Jess H. Chua

Defining the Family Business by Behavior

It is generally accepted that a familys involvement in the business makes the family business unique; but the literature continues to have difficulty defining the family business. We argue for a distinction between theoretical and operational definitions. A theoretical definition must identify the esence that distinguishes the family business from other businesses. It is the standard against which operational definitions must be measured. We propose a theoretical definition based on behavior as the essence of a family business. Our conceptual analysis shows that most of the operational definitions based on the components of family involvement overlap with our theoretical definition. Our empirical results suggest, however, that the components of family involvement typically used in operational definitions are weak predictors of intentions and, therefore, are not always reliable for distinguishing family businesses from non-family ones.

Strategic Management of the Family Business: Past Research and Future Challenges

This article reviews the literature on family business from a strategic management perspective. In general, this literature is dominated by descriptive articles that typically focus on family relationships. However, the literature does not usually address how these relationships affect the performance of a family business. Taking a strategic management perspective, we outline a new set of objectives for family-business research. We also identify some of the key issues and gaps that should be explored in future studies if research is to contribute to improving the management practices and performance of family firms.

Trends and Directions in the Development of a Strategic Management Theory of the Family Firm

This article provides a review of important trends in the strategic management approach to studying family firms: convergence in definitions, accumulating evidence that family involvement may affect performance, and the emergence of agency theory and the resource–based view of the firm as the leading theoretical perspectives. We conclude by discussing directions for future research and other promising approaches to inform the inquiry concerning family business.

Comparing the Agency Costs of Family and Non-Family Firms: Conceptual Issues and Exploratory Evidence

Family involvement in a business has the potential to both increase and decrease financial performance due to agency costs. In this article we discuss the different nature of agency costs in family firms and specify the combination of conditions necessary to determine the relative levels of agency costs in family and non–family firms through the impacts of agency cost control mechanisms on performance. We also present exploratory results based on a study of 1,141 small privately held U.S. family and non–family firms that suggest the overall agency problem in family firms could be less serious than that in non–family firms.

Family Involvement, Family Influence, and Family‐Centered Non‐Economic Goals in Small Firms

Using behavioral and stakeholder theories, we suggest that family firms may have family–centered non–economic goals and that these goals could influence firm behaviors. This study extends the literature by hypothesizing that the essence of family influence partially mediates the relationship between family involvement and family firms’ adoption of family–centered non–economic goals. The results using 1,060 small firms support the hypotheses. Aside from contributing to family business theory by explaining and testing mediating variables as sources of goal heterogeneity among family firms, our findings also imply that the involvement and essence approaches to defining family businesses may be hierarchically reconciled.

Succession and Nonsuccession Concerns of Family Firms and Agency Relationship with Nonfamily Managers

This article consists of two parts. The first part reports findings from a survey of the issues facing top executives in 272 Canadian family firms. Results show that succession is their No. 1 concern, thus supporting the predominant focus of family business researchers on succession issues. Results also show that concern about relationships with nonfamily managers is a close second in importance. The second part of the article uses Agency Theory to explain why relationships with nonfamily managers are so important. Empirical results show that both the extent and the criticality of a firms dependence on nonfamily managers are statistically significant determinants of the importance. This study implies that relationships with nonfamily managers is a neglected research topic and points to a new direction for research in family business management.

Factors Preventing Intra-Family Succession

Although research on management succession is a dominant topic in the family business literature, little systematic attention has been given to the factors that prevent intra-family succession from occurring. Based on a review and analysis of the literature, this article presents a preliminary model on the factors that prevent intra-family succession.

Important Attributes of Successors in Family Businesses: An Exploratory Study

Respondents from 485 family firms in Canada rated integrity and commitment to the business as the most important attributes of a successor. Results indicated that the older the family business and the longer the respondents tenure in that business, the more important these attributes became. Birth order and gender were rated the least important, despite the attention the literature has given to those attributes.

Family Control and Family Firm Valuation by Family CEOs: The Importance of Intentions for Transgenerational Control

Family firms are thought to pursue nonfinancial goals that provide socioemotional wealth, but socioemotional wealth is feasible only with family control of the firm. Using prospect theory, we hypothesize that socioemotional wealth increases with the extent of current control, duration of control, and intentions for transgenerational control, thus adding to the price at which owners would be willing to sell their firms to nonfamily buyers. Findings from two countries show that current control has no impact, and duration of control has a mixed impact. However, intention for transgenerational control has a consistently positive impact on the perceived acceptable selling price.

Succession Planning as Planned Behavior: Some Empirical Results

This paper uses the theory of planned behavior to hypothesize the influence of the incumbents desire to keep the business in the family, the familys commitment to the business, and the propensity of a trusted successor to take over on the extent to which family firms engage in succession planning activities. We test these hypotheses using data collected from presidents in 118 family firms. The results show that the propensity of a trusted successor to take over significantly affects the incidence of all succession-planning-related activities. Succession planning may, then, be the result of push by the successor more than of pull by the incumbent. Such a view has negative implications for the succession process that the family firms in our sample follow.