STRATEGIC ENTREPRENEURSHIP IN FAMILY BUSINESS
G.T. Lumpkin,1 Lloyd Steier,2 and Mike Wright34*
1Department
of Entrepreneurship and Emerging Enterprises, Whitman School of Management,
Syracuse University, Syracuse, New York
2Center for Entrepreneurship and Family Enterprise, University of Alberta School of Business,
University of Alberta, Edmonton, Alberta, Canada
3Centre for Management Buy-out Research, Imperial College Business School, London, U.K.
4Department of Management, Innovation and Entrepreneurship, Ghent University, Ghent,
Belgium
Keywords: family business; strategic entrepreneurship; familiness; succession; governance
*Correspondence to: Mike Wright, Centre for Management Buy-out Research, Imperial College
Business School, Exhibition Road, London SW7, U.K. E-mail: mike.wright@imperial.ac.uk
The purpose of this special issue is to promote research on the role of family in nurturing
entrepreneurial ventures as well as on the importance of strategic entrepreneurship in
maintaining the strength and viability of established and multigenerational family firms.
Two related research questions are at the heart of this inquiry: (1) In what ways does the
influence of family matter to strategic entrepreneurship?; and (2) How can strategic
entrepreneurship contribute to understanding and strengthening family firms? We begin
this introductory paper by providing a brief overview of the contributions of each of the
papers in this issue. We then develop a framework for addressing the role of family firms
in strategic entrepreneurship that highlights the input-process-output nature of strategic
entrepreneurship in family business and the contexts in which they occur. We conclude by
outlining a research agenda for future research in this area along the themes relating to
this framework. Copyright © 2011 Strategic Management Society.
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INTRODUCTION
Human beings are essentially social creatures who throughout history have created social
structures that shape their interactions. These structures have various manifestations that are
oftentimes overlapping, for example, the state, the church, the family, and business
organizations. Even though family represents a primary institution (one that greatly impacts the
creation, survival, and success of firms worldwide), management scholars have traditionally
devoted relatively little attention to this phenomenon. Recently, two distinct developments have
emerged that help address this deficiency. First, in the ‘last 15 years or so’ (Gomez-Mejia et al.,
2011: 654) research on family firms has grown tremendously. Second, research on strategic
entrepreneurship (SE) also began in earnest ‘early in the 21st century’ (Hitt et al., 2011: 57) and
offers a new lens with the potential to shed new light on the success of family business. This
special issue focuses on the intersection between strategic entrepreneurship and family business.
Family is manifest in both the creation and organization of most of the world’s firms (La
Porta et al., 1999; Gomez-Mejia et al., 2007). Within the U.S., recent research on the sociology
of entrepreneurship (Ruef, 2010) further debunks the ‘myth’ of the solo actor entrepreneur and
notes that most entrepreneurial activity is essentially a ‘group’ effort with family groups—
spouses, cohabiting partners, and kin—constituting an essential mechanism of the venturecreation process. The importance of family business to global economies is paramount. The
impact is so pervasive in part because family influences every level of analysis. Research finds
that: families play a vital role in the venture-creation process by providing or withholding
funding and emotional support (Sharma, 2004); the dominant coalitions of most family
businesses powerfully influence firm-level strategic orientations (Chrisman, Chua, and Sharma,
2005); and since family firms represent the majority of workforce employment and GDP
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(Astrachan and Shanker, 2003), there are significant policy implications in both developed and
developing nations. Considering the magnitude of their contribution, it could be argued that
research aimed at understanding business generally requires an appreciation of family business.
However, while more than 90 percent of small and medium enterprises (SMEs) are family
businesses (Astrachan and Shanker, 2003) and even one-third of Fortune 500 firms in the U.S.
are family influenced (Anderson and Reeb, 2003), general management research has hitherto
been studying family firms in their samples often without acknowledging the unique family
dynamics and influence that are at work.
The development of strategic entrepreneurship research has overlapped with growth in
family business research and is emerging rapidly as a topic critical for wealth creation and
economic strength. It is, therefore, important to explore the role of strategic entrepreneurship
within the context of family firms. So far, few researchers have investigated the role of strategic
entrepreneurship in family businesses. Generally speaking, entrepreneurship scholars have
tended to underestimate the contribution of family systems to entrepreneurial success, and many
existing family business scholars have focused on wealth preservation rather than wealthcreating activities such as opportunity recognition, innovation, strategy, and growth. The aim of
this essay and the purpose of this special issue is to promote research on the role of family in
nurturing entrepreneurial ventures as well as on the importance of strategic entrepreneurship in
maintaining the strength and viability of established and multigenerational family firms. Two
related research questions are at the heart of this inquiry: (1) In what ways does the influence of
family matter to strategic entrepreneurship?; and (2) How can strategic entrepreneurship
contribute to understanding and strengthening family firms?
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To address these research questions, we begin by providing a brief overview of the
contribution of each paper to the special issue. We then build upon a model of the strategic
entrepreneurship process set forth in a recent article by Hitt et al. (2011) to create a novel
framework for addressing the role of family businesses in strategic entrepreneurship. We also use
this framework to identify how each paper that appears in this special issue informs our research
questions. We end with suggestions for a future research agenda aimed at understanding the role
of strategic entrepreneurship in familial contexts.
PAPERS IN THIS SPECIAL ISSUE
Following a general call, 17 submissions were received. Papers were reviewed according to
standard SEJ procedures and Table 1 summarizes the papers in the special issue that successfully
negotiated this process. Each paper investigates a specific aspect of strategic entrepreneurship
and family business. Different theoretical perspectives are used in the papers including the
resource-based view (RBV), agency theory and informational asymmetries, entrepreneurial
orientation, stagnation theory, and institutional theory. Several papers integrate different
theoretical perspectives. For example, Chirico et al. (2011) integrate entrepreneurial orientation
and resource orchestration perspectives, Singal and Singal (2011) integrate agency and
institutional perspectives, and Nordqvist et al. (2011) bring together information asymmetry and
stagnation perspectives. The papers adopt a range of empirical approaches generating rich data
sets, ranging from longitudinal qualitative case studies (Sieger et al., 2011), to cross-sectional
mail surveys (Chirico et al., 2011) to large-scale panel data sets (Nordqvist et al., 2011; Singal
and Singal, 2011). Different analytical techniques are also adopted, including theory building
from cases, OLS regression, hazard models, and panel data estimation.
INSERT TABLE 1 ABOUT HERE
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A FRAMEWORK FOR FAMILY BUSINESS AND STRATEGIC
ENTREPRENEURSHIP
In developing our conceptual framework, we first highlight the input-process-output nature of
strategic entrepreneurship. Of course, our framework is consistent with the ‘systems’ logic of
most input-output models in that it assumes the various causal factors are interconnected. Family
firms create value in much the same way as other firms, but both the inputs to the value-adding
activities and the benefits that flow from value-creation processes may differ significantly in
family firms. Further, we believe families also impact the process itself due to the ways they
accumulate and leverage resources and because of the strong emphasis that many families place
on building socioemotional wealth in addition to financial viability. Finally, the strategic
entrepreneurship process is strongly influenced by contextual factors that tend to be unique to
family firms. Figure 1 depicts the framework that we used to organize our analysis.
INSERT FIGURE 1 ABOUT HERE
Inputs
Consistent with most ‘systems’ models of economic interaction, our model includes inputs as a
key category. Next we identify and discuss three key inputs: individual resources, family
resources, and organizational resources.
Individual resources
How might individual differences influence the strategic entrepreneurship of family firms? On
the one hand, the skills and capabilities that any given individual might bring to an
entrepreneurial venture are not likely to differ depending on whether it is a family business or a
nonfamily business. On the other hand, the background experiences and prior knowledge of
individuals who have: (1) grown up in a family business; (2) worked for a family business; or (3)
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been the prior owner of a family business could enhance or detract from their ability to be a
valuable resource.
