Management Control Systems in Family Firms: A Review of the Literature and Directions for the Future

Abstract

Family firms play a significant role in the global economy. Although family firm literature has devoted much time and effort to investigating topics concerning corporate governance, leadership, ownership and succession, accounting issues have received relatively scant attention. In this paper, we assemble and critically review extant literature on the choice of management controls. This is an essential topic for firms as management control systems (MCS) are used to make sure subordinates behave in function of the goals of the firm. Family firms, however, have distinct features, such as differences in governance structures and goals, which can have a significant impact on whether and how MCS are used. We conclude this review paper by providing avenues for future research that can advance our understanding of both the determinants and the outcomes of the choice of MCS.

Tweaking the entrepreneurial orientation–performance relationship in family firms: the effect of control mechanisms and family-related goals

“…Control mechanisms were found to reduce agency behavior by aligning individual and firm preferences, consequently resulting in higher financial performance (Chrisman et al 2007;Sieger et al 2013;Helsen et al 2016). We hypothesize in accordance with prior literature that the use of control mechanisms will avoid agency behavior by aligning individual and family (firm) preferences through specific monitoring and evaluation procedures (Sieger et al 2013;Eisenhardt 1989).…”

“…Two promising context factors of entrepreneurial behavior in family firms are discussed in the following: management control mechanisms and family-related goals. Prior literature in management accounting already showed that family dynamics such as trust (Sundaramurthy 2008) lead to a reduction in information asymmetries (Senftlechner and Hiebl 2015) and therefore require more complex control and management initiatives (Helsen et al 2016). Our study demonstrates that in family firms the impact of particular EO dimensions on firm performance depends on the usage of control mechanisms and the adherence to family-related goals.…”

“…So far, prior family business research predominantly addressed the use of control mechanisms from an agency theory perspective (Jensen and Meckling 1976;Schulze et al 2001). Agency problems were found to harm family business performance (Schulze et al 2001) and thus need to be controlled (Senftlechner and Hiebl 2015;Helsen et al 2016).…”

“…Literature on the use of control mechanisms in family business research is scarce (Helsen et al 2016;Mitter et al 2014). Drawing on accounting literature (e.g.…”

Personnel- and action control in gazelle companies in Sweden

“…Personnel control includes processes to involve, influence, motivate, and inspire, and it also considers personnel goals (Kleine and Weißenberger 2014). Nevertheless, such personnel goals develop not in isolation but through followup action controls (Kleine and Weißenberger 2014) during an operation rather than afterwards (Helsen et al 2016). Many of these are forward looking.…”