A Theoretical Framework for the Analysis of the Relationship Between Family Firms and Competitiveness

A Theoretical Framework for the Analysis of the Relationship Between Family Firms and Competitiveness

César Camisón (University of Valencia, Spain)
DOI: 10.4018/978-1-7998-1655-3.ch001


This chapter develops an additive model of the microeconomic sources of family firm (FF) competitiveness. Its main contribution is the proposal of a new explanatory framework with a perspective incorporating both ex post competitiveness and its determinants in a chain of multi-level causality. Based on fully-specified theory, the framework is designed to explain the complementarity of the effects of the firm's country, industry, district, strategy, and distinctive competences, focusing where appropriate on the case of the FF. The theoretical model also sheds light on the forces that influence the accumulation of sustainable competitive advantages. To that end, this chapter incorporates a particular focus on how the ownership and control structure affects the accumulation of intangible assets that give rise to the so-called family effect.
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The ownership and control structure is one of the basic characteristics that influence the strategic and operational decision-making of any organization; as such, it has important implications for corporate governance and economic performance (Vives, ed., 2000; Shleifer & Vishny, 1997; Short, 1994; Jensen, 1986). The comparative efficiency of different ownership and control structures (organizational forms) is an issue that has captured the interest of researchers in the field of agency theory (Thomsen & Pedersen, 2000; Li & Simerly, 1998; Gedajlovic & Shapiro, 1998; Shleifer & Vishny, 1997; Short, 1994; Oswald & Jahera, 1991; Jensen, 1986; Fama & Jensen, 1985; Williamson, 1985; Jensen & Meckling, 1976) for the past 80 years, ever since the seminal work of Berle & Means (1932).1 On the basis of this theory, the focus of interest has turned first to how the organizational form can protect or weaken the position and power base of senior management, as well as the analysis of the agency problem and the efficiency of the ownership concentration of various organizational forms (Fama & Jensen, 1985). Subsequently, the emphasis has turned to the role of the ownership structure—and particularly the type of owner—in organizational behaviour (Judge, 2012). This line of research recognizes the heterogeneity of the owner group and emphasizes that the identity of the owners is key to how they exercise their power and how this is reflected in the organization's strategy, structure, processes and outcomes (Thomsen & Pedersen, 2000; Nickel, Nicolitsas & Dryden, 1997; Hansmann, 1996, 1988; Short, 1994; Gedajlovic, 1993; McConnell & Servaes, 1990; Cubbin & Leech, 1983; Levin & Levin, 1982). Managerial discretion, the structure and dynamics of management systems, and the planning of relationships between management and owners can change substantially depending on the type of owners, their shareholder complexity and their degree of involvement in the management of the company. The literature has focused on the implications of the ownership interest and/or corporate governance of institutional investors, large shareholders (blockholders), and minority shareholder advocacy organizations. Only in a second phase has the focus of agency theory turned to the family identity of capital owners (Kellerman, Eddleston, Barnett & Pearson, 2008; Naldi et al., 2007).

Key Terms in this Chapter

Family Effect: It is the effect that family control of capital and/or ownership of a company has on the strategy, structure, and organizational results.

Familiness: Designates the advantages and disadvantages in terms of resources and capacities that flow from the nature of the family business.

Governance Structures: These are the structures that detail a company's corporate governance model, including the organs of which it is composed, their composition, the representation assumed by the shareholders and stakeholders and the practices and rules that guide their behaviour.

Ownership and Control Structure: It is the structure that defines the nature of the capital owners and the organs of the companies’ board of directors.

Family Firm Heterogeneity: Expresses the variability in the nature of the family business due to causes such as its size, the dominant family generation, ownership and governance structures, or the family participation in work, management, and capital.

Typologies and Taxonomies of Family Firm: These are the configurations that can be distinguished within the population of family businesses and which expresses its strategic and organizational heterogeneity.

Intangible Assets: They are assets made up of information or knowledge, that lack a material entity, that do not usually appear in the company's balance sheet and whose identification and measurement require specific methodologies.

Capabilities: These are resource teams that are coordinated and organized to perform certain tasks.

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