Individuals who have been associated with family businesses since childhood can bestow
either advantages or disadvantages as employees of family firms. They have the potential to
provide a unique form of human capital in the form of firm-specific tacit knowledge gained from
extensive exposure to the family business (Sirmon and Hitt, 2003). Such individuals may also
have a strong commitment to the family business and close ties with family members who are
key decision makers (Horton, 1986). By contrast, family members may be ill-equipped to take on
responsibilities as decision makers or even employees of a family business (Barach et al., 1988).
While family firms may care more about the survival of their businesses than is the case of
nonfamily firms, survival rates are relatively low and generally no better than in nonfamily firms
(Ward, 2004). Poorly qualified successors and those who lack the motivation but choose to work
in the family firm anyway disadvantage family firms that are attempting to encourage intrafamily succession (De Massis, Chua, and Chrisman, 2008; Handler and Kram, 1988).
Nonfamily members who work for family firms potentially provide a similarly ‘mixed
blessing.’ Nonfamily members bring an outside perspective that is potentially valuable. This may
be especially important in small family businesses that have few nonfamily members in senior
decision-making roles. Family business research into professionalization of management has
often highlighted the introduction of nonfamily members into the management team and board of
directors (Hall and Nordqvist, 2008). Studies have also found that some individuals prefer
working in family firms even if they are not family members because of the overall closeness,
conviviality and ‘feeling of family’ of the work environment (Tagiuri and Davis, 1996; Vallejo,
2009). However, those same conditions could create problem for nonfamily employees who
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witness family closeness but do not feel a part of it. Favoritism in compensation or key decisionmaking roles for family members may be demoralizing to nonfamily members: this could be
manifest in shirking or sabotage.
Family resources
Family-owned and operated businesses often enjoy competitive advantages because of what the
family itself has to offer to the business (Sharma, 2004). This can take many forms, beginning
with the synergies that accrue to family firms where individuals have the type of trusting
relationships and tacit knowledge identified in the previous section. Such conditions give family
firms a comparative advantage relative to nonfamily firms where turnover is relatively higher,
trust takes longer to establish, and task-specific knowledge has to be learned on the job
(Chrisman et al., 2005). Access to family resources and longer time horizons for payoffs on
investments can also strength a family business’ ability to compete (Sirmon and Hitt, 2003).
Drawing on the resource-based view of the firm, Habbershon, Williams, and MacMillian
(2003) suggested the term ‘familiness’ to represent the potential advantages that emerge when a
family system and its individual family members interact with the family business to produce a
unique bundle of resources. In other words, the involvement and commitment of the family are
able to bestow distinct advantages on family firms. The types of resources that contribute to this
virtuous mix include the entrepreneurial spirit of founders, the firm’s reputation, its management
practices, and the trust and communication among family members, to name a few (Chrisman,
Chua, and Steier, 2005). Drawing on social capital theory, Pearson, Carr, and Shaw (2008) have
advanced the notion of familiness by identifying the behavioral and social resources that are
unique to families. Quantitative (e.g., Ensley and Pearson, 2005) and qualitative (e.g., Tokarcyk
et al., 2007) studies of familiness are demonstrating its importance as a family business resource.
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The input from family systems to strategic entrepreneurship processes may not always be
positive. Research clearly indicates that the family and the relationships within it can be an
impediment relative to nonfamily firms, rather than a valuable resource (e.g., Chrisman et al.
2005). The complex set of social, cultural, and economic conditions that may yield distinct
advantages for one family business may result in dysfunctional or ‘constrictive familiness’ in
other settings (Chrisman, Chua, and Steier, 2005). Sibling rivalries, conflicts over ownership and
control, and difficulties transferring the management reins from one generation to another are
among the factors that can rob a family firm of the advantages it might otherwise enjoy (e.g.,
Miller, Steier, and Le Breton Miller, 2003). These potential problems and the dangers of
nepotism have inspired writers since Weber (1904/5) to favor the professionalization of
management and discount the advantages that families might be able to bestow on organizations.
Hence, the extent to which the family is a positive or negative resource remains a rich research
question.
Organizational resources
In many types of organizations, trust—the ‘willingness of a party to be vulnerable to the actions
of another party’ (Mayer, Davis, and Schoorman (1995: 712)—represents an essential ingredient
of economic exchange. Family-based organizations are in a unique position to provide a climate
of trust as a key resource and source of competitive advantage. Family firms that incorporate
trust into their governance mechanisms (Eddleston et al., 2010) can confer organizational
benefits relative to nonfamily firms if it leads to greater reduction in coordination costs. Trust,
however, can be taken too far in family businesses if it becomes a substitute for professional
management. It is incumbent on family firms to strive for levels of ‘optimal trust,’ as there are
situations where too much trust can disadvantage an organization (Eddleston et al., 2010).
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For many firms, strategic advantage ‘resides in the social capital (or relational wealth)
they are able to nourish and maintain’ (Steier, 2001: 259). Social capital represents the goodwill
and resources made available to an actor via reciprocal, trusting relationships (Arregle et al.,
2007). From a resource-based view of the firm, social capital is a particular source of strategic
advantage when it is valuable, rare, costly to imitate, and without substitutes (Barney, 1991).
Family firms represent unique repositories of personal and organizational social capital (Steier,
2001) that are hard to duplicate in nonfamily firms. Furthermore, family firms demonstrate
unusual capabilities of transferring this resource; for example, from incumbent leaders to
successors (Steier, 2001) and/or from family social capital to organizational social capital
(Arregle et al., 2007). In other words, family represents a unique social grouping wherein
strategic advantages residing in relationships can be passed from one member to another and/or
between groups.
Processes
Processes constitute a second key category within our framework. Here we identify three key
processes important to strategic entrepreneurship in family firms: orchestrating resources,
creating economic value, and creating socioemotional wealth.
Orchestrating resources
The concept of resource orchestration is highlighted in recent research that suggests effective
strategic entrepreneurship requires organizational leaders to acquire, organize, and deploy
resources for optimal advantage (Ndofor, Sirmon, and He, 2011; Sirmon, Hitt, and Ireland, 2007;
Chirico et al., 2011). Such activities highlight the value of using resources to both explore and
exploit entrepreneurial opportunities. Not only must organizations develop processes aimed at
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effectively bundling and leveraging resources, but to be successful, advantageous configurations
of resources need to be managed dynamically in response to changing conditions.
Among the process-related approaches to entrepreneurship that have emerged from the
strategy literature, entrepreneurial orientation (EO) is one of the most frequently studied (Rauch
et al., 2009). EO reflects the organizational processes, methods, and styles that enable firms to
identify and create venture opportunities (Lumpkin and Dess, 1996). Family business researchers
have found EO to be a useful framework for investigating entrepreneurship in family businesses
(e.g., Naldi et al., 2007; Nordqvist, Habbershon, and Melin, 2008). Salvato (2004) used the EO
framework to demonstrate that entrepreneurship manifests itself differently in three different
types of family firms—founder-centered, sibling/cousin, and open family firms. Zahra (2005)
examined how various family business characteristics and ownership structures (e.g., CEO
tenure, extent of family ownership) impact risk taking, which is one of the key dimensions of
EO. Kellermanns and colleagues (2008), using a modified measure of EO, found that firm size
and number of generations in the firm were significantly positively associated with
entrepreneurial behavior and that entrepreneurial behavior was a significant predictor of
employee growth (Kellermanns et al., 2008). Several studies have shown that to fully appreciate
the role of entrepreneurial orientation in understanding firm performance, EO must be evaluated
in multivariate configurations with other variables such as environmental factors and
organizational resources (e.g., Wiklund and Shepherd, 2005).
