Reacting to a Generalised Crisis. A Theoretical Approach to the Consumption of Slack Resources in Family Firms

Abstract

Research to date has shown that companies can accumulate resources over those strictly needed in order to overcome the uncertainty associated to a crisis. But the usage, redeployment, or consumption of this excess of resources when facing an adverse environment is yet underexplored. As suggested by the literature, the condition of family business can exert an important effect in such behaviour. This paper proposes a theoretical framework, focused on family business, about how firms manage the different slack resources when facing a general crisis. We make a call on family business scholars to leverage our propositions and the existing literature on slack resources to develop a guidance for family owners when facing an economic downturn.

Speed of Retrenchment Strategies of Family Firms in Times of Crisis

“…However, although a priori can be a great advantage in declining scenarios, small family businesses frequently due to lack of resources and qualified personnel do not anticipate these environments with the consequent damage it generates (Alonso-Dos-Santos & Llanos-Contreras, 2019). Therefore, access to resources available to larger companies may allow a faster decrease in a decline (Agustí et al, 2021). As mentioned above, firm size is linked to the firm's available stock of resources and capabilities (Penrose, 1959).…”

“…As Josefy et al (2017, p. 779) state, firm size has emerged as one of the strongest antecedents of survival outcomes. In the case of family business, their stock is combined with family-related resources (Sirmon & Hitt, 2003) that make it possible to hire external, professional and non-family managers and directors, improving human and social capital, as well as other, such as financial, resources (Agustí et al, 2021;Brewton et al, 2010). Larger family firms will be able to take quick turnaround decisions, mobilizing a wider set of resources and capabilities in order to achieve rapid performance recovery.…”

“…Recent authors have been keen to adopt a dynamic perspective for turnaround strategy research (Barbero et al, 2017(Barbero et al, , 2020King et al, 2022). We know how underperforming family firms react in order to improve their outcomes, but we still do not fully understand the pacing of their behavior during these processes (Agustí et al, 2021;Laffranchini et al, 2022). We believe that this knowledge can help to understand the impact of the family character on strategic decisions taken by a family business and especially from the perspective of the SEW (Belling et al, 2022;Hernández-Linares et al, 2019;Laffranchini et al, 2020).…”