Pietro Mazzola

Strategic Planning in Family Business: A Powerful Developmental Tool for the Next Generation

This article addresses the issue of training next-generation family members once they have joined the management team in their family firm. The qualitative analysis of strategic planning processes of 18 Italian family firms shows that involving next-generation family members in the planning process benefits their developmental process. The findings indicate that this involvement provides the next generation with crucial tacit business knowledge and skills, facilitating interpersonal work relationships between incumbents and next-generation leaders and building credibility and legitimacy for the next generation. The comparative analysis of the cases allowed us to identify the five variables that seem to combine in explaining much of the observed differences in the amount and composition of benefits experienced in the 18 firms. Our findings extend current understanding of two understudied topics in family business: the postentry-phase training of the next generation and strategic management in family firms.

Generational Involvement in the Top Management Team of Family Firms: Exploring Nonlinear Effects on Entrepreneurial Orientation

The present study contends that an inverted U–shaped relationship exists between generational involvement—i.e., the number of family generations simultaneously involved in the family–firm top management team (TMT)—and entrepreneurial orientation (EO). Drawing on the upper echelons theory, we conceive generational involvement as a proxy of knowledge diversity in multigenerational family TMTs. We argue that while moderate levels of generational involvement stimulate task–related constructive conflicts for EO, increased kinship distance and relationship conflicts led by high levels of generational involvement are likely to undermine this potential advantage by damaging the relational context for EO. Our hypothesis is confirmed on a data set of 199 family firms.

Income Smoothing in Family‐Controlled Companies: Evidence from Italy

Manuscript Type: Empirical.Research Question/Issue: This paper focuses on the relationship between one of the main corporate governance dimensions – ownership structure – and income smoothing. The paper investigates whether family‐controlled companies differ from non‐family‐controlled companies with respect to income smoothing. Due to different incentives of management and owner investment horizons, we hypothesize that income smoothing is less likely among family‐controlled companies than among non‐family‐controlled companies. Additionally, we hypothesize that among family‐controlled firms income smoothing is less likely when CEO and Board Chairman are members of the controlling family. Various definitions of “family control” are applied. A sample of Italian listed companies is used for the empirical analysis.Research Findings/Insights: We find evidence that income smoothing is less likely among family‐controlled companies than non‐family‐controlled companies. Moreover, among family‐controlled companies, income smoothing is less likely for firms whose CEO and Board Chairman are members of the controlling family.Theoretical/Academic Implications: This paper fills a gap in the literature, suggesting that not only the level of ownership concentration or insider ownership but also the nature of the dominant shareholder (family versus non‐family) should be considered when addressing the motivations for income smoothing. Furthermore, our findings indicate that agency theory and stewardship theory are complementary in explaining the role played by family control in income smoothing decisions. While in non‐family‐controlled companies the traditional owner‐manager agency problems tend to prevail and motivate income smoothing, in family‐controlled companies such agency issues become less relevant and a stewardship attitude emerges, rendering income smoothing less likely.Practitioner/Policy Implications: This study is of interest to financial statement users, including analysts and investors, as it shows that different company types (e.g., family versus non‐family) have a different attitude towards income smoothing. In particular, these results aid users in interpreting the companys reported profitability and its potential variability. The conclusions also are of interest to auditors when evaluating the reliability of the reported income of companies characterized by various ownership structures.

Corporate venturing in family business: The effects on the family and its members

Previous literature on corporate entrepreneurship (CE) in family business (FB) focusses on the determinants of CE and presents conflicting results on its effects on firm-level performance. We argue that previous studies have overlooked the idea of FBs being complex social systems comprising three components, controlling families, business entities and individual family members; and any business activity in a FB should also be studied with respect to its effects on the family and individual family members, which ultimately impacts the performance. Moreover, previous FB literature addresses CE as a monolithic concept and does not separate its two primary types: corporate venturing (CV) and strategic renewal (SR). This article focusses solely on CV, investigating the impact of CV on FB. The research is based upon a set of longitudinal in-depth case studies of three FBs engaged in CV initiatives. The findings suggest that CV can have positive, negative or possibly both effects at the family and individual levels depending on four moderating factors. At the individual level, if a succession process is present, CV may increase the incumbent leaders capability to effectively direct the selection and development process of next generation family members (NGFMs) as well as the NGFMs’ human capital. However, CV could also reduce the affective commitment of NGFMs to the core business and such a risk appears to be higher when CV participation in the FB strategy is low. At the family level, development of CV initiatives may both enhance and reduce the family cohesion. The risk of its decrease grows with greater relevance of non-active family members’ ownership and the greater financial impact of the CV initiative itself.

The Importance of Integrated Goal Setting: The Application of Cost-of-Capital Concepts to Private Firms

In this article, we examine financial return, answer the question of how one knows when the return is adequate, and explore the relationship of short- and long-term returns as they relate to business health.

Family Involvement in the Board of Directors: Effects on Sales Internationalization

Previous research shows that family involvement in the board of directors can be both positive and negative for sales internationalization. The ambiguous nature of this relationship has hindered theory building on this important phenomenon. Integrating stewardship, stagnation, and upper echelons perspectives, we propose a nonlinear, J‐shaped relationship between family involvement in the board of directors and sales internationalization. Results from running ordinal regression analysis on data drawn from 203 U.S. family businesses confirmed our conjecture. We discuss the implications of our findings for family business theory and practice and indicate avenues for future research.