This was the conclusion of Chirico et al. (2011) who examined the impact of
entrepreneurial orientation and other forces on family firm performance. Their paper constitutes
a test of the resource orchestration concept, which suggests that resources must be effectively
leveraged to contribute to competitive advantages and superior performance (Sirmon et al.,
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2007). In the Chirico et al. (2011) study, generational involvement is the resource that needs to
be leveraged and leveraging consists of using EO processes to mobilize and participative strategy
making to coordinate. Their findings indicate that EO, when combined with increasing
generational involvement, contributed negatively to firm performance. But when participative
strategy making was used to coordinate generational involvement at the same time that EO
provided the mobilizing vision, performance was strong. Hence, the findings support the view
that a configuration of multiple variables was required to explain the phenomenon.
While entrepreneurial behavior is critically important to a firm’s survivability and growth
(Lumpkin and Dess, 1996), there are also certain ‘configurations’ of strategy and structure
(Miller, 1986) that confer advantage. Miller (1986), drawing on insights from Porter’s (1980)
study of competitive strategies, highlights four broad dimensions of competitive strategy:
differentiation, focus, cost leadership, and asset parsimony. Miller further (1986) discusses how
successful integration of strategy and structure can be achieved by offering illustrative examples
such as, simple niche marketers, mechanistic cost leaders and innovating adhocracies. Each of
these strategic approaches requires organizational processes and well-adapted resource
configurations to be effective.
Miller and Le Breton-Miller (2005) also examined successful family firms and noted that
certain elements of their internal processes enabled them to gain competitive advantages relative
to their nonfamily counterparts. They described these advantages along four axes, referring to
them as the four C’s—continuity (unusually long time horizons and farsighted goals),
community (unusual care of employees, including an engaging culture), connection (a focus on
enduring relationships outside the firm), and command (the ability to make quick and bold
decisions). In family firms, these four C’s are uniquely configured to support more generic
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strategies such as quality, cost, or innovation. The ability to leverage these capabilities gives
family firms strategic advantages. The four C’s function as resources that family firms are able to
configure to their advantage. For all firms, appropriate resources are necessary but insufficient to
achieve a competitive advantage (Sirmon and Hitt, 2003). Resources must also be bundled and
managed in specific ways to achieve optimum advantage. For Sirmon and Hitt (2003: 353)
family firms enjoy ‘special niches’ in the competitive landscape and—relative to their nonfamily
counterparts—enjoy higher levels of ‘social capital, patient capital, and survivability capital…’
Earlier we discussed social capital as part of organizational resources. Patient capital is often a
unique feature of family firms because they typically have longer time horizons and are not as
accountable for short-term deliverables as their nonfamily counterparts. Similarly, the duality of
family and business relationships (Sirmon and Hitt, 2003: 343) often translates into a repository
of ‘survivability capital’ wherein family members contribute personal resources such as ‘free
labor, loaned labor, additional investments, or monetary loans.’ The combination of these unique
resources makes family firms much more durable organizations than nonfamily firms.
An important aspect of the durability of family businesses is their ability to orchestrate
resources over time to maintain entrepreneurship. In this issue, Sieger et al. (2011) shed light on
this point in the context of the role of different resources in facilitating portfolio entrepreneurship
behavior. They show that portfolio entrepreneurship declines for industry-specific human capital,
stays constant for industry-specific reputation and industry-specific social capital, and increases
for meta-industry human capital, meta-industry reputation, and meta-industry social capital.
Creating economic value
Ireland, Hitt, and Sirmon (2003) identified the combination of advantage seeking and
opportunity seeking as the central idea behind strategic entrepreneurship. These processes enable
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organizations to identify value-adding innovations, technological capabilities, economic
conditions, or market disequilibria that can be explored and exploited to create economic value
by forming a new venture or extending the competitive success of an existing organization (Hitt
et al., 2011). Family firms, because of the unique advantages they bring to the value-creation
process, may be in a relatively stronger position to build and appropriate economic value than
nonfamily firms. For example, Chirico and Salvato (2008) suggest that family businesses may
have advantages in knowledge integration associated with organizational adaptation because the
family setting kindles denser social interactions and a stronger willingness to integrate
knowledge compared to nonfamily firms. Another example, as noted briefly earlier, relates to
family firms’ ability to leverage resources more efficiently because of their long-term
orientation. Zellweger (2007) posited that family firms can create just as much shareholder value
by investing in lower-return projects as their nonfamily counterparts because their use of patient
capital enables them to postpone gains. Such advantages are likely to be associated with greater
long-term economic value creation by family firms.
Despite the advantages patient capital or richer knowledge integration may bestow, the
family-based governance processes associated with those and other family business activities
may be an impediment to value creation. Strong control of family resources by a dominant
coalition may obstruct investments generally; relationship conflict may hamper knowledge
integration (Chirico and Salvato, 2008). Different ownership regimes have also been found to
advantage family firms in some cases but limit their competitive capabilities in other cases.
Owner-managed family businesses and those with high concentrations of ownership are thought
to escape many of the agency-related problems associated with the separation of management
and ownership (Schulze et al., 2001). Once ownership becomes more dispersed into forms such
13
as sibling partnerships and cousin consortiums (Ward and Dolan, 1998), control systems become
less effective and may disadvantage family-owned businesses (Schulze, Lubatkin, and Dino,
2003). Recent research into ownership concentration by business groups has identified few
advantages for family-based groups, despite long-held beliefs that family bonds are durable and
powerful, especially in emerging markets (Khanna and Rivkin, 2006).
The findings from the study by Singal and Singal (2011) provide some further insights
into this by showing that firms with concentrated ownership outperform firms with dispersed
ownership; however, controlling for ownership there is no significant difference between familycontrolled firms and firms controlled by foreign corporations or the state. This study relates to
the Indian context and it would be interesting to examine whether the findings also apply in other
contexts. For now, the preponderance of evidence seems to suggest that family ownership does
not afford value-creating advantages, except possibly among closely held and managed family
firms.
Creating socioemotional wealth
Prior research indicates that even though family businesses consistently prioritize financial
concerns, they also report that nonfinancial objectives are highly important (e.g., McCann, LeonGuerrero, and Haley, 2001). Thus, there is a good chance that the organizational processes
family firms engage in are not focused exclusively on economic wealth creation, but also include
socioemotional wealth creation (Gómez-Mejía et al., 2007). Creating socioemotional wealth is
described as the type of activities that a family business might engage in to ‘meet the family’s
affective needs, such as identity, the ability to exercise family influence, and the perpetuation of
the family dynasty’ (Gómez-Mejía et al., 2007: 106). As such, the processes involved in creating
socioemotional wealth include doing what is required to achieve the types of nonpecuniary goals
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that family firms are likely to strive toward—creating family harmony (Chrisman et al.,
forthcoming), maintaining a positive community image and respect (Dyer and Whetten, 2006),
passing the business on to successive generations (Chua, Chrisman, and Sharma, 1999),
integrating family values into the business system (Handler, 1990), expressing altruism toward
family member employees (Schulze et al., 2003), and achieving family independence and
security (Tagiuri and Davis, 1992).
Family business researchers have built upon strategy and entrepreneurship research to
investigate a range of nonfinancial outcome variables. For example, Sorenson (2000) asked
family business owner-managers to assess four family outcomes, including family independence
and satisfaction, tight-knit family, respect in community, and child and business development. In
a study of outcome and dependent variables across 12 years of family business research, Yu et
al. (forthcoming) identified a wide array of outcome variables that had appeared in family
business research, including satisfaction, commitment, and family values. Clearly, family
businesses are motivated not only to financial wealth creation but also to socioemotional wealth
creation.
