A selection of interesting research and articles we found recently.
Does having family members in the top team influence performance?
Yes, according to Pankaj Patel and Danielle Cooper, who investigated the upper echelons of publicly-traded family firms that comprise both family and non-family members. Given that family members are often very influential in top teams, non-family members may participate less, thereby lowering the ability to devise strategic actions that increase performance.
After examining 231 publicly-traded family firms, representing 1,934 firm-year observations from 2001 to 2010 and controlling for endogeneity, the authors found that greater equality in structural power (or compensation, status, and representation) across family and non-family upper echelon members enhanced performance in family firms, but was weaker under the presence of a founder CEO, among other things.
For more details, see: Pankaj C. Patel and Danielle Cooper. 2014. Structural Power Equality between Family and Non-Family TMT Members and the Performance of Family Firms.
Academy of Management Journal, 57, 1624-1649.
Are family owned businesses more or less susceptible to misconduct?
Ding Shujun and Wu Zhenyu explored the effects of family ownership on the corporate misconduct of small firms in the United States. They concluded that small family-owned firms are less likely to commit misconduct than small non-family-owned firms. One possible explanation is that family firms are concerned about the trans-generational succession of moral capital. However, a negative relationship between family ownership and misconduct appears only in mature firms. In relatively mature firms, only those family firms whose owners are older are less likely to commit corporate misconduct.
Read the article: Shujun Ding and Zhenyu Wu. 2014. Family Ownership and Corporate Misconduct in U.S. Small Firms.
Journal of Business Ethics, 123(2), 183-195.
Family firms bearing their founder’s name benefit on new product introductions
Saim Kashmiri and Vijay Mahajan explored the relationship between the way family firms are named, and the shareholder value impact of these firms’ names on new product introductions. Using 1,294 product introduction announcements of 107 publicly listed US family firms, the authors showed that the presence of the founding family’s name as part of a family firm’s name acts as a valuable firm resource, increasing the abnormal stock returns surrounding the firm’s new product introductions.
Superior returns to family-named firms’ new product introductions are partially mediated by these firms’ history of ethical product-related behaviour: family-named firms, particularly those with corporate branding, and those where a founding family member holds the CEO or chairman position, are more likely to exhibit a history of avoiding controversies from product safety and deceptive advertising. The authors highlight the managerial and theoretical contributions of this research.
See: Saim Kashmiri and Vijay Mahajan. 2014. A Rose by Any Other Name: Are Family Firms Named After Their Founding Families Rewarded More for Their New Product Introductions?
Journal of Business Ethics, 124(1), 81-99.
CSR actions in publicly traded & versus family-owned companies
Rajat Panwar and his associates argue that corporate social responsibility (CSR) is one of the ways through which companies gain legitimacy. However, CSR actions themselves are subject to public skepticism because of increased public awareness of greenwashing and scandalous corporate behavior. Legitimacy of CSR actions is i influenced by the actions of the company, but is also rooted in the basic cultural values of a society and in the ideologies of evaluators. Panwar’s study compared the legitimacy of CSR actions between publicly-traded and family-owned forest products companies.
Results indicate a lower legitimacy for CSR actions of publicly-traded companies than for family-owned companies. The study also examined the effect of social responsibility orientation (SRO) of evaluators on the legitimacy accorded to companies’ CSR actions. Panwar and associates found that SRO was negatively associated with legitimacy, especially for women. Perceived profitability of companies was negatively associated with legitimacy of CSR actions for publicly-traded but not for family-owned companies.
Read further in Rajat Panwar, Karen Paul, Erlend Nybakk, Eric Hansen and Derek Thompson. 2014. The Legitimacy of CSR Actions of Publicly Traded Companies Versus Family-Owned Companies.
Journal of Business Ethics, 125(3), 481-496.
Does organisational harmony enhance performance in family businesses?
Yes, harmony does improve family business performance according to recent research that compared the levels of organisational harmony between family and non-family firms. The researchers also examined the influence of organisational harmony on family firms’ performance (profitability, longevity and group cohesion). Starting from a definition of organisational harmony as a value and considering the importance of the management of organisational values, the researchers adopted three topics indicated by the general literature (organisational climate, trust and participation) to analyse organisational harmony, as well as three other topics for performance (profitability, survival and group cohesion).
Results indicate that family firms have higher levels of these three qualities than non-family firms, and that the levels of trust, participation and organisational climate have a positive and significant influence on the performance of family firms. These results can be understood as a consequence of the influence of family social capital on organisational social capital and so on the performance of family businesses.
From the perspective of institutionalism, the higher levels of harmony existing in family businesses are a reflection of the pressures that the owning family as an institution exercises on the organisational social capital in its companies.
Read further details at: M. Carmen Ruiz Jiménez, Manuel Carlos Vallejo Martos, and Rocío Martínez Jiménez. 2015. Organisational Harmony as a Value in Family Businesses and Its Influence on Performance.
Journal of Business Ethics, 126(2), 259-272.