bailey, 2019;Glowka et al, 2021;Hiebl et al, 2019;Ludin et al, 2017;Paape and Speklé, 2012). However, the findings on how other characteristics of top managers such as CEOs, CFOs and CROs, as well as entire top management teams influence change in risk management and risk governance are still missing.…”

A Bibliometric Overview of Tourism Family Business

“…TFB are often centered on a vision which places personal or family needs and preferences ahead of growth and profit maximization [7,42], yet this presents them with specific challenges for entrepreneurship [43] and inheritance [44,45]. This feature is directly related to the fact that the majority of TFB are SMEs or even micro businesses [7,46], and the founder is still the owner and director [10,13,47,48]. Specifically, in the study by Kallmuenzer et al [46], nearly 70% of surveyed firms from Western Austria, Vorarlberg, Tyrol, and Salzburg are small firms with fewer than 49 employees.…”

“…Given that the development of resources and capabilities is the result of business decisions, the analysis of the germination process requires analysis of the specific features of the bodies in which responsibility and decision-making power rests. Agency theory points to the ownership structure as a determinant of the company's behavior, since its profile has important consequences for decision-making, exploitation of opportunities, resource and capabilities development, and attitude towards risk [48,136,137]. Therefore, we recommend that researchers consider: RQ6: What ownership and control structures, related to family involvement, are the most suitable for promoting dynamic capabilities and innovation performance in TFB?…”