An important question for strategic entrepreneurship researchers is whether efforts to
achieve these socioemotional goals complement or compete with processes to attain an
organization’s financial goals. Socioemotional goals may provide a richer context in which to
move toward financial goals because the concern for the family firm extends beyond the business
itself to the family. However, many family business owners may have either a ‘family-first’ or
‘business-first’ attitude so that decisions made in favor of one often jeopardize the other
(Schuman, Stutz, and Ward, 2010). For example, a business-first attitude that is too strong could
result in asking too much of family members and damaging family relationships. By contrast, a
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family-first decision-making process could keep peace in the family but result in poor business
decisions that affect the reputation or viability of the business. How socioemotional goals affect
the opportunity-seeking and advantage-seeking behaviors of family firms is a fruitful area for
future research. Zellweger and Nason (2008) provide an interesting initial study adopting a
stakeholder theory approach to examine the potential relationships between performance
outcomes satisfying different stakeholders in family firms.
Outputs
Our framework also suggests four key outputs relevant—and somewhat unique—to family firms.
These include: individual benefits, family benefits, organizational benefits, and societal benefits.
Individual benefits
The payoffs for individuals working in family firms can be numerous. For family firm members,
there is the opportunity to participate in the creation of family wealth, not just as a beneficiary of
the family fortune by virtue of inheritance, but also as a senior decision maker responsible for
protecting, managing, and leveraging the family’s wealth. There is also the satisfaction of
working within a family system which, under the right circumstances, can be highly fulfilling
(Sharma, Chrisman, and Chua, 2003). For younger family members, a family business can
provide an opportunity for unique work or professional experiences that may not be available to
others. Even for nonfamily members, there are benefits to involvement with a family business,
especially where the business offers financial stability and a favorable work environment.
Working for a family business can be emotionally, cognitively, and financially satisfying.
However, some of the same factors that can benefit individuals might, under different
circumstances, manifest detrimentally. Nonfamily members run the risk of feeling marginalized
or treated unfairly in family businesses. A struggling family business, as opposed to one that is
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thriving, may make unreasonable demands on family members by asking them to work for poor
wages or inhibiting their freedom to pursue other goals. In family businesses where conflict is
high and trust is low, work can become drudgery, especially for family members who are
surrounded by troubling relationships.
Family benefits
The benefits to a family that owns and operates a family enterprise may depend on how
successful the business is. Family firms with informed strategies, efficient operations, and
thoughtful leadership can create substantial wealth for a family, both economic and
socioemotional. Even a family business that is only modestly successful financially may provide
benefits to a family that values qualities such as trust, loyalty, and interdependence (Lumpkin,
Martin, and Vaughn, 2008). Other values, such as those associated with a strong parental
influence, may also benefit family firms. Ensley and Pearson (2005: 279) found that parental top
management teams (TMTs) financially outperformed firms with nonfamily TMTs and had ‘a
stronger belief in their abilities, a greater sense of belonging to the team, greater consensus on
the strategic direction of the firms, and less detrimental conflict.’
The family may also benefit from prestige and reputation in the local community. These
benefits may extend to the wider family beyond members who are immediately involved in the
running of the business. Similarly, when the time comes for succession, there may be important
family benefits from ensuring that the succession is seen to maintain the family’s reputation.
Even where succession involves transferring the family business outside family ownership, there
may be benefits to the family in ensuring that the firm is sold to a friendly buyer, for example
through a management buyout (Howorth, Westhead, and Wright , 2004) who will ensure the
continuity and development of the business in the locality. Such a sale may mean that family
17
owners need to ensure that they develop a second tier management team who can take over the
business and have the capabilities to identify and exploit future entrepreneurial opportunities.
Although there may be private benefits, there are also potential downsides to the family
per se through being closely associated with the family business (Dyck and Zingales, 2004). The
negative impact on the family locally from unwanted publicity or notoriety may help constrain
the extent to which family businesses engage in nonethical business practices. There are positive
benefits in the fulfillment of seeing the next generation build on and extend a family legacy, but
handled badly, negative effects may arise that involve tearing the family apart through lawsuits
or litigation; these may have a detrimental effect on the entrepreneurial development of the
business, as management is distracted from recognizing opportunities and threats and adapting
resources accordingly.
Organizational benefits
Strategic entrepreneurship is fundamentally concerned with a quest to make organizations more
effective. As organizations ‘dominate’ our socioeconomic landscape (Baum and Rowley, 2002)
it is paramount to understand the implications of different forms of organizing because of how
they provide the contexts within which strategic decisions are made (Bradach and Eccles, 1989;
Williamson, 1975, 1985). Throughout the world, familial capitalism presents alternatives to
market and hierarchical forms of organization and is closely linked to entrepreneurial activity
(Steier, 2009b). Familial-owned, controlled, and/or managed firms confer certain benefits versus
their nonfamily counterparts. We note that there are an infinite number of organizational
permutations and contexts relative to family-influenced firms; and the benefits they confer are
embedded within a variety of theoretical perspectives. Next we offer a number of examples of
18
these perspectives, including stewardship, agency, altruism, corporate brand identity, and
resource-based views.
Altruism, defined as the selfless regard for the well-being of others provides useful
explanations for human behavior beyond economic self-interest (Simon, 1993). Altruistic
behavior is particularly manifest in family firms (Schulze, et al., 2003) and may well provide
benefits to organizations that prioritize socioemotional wealth creation. Family members often
assume the role of stewards who, by investing in the firm over the long term, create enduring
value for stakeholders. Stewardship theory can be used to address the organizational benefits
associated with nonpecuniary goals. Agency theory, by contrast, is typically linked to financial
benefits. Traditional agency theory posits that when the same people own and manage a firm
there will be no agency costs (Jensen and Meckling, 1976). Of course family firms, by virtue of
combining ownership and management, are in unique positions to enjoy reduced agency costs
(Gomez-Mejia, Nuñez-Nickel, and Gutierrez, 2001; Schulze et al., 2001). Le Breton-Miller,
Miller, and Lester (2011) explore these two competing governance perspectives relative to
family firms—stewardship and agency—and report that, depending on the circumstances, either
of these features provide benefits.
Identity theory suggests that family firms have the option of ‘intertwining’ family and
firm when seeking strategic advantage. Micelotta and Raynard (2011: 199) highlight three
strategic variations or choices relative to corporate brand identity: ‘family preservation, family
enrichment, and family subordination.’ For example, family businesses can use their family
identity as a marketing device to gain organizational benefits; this may be especially important if
their trading partners are also family businesses. A ‘family company’ brand may, however, be
19
beneficial in some industries (consumer products, local, etc.), but detrimental in others (high
tech, accounting, medical, etc.).
Family firms enjoy certain resources and advantages that are rare and hard to imitate.
While organizations may benefit through accessing financial, human and social resources from
the family, from a resource-based view perspective, it is those family-specific resources that are
rare and inimitable that will make the distinctive contribution. For example, Sirmon et al. (2008:
993) examine firms’ strategic responses to the threat of imitation and find that those firms that
are best able to create hybrid governance structures—those that ‘integrate the best of family and
nonfamily firms’—are often best suited to meet the threat of imitation. There may also be a
darker side to organizational effects, where resource flows go from the organization to the family
through the funding of particular lifestyles by means of large dividends and lack of investment
All of these theoretical perspectives highlight the potential of familial-based ways of
organizing an enterprise to confer certain advantages to it; they also further demonstrate the
complexity of organizing these complex resources. We trust that the field of strategic
entrepreneurship, including the articles in this special issue, will usefully contribute to further
understanding how complex familial resources might usefully be assembled.
