Viewing Family Firm Behavior and Governance Through the Lens of Agency and Stewardship Theories

Abstract

Agency and stewardship theories are prominent perspectives to examine myriad issues within family firms. Although considered opposing theories, both address the same phenomena: the individual-level behaviors and firm-level governance mechanisms that predict organizational outcomes. Accordingly, we review and synthesize these theories concurrently, using the concepts of behavior and governance as our organizing framework. Our review encompasses 107 family firm articles grounded in agency and/or stewardship theory, published between 2000 and 2014 in 24 journals across several disciplines. Additionally, we identify future research areas that provide scholars opportunities to push theoretical boundaries and offer further insights into the family firm.

Family entrepreneurship as a field of research: Exploring its contours and contents

“…Although often considered as opposing theories, both stewardship and agency theory address the same phenomena: the individual-level behaviors and firm-level governance mechanisms that predict organizational outcomes (Madison, Holt, Kellermanns, & Ranft, 2015). Accordingly, we review these theories concomitantly, using the salient points for understanding family entrepreneurship.…”

Are Family Firms Good Employers?

“…Research about family firm governance (see Madison, Holt, Kellermanns, & Ranft (2016) for a review) is also mixed, with some authors suggesting that stewardship behaviors are prevalent (Pearson & Marler, 2010), while others find that agentic behavior is commonplace (Chrisman et al, 2013).…”

“…Hernandez (2012) argues, however, that financial stewardship is but one among many behaviors that are antecedent to the emergence and institutionalization of organizational stewardship. Moreover, the relatively widespread notion that stewardship behaviors emerge over a period of time (Madison et al, 2016) also implies that financial stewardship may sometimes be antecedent to, and hence not concomitant with, organizational stewardship.…”

“…Finally, Davis et al (1997) and Madison et al (2016) argue that governance practices that are commonplace in public firms, such as the use of incentive compensation and emphasis on short-run financial performance, can deter stewardship. Miller et al (2008) and others (Corbetta & Salvato, 2004;Eddleston & Kellermanns, 2007;Frey, 1993Frey, , 1997 therefore argue that stewardship behaviors are most likely to emerge when ownership is private and owners are free to implement policies that maximize their welfare.…”

Identity in Family Firms: A Theoretical Analysis of Incentives and Contracts

“…The model has been criticized for engendering an undersocialized view of principals and agents (Lubatkin, Lane, Collin, & Very, 2007). Also, it does not allow for a dynamic analysis, in the sense that it neither describes what happens after goal alignment is realized, nor how the firm's governance change over time (Madison, Holt, Kellermanns, & Ranft, 2015).…”