Understanding the transgenerational orientation of family businesses: the role of family governance and business family identity

Abstract

The development of a transgenerational orientation is one of the most significant challenges that family businesses face and only a small number actually survive across generations. While prior research has focused on the business unit to provide us with a solid understanding of how corporate governance affects business performance and continuity, the role of the business family in the development of a transgenerational orientation has received less attention. To address this gap, this article applies a new systems and social identity theory framework to examine how family governance and business family identity can contribute to strengthening the transgenerational orientation of the business. A transgenerational orientation is defined as a decision premise to maintain the family's control over the business across generations. Using a large data set, findings show that the presence of family governance measures and the business family's identity are positively related to a transgenerational orientation of the business, with business family identity acting as a mediator. Thus, the development of family governance measures can foster communication within the business family and enhance the family members' emotional investment in the business which strengthens the transgenerational orientation in the business.

Family Firm Goals and their Effects on Strategy, Family and Organization Behavior: A Review and Research Agenda

“…Findings also indicate a positive relationship between family governance communication mechanisms (e.g. family constitutions, formal and informal meetings and family councils) and intra‐family succession intentions or goals (Suess‐Reyes ). These findings illustrate the potential impact that communication can have as a feedback mechanism.…”

Tracing the Roots of Constructive Conflict Management in Family Firms

“…In family firms, trust is invoked as a governance mechanism facilitating open-minded discussions in family forums, such as family councils or boards, in which family members participate (Eddleston, Chrisman, Steier, & Chua, 2010). Thus, family governance contributes to family communication and creates affective significance and a feeling of shared purpose, which results in supportive behavior among family members (Suess-Reyes, 2017). Moreover, maintaining trust in family firms implies appreciating the value of functional conflict in decision making (Sundaramurthy, 2008).…”

Management control mechanisms and stewardship in family firms: an analysis of antecedents and consequences

“…On one side, we find that higher family control and influence intention is negatively associated with the level of formality and the level of participation in the goal setting process, which implies a higher level of centralization of decisions made in the firm and less transparency concerning the family firm's goals. On the other side, our results provide evidence that a family's dynastic succession intentions are positively associated with more formal and more participative goal setting and performance evaluation processes (Giovannoni et al, 2011;Songini et al, 2013;Suess-Reyes, 2016;Zahra et al, 2007). These findings are also consistent with the discussion of a restrictive and an extended SEW perspective (see Miller & Le Breton-Miller, 2014), which has implications for priorities and outcomes in the family firm, such as time horizons, strategic behaviours, management control and management arrangements, among others Miller & Le Breton-Miller, 2014).…”

“…The renewal of family bonds through dynastic succession points to the family's intention to maintain the company for future generations -also recognized in the literature as transgenerational sustainability or transgenerational orientation (Berrone et al, 2012;Chrisman, Chua, Pearson, & Barnett, 2012;Suess-Reyes, 2016;Zellweger & Dehlen, 2012). In this sense, the enterprise is seen as a family's heritage and tradition (Berrone et al, 2012;Casson, 1999), and it indicates that the firm is not just an asset held by the family.…”

“…Transgenerational orientation is a central point in the main frameworks of family distinctive characteristics and intentions (Suess-Reyes, 2016), such as familiness, essence, and socioemotional wealth.…”