Societal benefits
Family firms have a profound influence on economic development and societal wealth creation
throughout the world (Morck and Steier, 2005). This influence is a most interesting empirical
phenomenon. For example, family firms have been represented as both ‘pariahs’ and ‘paragons’
of economic development (Carney and Gedajlovic, 2002; Steier, 2009a). Thurow (1989) makes a
similar distinction and represents them as falling within two broad categories: ‘oligarchs’ that are
driven largely by selfish interests and tend to be exploitive; and, ‘establishments’ that care
20
greatly about the larger society and see the best interests of this larger society as closely aligned
with their own. As an organizational form, family firms are remarkably resilient (Morck and
Steier, 2005) and oftentimes demonstrate an extraordinary capacity to change should the broader
context demand it (Khanna and Palepu, 2005). Of course, the societal benefits of familial
capitalism are not just limited to large firms. Family involvement is manifest in the creation and
evolution of small firms everywhere. Here again the creative mobilization of familial resources
represents an important dimension of the entrepreneurial process.
A fundamental concern of the fields of strategic management and entrepreneurship is the
search for rents (Mahoney and Pandian, 1992). Rents are the return in excess of the resource
owner’s opportunity costs. Within societal contexts, we believe it is important to broaden the
dialogue from a singular focus on profit to include a discussion of the type of profit or rent.
Firms can be seen as exacting four different kinds of rents: monopolistic, political, Ricardian,
and entrepreneurial (Schumpeterian). Oligarchs typically rely on monopolistic and/or political
rents that are not in the best interests of the broader society whereas Ricardian and—in
particular—entrepreneurial rents offer much greater benefits to society. For family firms (even
those that were essentially entrepreneurial at the time of creation), it is particularly seductive to
seek political and/or monopolistic rents (Morck and Yeung, 2004). In other words, entrepreneurs
who accumulate certain means of production are often in positions of power where they can
organize those means to exploit others. For policy makers and researchers alike, it is important to
identify those conditions and actions that promote entrepreneurial activity. Importantly, the
papers in this special issue illuminate entrepreneurial activity in various parts of the world.
Context
21
Most strategic management literature includes context as an important aspect of firm survival
and success. Our framework includes four key contextual dimensions relevant to strategic
entrepreneurship in family firms: institutional environment/family as an institution; local
conditions/national culture and geography; ownership regimes/multigenerational involvement
and succession; and temporal considerations/planning horizons and business life cycles.
Institutional environment/family as an institution
The initial call for papers for this special issue noted that ‘family was manifest in both the
creation and organization of most of the world’s firms.’ Indeed, the submissions—and eventually
the papers selected for publication—further reflect the global importance of family businesses.
This special issue contains data sets and/or cases based on family firms located in various parts
of the world: Switzerland, Ireland, France, Chile, Guatemala, Sweden, and India. While each
paper addresses strategic entrepreneurship themes, collectively their varied geographic focus
suggests that institutional context merits further attention. Indeed, institutional environments
shape entrepreneurial activity. Similar to the emerging field of transnational entrepreneurship
(Drori, Honig, and Wright, 2009: 1010), there is a need ‘to understand how varied institutional
contexts and differences shape the ways’ in which family firms operate and facilitate productive
entrepreneurship.
Institutional context greatly influences manifestations of entrepreneurship at the
individual and country level (Morck and Steier, 2005). Relatedly, the varieties of capitalism
(VOC) literature (Orru, 1997; Hall and Soskice, 2001; Steier, 2009a) suggests that institutional
context varies considerably across countries. Indeed, family businesses throughout the world
operate within ‘a variegated collection of economic systems’ (Morck and Steier, 2005: 1).
Although family firms can be found everywhere, they have distinctly different manifestations
22
and roles (La Porta et al., 1999). In other words, strategic entrepreneurship in family firms is
greatly influenced by the institutional context (Orru, 1997; Steier, 2009b).
According to commonly used VOC categorizations (Orru, 1997), the papers in this
particular issue represent family business activity in distinctly different contexts: north, central,
and southern Europe; south Asia; and South America. Much of the existing literature on
entrepreneurship and family firms assumes a homogeneity largely influenced by AngloAmerican views of capitalism (Steier, 2009b). We view the varied geographic focus of the
articles in this special issue as contributing to understanding the richer mosaic of strategic
entrepreneurship in family firms throughout the world. However, collectively they also signal the
need for comparative frameworks that further incorporate institutional context as a key variable.
Entrepreneurs have a key role in economic development (Baumol, 1990). However, they
do not necessarily have a bias toward productive innovation—their bias is toward profit.
Similarly, some family firms are biased toward rent seeking (Morck and Yeung, 2004) as
opposed to true value creation. Societal- and country-level institutions play important roles in
determining the allocation of entrepreneurial effort (Baumol, 1990); hence, incorporating
institutional contexts and effects greatly enhances the explanatory power of strategic
entrepreneurship and family business.
Local conditions/national culture and geography
Despite increased globalization of markets and production, differences between countries remain
‘larger than generally acknowledged’ and it remains important to understand the nuances
associated with this heterogeneity (Ghemawat, 2007: 9). Strategic entrepreneurship at the family
level continues to be influenced by factors such as local conditions, national culture, and
geography (Chrisman, Chua, and Steier, 2002). Next, we briefly discuss these factors.
23
At the local level, powerful social contexts such as household and/or ethnicity affect the
venture-creation process (Rodriguez, Tuggle, and Hackett, 2009). Households are usefully
viewed as opportunity platforms or incubators, wherein venture creation is influenced by factors
such as the financial, social, and health context of the household (Steier, 2009a). In other words,
some households preoccupied with certain demands, such as financial concerns or the care of a
sick relative, will have a lower propensity to found a new venture whereas certain other
households with relatively few resources embrace entrepreneurship as a way of changing
economic circumstances. A large number of entrepreneurs often attribute their success to
supportive family members. Familial responsibilities and or culture further circumscribe the
venture-creation process; for example, Khavul, Bruton, and Wood (2009) examine the creation
of small firms in East Africa and highlight the influence of strong family and community ties.
The national welfare mix also affects the venture-creation process at the local level
(Steier, 2009b) and there is a great deal of variation throughout the world as to whether the state,
the market, or the family unit is left to perform essential welfare functions such as care of the
elderly or children. Each of these generic models—state, market, family—shape entrepreneurial
activity in different ways.
Two additional boundaries useful for examining entrepreneurial activity in familial
contexts include national culture and geography (Chrisman et al., 2002). National culture has
long been closely linked to economic success (Landes, 1998) and is particularly relevant within
the realm of entrepreneurship (Shane, Venkataraman, and MacMillan, 1995). Similarly,
geographic regions have a profound influence on economic activity and continue to provide
useful boundaries for conducting entrepreneurship research (Audretsch, 2001). Saxenian (1994)
suggests that there is a strong correlation between regional culture and regional advantage.
24
The studies in this special issue exhibit considerable variety in terms of local conditions,
national cultural, and region. However, they devote relatively little attention to these dimensions.
We believe that, in regard to future research relative to strategic entrepreneurship in family firms,
there are considerable opportunities to incorporate this variation in theory building. We return to
this point later.
Ownership regimes/multigenerational involvement and succession
Family businesses may be characterized by heterogeneous ownership and governance regimes
that influence the objectives, strategic entrepreneurship processes, and performance of the firm.
Family businesses may involve ownership and management by founders and/or subsequent
generations. The ownership distribution may be tightly held or become more diffuse with future
generations, many of whose members may not be part of the management of the firm but who
exert other influences on its direction (Gersick et al., 1997; Westhead and Howorth, 2007). The
configuration of the ownership may also be influential in determining entrepreneurial activities,
for example whether relationships between family members are husband-wife, siblings, cousins,
extended families, etc.