Handbook of research on strategy process

Contents: Introduction: Structure of the Book and Contributions Pietro Mazzola and Franz W. Kellermanns PART I: REFLECTIONS 1. The Development of Strategy Process Research and the Most Influential Articles and Authors Ofer H. Azar and David M. Brock 2. Shifting Focus from the Determinants to the Origin: The Foundations of a Dynamic View of Managerial Discretion Ingo Kleindienst and Thomas Hutzschenreuter 3. The Politics of Strategy Process Duane Windsor 4. The Strategic Arena Approach to Strategy Process Research Anders Melander, Leif Melin and Mattias Nordqvist 5. Strategy Process Research and the RBV: Social Barriers to Imitation Patrick Regner 6. The Feedback Structure of Strategy Process and Top-Managements Role in Shaping Emerging Strategic Behavior Vittorio Coda and Edoardo Mollona 7. Putting the Manager Back into the Picture: The Value of a Strategy Process Perspective Torsten Schmid, Steven W. Floyd and Bill Wooldridge PART II: DELIBERATE STRATEGIES 8. Making Strategy Work: A Literature Review on the Factors Influencing Strategy Implementation Li Yang, Guo-hui Sun and Martin J. Eppler 9. Five Alternative Approaches to the Strategic Reorientation Process Robert Chapman Wood and Osvald Bjelland 10. Managerial Interplay: Linking Intent to Realized Strategy Bill Wooldridge and J. Ignacio Canales 11. Banking on Ambidexterity: A Longitudinal Study of Ambidexterity, Volatility and Performance Amir Sasson and Mario Minoja 12. From Theory to Action: The Story of One Strategy Paul N. Friga PART III: EMERGING STRATEGIES 13. Strategic Initiatives: Past, Present and Future Christoph Lechner and Markus Kreutzer 14. The Risky Prospects of Entrepreneurial Initiatives: Bias Duality and Bias Reversal in Established Firms James J. Chrisman, Alain Verbeke and Erick P.C. Chang 15. Entrepreneurial Orientation: The Driving Force for Corporate Entrepreneurship Esra Memili, G.T. Lumpkin and Gregory G. Dess 16. A Complexity Perspective on Strategic Process Research Terry B. Porter PART IV: SPECIAL TOPICS 17. Strategic Decision Processes in the Realm of Strategic Alliances Jorge Walter 18. A Review of Research Progress in Understanding the Acquisition Integration Process: Building Directions for Future Research Annette L. Ranft, Frank Butler and Jennifer Sexton 19. Internationalization Process Alvaro Cuervo-Cazurra 20. Constructing Power to Drive Strategy Processes in Multinational Firms Markus Venzin 21. Perceptions, Processes, and Performance During Organizational Decline Michael R. Braun and Scott F. Latham 22. An Institutional View of Process Strategy in the Public Sector P. Devereaux Jennings, Paul A. Zandbergen and Martin L. Martens 23. Public Sector and Strategic Management: The Case Study of the US Army Corps of Engineers Anil C. Patel 24. The OODA Loop: A New Strategic Management Approach for Family Business Joseph Astrachan, Chet Richards, Gaia Marchisio and George Manners

Conflicting selves : family owners’ multiple goals and self-control agency problems in private firms

This study examines the self–control agency problems associated with family ownership in private firms. Theorizing that family owners’ inner conflicts between economic and non–economic goals lead to competing preferences in the allocation of financial resources, we predict that the relationship between financial slack and firm profitability is contingent on factors that increase the potential salience of either economic or noneconomic goals for family owners. Accordingly, our findings suggest that self–control is a separate source of agency costs in private firms and that family ownership is not as crucial as owners’ goals in predicting the impact of financial slack on firm profitability.

Is Corporate Board More Effective Under IFRS or “It’s Just an Illusion”?

The present study contends that the increased effectiveness of corporate boards in constraining earnings management around International Financial Reporting Standards (IFRS) introduction might be “transitory” and fade away over time. Drawing on the attention-based view (ABV) of the firm, we argue that the higher effectiveness of corporate boards might have been driven by a temporary higher level of attention, which independent directors (INDs) and audit committees (ACs) allocated to accounting issues at the time of transition to IFRS. Our empirical results highlight that corporate board’s effectiveness reaches its peak around the adoption time, showing an “inverted-U” path. This study contributes to the current debate on the extent to which additional contextual factors might prevail on accounting standard regulation—per se—in improving earnings quality. We further suggest that boards’ effectiveness in monitoring the corporate financial accounting process is contextually dependent.

Strategy, Valuation, and Forecast Accuracy: Evidence from Italian Strategic Plan Disclosures

Abstract Using a sample of 264 strategic plan presentations by Milan Stock Exchange firms during 2001–2012, we present evidence of both a security price reaction and an increase in the accuracy of analysts’ earnings forecasts pursuant to plan disclosure. In the cross-section, the information content of the plan disclosures and the accuracy increase are incrementally associated with the extent of forward-looking narrative disclosures in the plan, after controlling for other disclosures within and outside the plan presentation and the fact that the firm has self-selected into the sample. Both quantitative and qualitative narrative disclosures are informative to investors and analysts. The results are driven by narrative disclosures about company strategy and action plans rather than about the business environment in which the company operates. Our study informs the current debate on the use of voluntary comprehensive, integrated, long-run-oriented strategic plan disclosure as a potential complement for disclosures such as quarterly earnings forecasts that have been described as an example of ‘short-termism’.