Family businesses may be privately owned, but in some jurisdictions large numbers of
listed corporations have significant residual family ownership and control, as well as an ethos of
family values. Privately held family businesses may be more likely to pursue stewardship
objectives and construct boards comprising individuals whose perspectives are consistent with
this. Publicly held family businesses may be more obliged to introduce boards with independent
directors in order to comply with corporate governance regulations. Yet, while publicly listed
family businesses may be subject to scrutiny by analysts and demands of institutional investors,
family values may endure even where there are no longer any original family members on the
25
board. The extent to which listed family firms are exposed to takeover pressures may also affect
approaches to strategic entrepreneurship. For example, firms may become more risk averse and
looking for shorter-term payoffs under the threat of takeover.
While there has been extensive research on succession in family businesses, this has
mainly focused on the challenges relating to the transfer of the firm to the next generation (De
Massis et al., 2008), including whether the next generation continue to be involved or set out to
develop their own independent firms. Multigenerational involvement raises important contextual
issues that may influence strategic entrepreneurship both in terms of the introduction of
subsequent generations alongside founders and with respect to the continuing role of the founder
when the business has ostensibly been passed on to the next generation (Salvato, Chirico, and
Sharma, 2010). On the one hand, founder generations may offer mentoring support and
established networks and transfer tacit knowledge and ownership of the business to the next
generation at a substantial discount. On the other hand, continued founder involvement may
reinforce path dependencies that the next generation may seek to shift as they perceive new
opportunities in the context of changing market conditions. Further, as ownership moves to the
next generation yet only a subset of family members continue to be involved in the business,
conflicts may emerge with those family members who are no longer involved but retain an
ownership stake; this may constrain strategic entrepreneurship.
Yet, transfers to outside owners, either through a management buyout or corporate
acquisition, are quite frequent and raise issues concerning both the rationale for such transfers
(Howorth et al., 2004) and the effects on strategic entrepreneurship and family values. The paper
by Nordqvist et al. (2011) sheds some light on this issue, to which we return later.
Temporal considerations/planning horizons and business life cycles
26
Business forecasting and planning are traditional functions of strategic managers who are
charged with overseeing the long range vision of an organization. However, as the practice and
field of strategy have evolved over the last 40 years, the time horizon for planning has shrunk
and the importance of planning has diminished. Dynamic markets, hypercompetition, and rapidly
evolving technologies are among the forces that have demanded decision makers to shelve
strategic plans in favor of a bias for action and opportunity–driven adaptability (D’Aveni, 1994;
Bettis and Hitt, 1995). For publicly traded firms, quarterly performance expectations often
demand that strategic managers focus on short-term results at the expense of long range
considerations.
Family businesses have not been insulated from the pressure to rapidly adapt and be
effective in the short run. But unlike many nonfamily firms, most family businesses approach
strategic decision making with a long-term orientation (Zahra, Hayton, and Salvato, 2004).
Family firm owners that aspire to maintain sufficient control of a business to pass it on to the
next generation weigh long range consequences differently. Hence, the long-term viability of
family firms is an important driver in strategic decision making (Zellweger, 2007). This
perspective affects many organizational decisions. For example, a willingness to consider long
run outcomes may lead family firms to invest ‘patient capital’ in resources they do not anticipate
liquidating (Sirmon and Hitt, 2003).
Research indicates that family firms often outperform nonfamily firms on a range of
performance measures (Anderson and Reeb, 2003). Based on an in-depth study of 40 highperforming family-controlled businesses, Miller and Le Breton-Miller (2005) concluded that one
of the major reasons the strongest family firms tended to financially outperform nonfamily firms
was because of their long-term orientation. Whether a long-term orientation benefits or impedes
27
the performance of entrepreneurial family firms, however, remains unclear. In an analysis of how
short-term versus long-term considerations might affect the entrepreneurial orientation of family
firms, Lumpkin, Brigham, and Moss (2010: 255) concluded that ‘innovativeness, proactiveness,
and autonomy are more likely to thrive in a climate where long-term values are favored; risk
taking and competitive aggressiveness, by contrast, are less likely to be highlighted in companies
that manage for the long run.’ Hence, the long time horizon most family businesses exhibit will
generally, but not always, favor entrepreneurial action.
This is especially interesting in light of the findings by Nordqvist et al. (2011). On the
one hand, they concluded that family firms are most likely merely acting rationally when they
transfer ownership of relatively more risky businesses to external owners. On the other hand,
their study finds that firms transferred to external owners have higher long-term performance
despite the fact that the firms are sold under conditions of greater uncertainty and likely face
riskier futures. This suggests that the appetite for some types of entrepreneurial behavior, such as
risk taking, may be lower in family firms that are trying to ensure their long-term survival. A
further issue in assessing whether temporal considerations will encourage or prevent a family
firm from being more entrepreneurial is whether it is a first-, second-, or later-generation
business.
Interaction between inputs and environmental factors
The business environment plays an important role in shaping and influencing family business
outcomes. However, the environmental forces that influence family firms are not appreciably
different from those affecting all other firms. Hence, strategic entrepreneurship researchers can,
in general, turn to prior studies for insights about the role of environmental factors on the
strategic entrepreneurship process (Hitt et al., 2001).
28
Other environmental factors may, however, constitute important inputs for family
businesses. For example, family firms are more common than nonfamily firms in regions that are
relatively less economically developed (Chang et al., 2008). This represents an opportunity for
family firms to thrive in part because of their unique ability to marshal private resources and in
part because of their relationship to local authorities. On the one hand, family firms are often
willing to operate independently of governmental support or sanction; on the other hand, family
firms may be linked with local power brokers in ways that favor their business activities but may
be detrimental to economic development because of corrupt practices (cf. Morck and Yeung,
2004). Hence, regional economic conditions and local governance practices may play an
important role in whether or not family businesses prosper, especially in emerging economies.
DISCUSSION OF FUTURE RESEARCH AGENDA
Although considerable progress has been made in research on family businesses, major research
avenues remain to be explored on the interface between strategic entrepreneurship and family
business. In this section, we elaborate a potential future research agenda that builds upon the
framework developed in previous sections. The principal research questions are summarized in
Table 2.
INSERT TABLE 2 ABOUT HERE
Inputs
Attention to the microfoundations of strategic entrepreneurship in family businesses emphasizes
the need to understand the behavior of individuals and families within family businesses. On the
one hand, there is a need to examine whether and how the cognitive characteristics of family
business entrepreneurs differ from entrepreneurs in nonfamily businesses. This analysis needs to
encompass both entrepreneurial individuals and teams within family businesses. A major
29
challenge for family businesses may arise in the transition from first to subsequent generations,
in that important cognitive attributes may be lost if founders leave the business.
An important issue concerns the extent to which founders of family businesses can or are
able to do things that will enable their children to perform better when they take over the family
business. For example, to what extent do parents act as role models, imbue value systems, and
employ offspring in the family business? To what extent is this process limiting because it
involves the inculcation of biases that are detrimental to future performance? Further qualitative
analysis is needed on whether and how families introduce and nurture the requirements for
entrepreneurial activity in conjunction with the specifics of the family’s business. Extending this
point further, this analysis could consider whether this process leads to differences between
offspring of family business owners who take up the family firm and those that go on to create
their own business.
The context of a family business may affect how learning occurs within the business and
how learning from outside the business is incorporated as inputs into the future development of
the firm. For example, family values and management styles may make it difficult to incorporate
information and knowledge relating to new market developments that do not accord with the
established modus operandi. This may be true of all organizations to some extent, and further
analysis is needed to examine whether and how family businesses differ in their learning from
nonfamily firms.
Like entrepreneurs in general (Ucbasaran, Westhead, and Wright, 2009), family firms
may engage in multiple ventures that are sequential or concurrent. Yet, the extent to which
family support may encourage or impede both the extent and nature of subsequent
entrepreneurial activity is little understood. Further, habitual entrepreneurs may learn different
30
lessons from prior entrepreneurial experience depending on whether it was successful or not
(Ucbasaran et al., 2010). It is unclear whether and how family pressures influence learning from
prior experience. For example, if prior failure is perceived as having a detrimental impact on the
family’s wider reputation and wealth, there may be pressure either to adopt more risk-averse
strategies or to exit from future entrepreneurship. Family businesses with more diffuse
nonmanagerial owners may be more susceptible to these pressures than other family businesses
or ventures owned by nonfamily habitual entrepreneurs. Does the glue of the family lead to more
support for subsequent entrepreneurial efforts compared to teams that are not family related? Or
are some families able to institutionalize learning (good and bad) from previous entrepreneurial
ventures, which can be leveraged by future family member start-ups?
There is some recognition of the importance of initial resource endowments for the
subsequent development of ventures. For example, Clarysse, Bruneel, and Wright (2011) have
analyzed the differences in technological resources endowments for university and corporate
spin-offs. Research on imprinting has also considered the impact of initial conditions that
effectively set in train the development of subsequent path dependencies. Detailed analysis is
required of the dimensions of the initial founding conditions that are unique to family firms and
how these affect subsequent development trajectories. Relatedly, the initial allocation of familybased resources may also influence subsequent development. For example, the initial provision
of financial, human, social, or organizational resources may create difficult to reverse original
configurations of family involvement and ownership that owe more to obligations to family
members than to the effective running of the business. What aspects of these obligations and
commitments create the greatest challenges for family businesses?
Processes
31
As with entrepreneurship and management research more generally (Barney, Ketchen, and
Wright, 2011), we know relatively little about the processes involved in the creation and
development of strategic entrepreneurship in family businesses. How do resource accumulation,
configuration, and coordination differ in family businesses compared to nonfamily businesses?
How do family businesses sustain the processes of entrepreneurial activity over time through the
development of serial family business entrepreneurs?
Are family businesses particularly susceptible to ingrained path dependencies in their
processes that make it difficult to change when environmental conditions change? Qualitative
analysis is needed to compare how some family businesses successfully make this shift while
others do not. An interesting initial study in this direction is provided by Salvato et al. (2010).
Businesses face major challenges in moving from one phase of development to another
(e.g., Vohora, Wright, and Lockett, 2004). We know little, however, about the processes that
family businesses adopt to transform their enterprises strategically as they grow, professionalize,
and introduce external capital and nonfamily managers. Further, insights are lacking concerning
the specific barriers in this development process faced by family businesses compared to
nonfamily firms.
The influence of family on the process of firm development may be particularly
important in respect to two activities that involve less routine actions. Both innovation and
internationalization present risks for all firms. Further research is required to examine to what
extent family values, diffuse ownership, and governance facilitate or impede these processes. For
example, if family businesses are able to take a longer-term perspective, perhaps they can engage
in greater experimentation in how they undertake innovation and internationalization.
Outputs
32
We noted that there is a need to examine the cognitive composition of entrepreneurial teams as
inputs into the strategic entrepreneurship process in family businesses. There is also a need to
consider the impact of the loss of tacit knowledge and the ability to identify and exploit
opportunities when family businesses are transferred to the next generation. Such a loss may lead
to a decline in performance and even failure. Recognition of the heterogeneity of family business
types also calls for examination of their differential impacts on performance.
Poor performance following the exit of founders and their tacit knowledge and
entrepreneurial cognition may lead to reacquisition by the founder at a significantly lower price.
Studies are warranted that examine the extent of this phenomenon. Additional issues relate to
whether the founder is able to rescue the business and whether this leads to short-term or longerterm recovery. Further analysis is warranted concerning whether the founder is ‘part of the
solution or part of the problem.’ In other words, to what extent is the founder able and willing to
put in place successor management who will be able to continue the business into the future
when the founder really is no longer able to run the firm? This issue may have implications both
for the continued wealth generation of the family and for the returns that investors may be
seeking when they reinvest in exited family founders.
In contrast to some earlier perspectives, recent developments have recognized that family
firms may be entrepreneurial; however empirical work on the innovativeness of family
businesses compared to nonfamily businesses remains limited. Family objectives concerned with
ensuring longevity may mean that the firm becomes risk averse, which may create challenges in
a sector where continued innovation is important. Moreover, the heterogeneity of innovation
needs to be recognized and analysis undertaken not just in terms of whether family businesses
are more or less innovative, but whether they undertake different types of innovation.
33
Alternatively, there may be a selection effect in that family entrepreneurs with more innovative
cognition enter into ventures in innovative sectors.
While family businesses may possess an initial set of innovative capabilities, questions
arise concerning whether these firms possess, develop, or can acquire the expertise they need to
continue to be innovative. For example, challenges may arise in recruiting nonfamily members
with the requisite expertise if such individuals perceive they will be disadvantaged in career
progress in relation to family members. Alternatively, family firms may encourage younger
generations to gain expertise in other environments that can enable them to be more innovative
when they return to the family business. Both quantitative and qualitative research is needed in
this area. Quantitative analysis may help establish whether family firms are less innovative than
nonfamily firms in similar sectors. Qualitative research is needed that examines the processes of
innovation in family firms and how family objectives and structures influence the timing and
nature of innovation. Qualitative research may be able to untangle the richness of processes
related to the resistance and conflicts that may arise when some individuals challenge entrenched
founders with innovative proposals that may, on the one hand, be risky but, on the other hand, be
vital to ensure the longevity of the business.
Context
We have commented on the role of different institutional contexts in the study of family
businesses. Additional research is needed that considers how familial capitalism and
entrepreneurship differ across contexts. Such research needs to recognize the heterogeneity of
contexts and how these influence family business. While emphasis tends to be placed on
institutional context, Zahra and Wright (2011) have suggested four dimensions of contexts.
34
First, spatial context concerns the geographical distribution, concentration, and mobility
of family business. Strategic entrepreneurship may vary across international contexts due to
differences in the role of family businesses, family business groups, and extended kinship ties.
Family human, social, and organizational capital may play important roles in family businesses
involved in developing transnational activities, that is, operating in more than one country. For
example, family relationships may substitute for cumbersome and incomplete coordination
structures and processes across different contexts. Families whose members have previously
emigrated to a particular country may provide local knowledge and other resources that can help
establish international or transnational activities.
Second, temporal context relates to the evolution of family businesses over time and the
implications of changes across this life cycle for their continued success. Analysis is needed of
how contextual factors may influence the nature and timing of family firm succession and
survival. Tax incentives to encourage succession, including sale to outsiders, may change over
time or may differ between institutional contexts. The effectiveness of these measures may be
moderated in different contexts by cultural resistance to ‘outsiders,’ sale to lifelong competitors,
or lack of acceptance of the family firm as a tradable asset.
If succession is affected through sale of the family business to outsiders, questions arise
as to what extent the family values or ethos are so well entrenched that they continue in some
form. Analysis of these challenges could incorporate and add to recent developments in the arena
of shifting from established path dependencies. Contextual factors may also influence the extent
to which family entrepreneurs and subsequent generations return to entrepreneurship following
exit that is occasioned by firm failure.
35
The temporal dimension also concerns variations in time orientations across groups and
societies. These variations may have implications for the way in which family businesses in, say,
certain emerging economies respond to attempts to integrate these economies into the global
marketplace.
Third, social context refers to the relationships that develop among multiple groups who
influence the emergence, survival, and growth of family businesses. These relationships may
differ across institutional contexts and influence the boundaries of family businesses. For
example, in contexts where extended families are important, the boundaries of family businesses
may be more extensive than elsewhere. Further social context also concerns the
complementarities and substitutabilities between family businesses and other forms of
organizations. As such, the networks of family firms may play an important role in influencing
industry configurations.
Finally, the institutional dimension captures the effect of different institutional contexts,
including informal cultural aspects and formal regional institutions.
CONCLUSION
In this special issue, one of our primary objectives was to promote research and understanding of
strategic entrepreneurship in familial contexts throughout the world. We trust that we have
achieved this objective in a number of ways. First, we include four diverse articles from varied
international contexts that utilize multiple methods of inquiry. Second, in addition to offering
summaries of and comments one these articles, this introductory article develops a conceptual
framework of strategic entrepreneurship in family firms that highlights the input-process-output
nature of the process. Third, we discuss opportunities for further research.
36
As family business continues to be the subject of increased scholarly attention, we
believe that strategic entrepreneurship offers a unique and useful lens from which to view this
organizational phenomenon. We recognize that we offer only a small sampling of what is a very
complex area of study. Finally, we strongly encourage others to continue this line of inquiry.
ACKNOWLEDGEMENTS
All authors contributed equally to this article. The authors thank Rob Nason and Nanette
Warman for helpful comments on an earlier draft.
37
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CONTEXT
Institutional environment/
family as an institution
Local conditions/
national culture and geography
Interaction between inputs
and environmental factors
Ownership regimes/
multigenerational involvement and succession
INPUTS
Temporal considerations/
planning horizons and business life cycles
OUTPUTS
PROCESSES
Individual resources
Orchestrating resources
Individual benefits
Family resources
Creating economic value
Family benefits
Organizational resources
Creating socioemotional
wealth
Organizational benefits
Societal benefits
Figure 1. A framework for family business and strategic entrepreneurship
50
Table 1. Summary of papers in the special section
Authors
Research
questions
Theoretical
perspective
Data and methods
Key findings
Nordqvist,
Wennberg,
Wiklund,
and
Hellerstedt
What is the
impact of
different types of
ownership
transfer in family
firms?
Information
asymmetries;
stagnation
perspective of
family business.
2,647 Swedish
family firms in
existence 1997-2007
that went through an
ownership change;
Difference-indifference, OLS, and
Cox proportional
hazard duration
model estimation.
Firms transferred
within the family have
more stable short-term
prospects in terms of
sales growth and
survival; firms
transferred externally
show more long-term
prospects in terms of
generating higher
profits; choice of
ownership transfer
mode may be
economically rational
when families divest
firms with more
uncertain outcomes.
Chirico,
Sirmon,
Sciascia and
Mazzola
What
configuration of
factors is needed
to increase
performance
through
entrepreneurship
in family
businesses?
Resource
orchestration;
entrepreneurial
orientation.
Mail survey of the
two highest
executives in 199
Swiss family firms;
OLS.
Realizing the benefits
from entrepreneurship
in family firms is
complicated and
affected by the
configuration of high
levels of
entrepreneurial
orientation,
generational
involvement, and
participative strategy;
only with all three
factors present will the
benefits of
entrepreneurship be
fully realized.
Sieger,
Zellweger,
Nason, and
What is the
process through
which portfolio
entrepreneurship
RBV
Four in-depth
longitudinal cases
from Europe and
Latin America
Six resource
categories relevant to
the portfolio
entrepreneurship
51
Clinton
develops in
family
businesses?
Singal and
Singal
Does family
control of the
firm confer
performance
advantages over
and above those
conferred by
concentrated
ownership?
Agency theory;
institutional theory.
involving 26
respondents; translevel analysis; theory
building.
process; the
importance of these
categories varies over
time (portfolio
entrepreneurship
declines or industryspecific human
capital; stays constant
for industry-specific
reputation and
industry-specific
social capital;
increases for metaindustry human
capital, meta-industry
reputation, and metaindustry social
capital).
Panel data of Indian
corporate sector built
from five separate
data sets including
stock returns,
financial indicators,
stock holdings,
director details, and
company
characteristics, 20012009; 4,382 firms
including 3,257
family, 113 stateowned, 303
subsidiaries of
MNEs and 709 with
dispersed ownership.
Firms with
concentrated
ownership outperform
firms with dispersed
ownership; controlling
for ownership, there is
no significant
difference between
family-controlled
firms and firms
controlled by foreign
corporations or the
state.
52
Table 2. Themes for a research agenda
Inputs
How do the cognitive
characteristics of family
business entrepreneurs differ
from nonfamily business
entrepreneurs?
Process
How does resource accumulation,
configuration, and coordination
differ in family businesses
compared to nonfamily businesses?
What is the contribution of family
systems and/or households to the
venture-creation process and how
does this differ from nonfamily
firms?
How does the human capital
and cognitive composition of
founder family business teams
differ from teams in second
generation family businesses?
How does the human capital
and cognitive composition of
family business teams differ
from teams in nonfamily
ventures?
How do the cognitive dimensions
of family firm entrepreneurs
influence the microprocesses of
family firm creation and
development?
To what extent are attempts at
portfolio or serial
entrepreneurship either within
the family firm or as further
independent ventures facilitated
or constrained by family
influence?
What processes do family
businesses adopt to transform their
enterprises strategically as they
grow, professionalize, and
introduce external capital and
nonfamily managers? What
specific barriers are faced by
family businesses compared to
nonfamily firms?
To what extent does learning
How do family businesses manage
Outputs
What is the nature of conflicts
between benefits for individual
family members and family?
How are these resolved?
Context
How do the boundaries of family
businesses differ across institutional
contexts?
To what extent do individual
family members exit the firm to
achieve benefits that meet their
objectives?
How does strategic entrepreneurship
vary in international contexts due to
differences in the role of family
businesses, family business groups,
and extended kin ties?
What is the impact of the loss of
the tacit knowledge of the
founder when family firms are
transferred to the next generation
or sold?
What is the role of family human and
social capital in family firms
involved in transnational activities?
How do these vary between
emerging and developed economy
contexts?
How does familial capitalism and
entrepreneurship differ across
institutional contexts? What are the
dimensions of these contexts in
terms of spatial, temporal, social,
and cultural aspects?
What is the impact of different
forms of external succession on
former family firm performance?
To what extent does family
How do institutional factors
53
from prior entrepreneurial
experience (success or failure)
differ between family business
entrepreneurs and nonfamily
business entrepreneurs?
the tensions between maintaining
family control versus the need to
exit to maintain entrepreneurial
strength, survival, and success?
reconciliation emerge after splits
and how does this affect
entrepreneurial activity?
influence the nature and timing of
family firm succession and survival?
What is the role of tax incentives for
succession versus resistance to
‘outsiders’ and acceptance of the
family firm as a tradable asset in
different contexts?
To what extent are industry
configurations influenced by
networks of family firms?
Does family support encourage
or impede subsequent
entrepreneurial activity?
To what extent and how do family
businesses maintain the
entrepreneurial spirit of the
founding generation?
To what extent does the
allocation of family-based
resources contribute to initial
entrepreneurial endeavors?
To what extent do family values
contribute to or impede innovation?
How do family firms in high-tech
sectors differ from nonfamily
firms in terms of their
innovativeness, growth, and
financial strategies?
To what extent are conflicts and
tensions between family,
individual, and organizational
benefits reflected in different
forms of organization and modes
of growth?
What founding conditions are
unique to family firms and how
do these affect subsequent
development trajectories?
To what extent do family
businesses differ in their approach
to the nature and timing of
internationalization?
To what extent do family values
continue in family businesses that
are sold? Where family businesses
are acquired by external
entrepreneurs, do new family values
emerge? What challenges arise in
shifting from the path dependence of
original family ethos?
What are the different forms of
What happens to subsequent
family business and how are these generations when founder families
related to differential societal
exit from entrepreneurship?
benefits?
What are the downside aspects
of the inputs provided by
families?
How do family businesses sustain
the processes of entrepreneurial
activity over time (serial family
business entrepreneurs)?
To what extent and why are
family businesses reacquired by
the family following external
exit?
How do environmental factors
interact with individual, family, and
organizational resources to affect
their value as inputs?
54