Strategic Behavior in Family Firms: A Theoretical Insight Into Dynamic Familiness

Strategic Behavior in Family Firms: A Theoretical Insight Into Dynamic Familiness

Ismael Barros (Universidad Austral de Chile, Chile), Juan Hernangómez (Universidad de Valladolid, Spain) and Natalia Martín Cruz (Universidad de Valladolid, Spain)
DOI: 10.4018/978-1-5225-8012-6.ch017


Previous research emphasizes that the participation of the family in business operations is the source of resources and capabilities that conditions the strategic behavior of the family firm. This influence has been recognized as “familiness.” However, this definition is contextualized from static reasoning that ignores the effect of family dynamics on the behavior and value generation of the family-owned business. Prior literature has recognized that the family influence has a dynamic character based on the idiosyncratic process of knowledge management that manifests itself in the company, dynamic familiness. This family capability is shaped by family organizational routines through the family influence and aims to increase its knowledge portfolios for the strategic use of its resources. This chapter addresses the relationship between family influence and the process of learning and knowledge management. The analysis of this relationship allows assessing how family influence can promote the generation of family organizational routines based on knowledge management processes.
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How does the family contribute to the success of the family business? This question is relevant because it has been shown that the interaction between family and strategic management creates value (Astrachan, 2010). However, research that helps to understand the strategy in the family business is still scarce (Chrisman et al., 2005). Indeed, the relationship between the family dimensions and the strategies of the family business has not been examined in depth (Goel et al., 2012). Previous studies have used various theoretical models to explain the strategic differences between family and non-family businesses (Chrisman et al., 2008) and variations in strategic behavior among family businesses (Chua et al., 2012). The resource-based view and agency theories have dominated research on family business strategy (Chrisman et al., 2005).

In particular, it has been from the agency theory applied to the strategic field in the family business (Gómez-Mejía et al., 2001; Schulze et al., 2001; Anderson & Reeb, 2003; Morck & Yeung, 2003; Schulze et al., 2003a; Schulze et al., 2003b; Chrisman et al., 2004; Carney, 2005; Villalonga & Amit, 2006), which have studied the relationships between ownership, management and performance, ownership structures, altruism and self-control, agency conflicts and the comparison of agency costs between family and non-family businesses and the government structures.

On the other hand, the application of the resource-based view theory in the family business (Cabrera-Suárez et al., 2001; Habbershon et al., 2003; Sirmon & Hitt, 2003) and in the specific field of strategy (Chrisman et al., 2005; Moores, 2009; Astrachan, 2010) has verified how the presence of the family in the company affects the strategic choice (Chrisman et al., 2009). It is argued that the resources provided by the family to the company facilitate decision-making processes (Arregle et al., 2007); in particular, as a consequence of the simultaneous participation of the family in property, government and management (Klein et al., 2005), family relations (Eddleston et al., 2008) or desire for succession (Cabrera-Suárez et al., 2001).

These two theories develop static arguments about the effects of the resources of the family business, for example, relying on the concept of familiness, analyzing only its resource endowment, but neglecting its use over time in value creation activities (Eddleston et al., 2008). These approaches have made it difficult to identify possible strategic behaviors of family businesses associated with achieving more familiar and less economic objectives; which could explain some performance differences between family businesses (Chirico et al., 2012). On the other hand, these theories do not clearly define what resources and capabilities the family can transmit, based on the dynamic interaction between family and business (Habbershon et al., 2003). Their application does not allow to consider the dynamics, variety, and nature of social relations in the family system and within the company (Goel et al., 2012).

Key Terms in this Chapter

Business Strategy: Plans and programs defined by an organization to achieve its medium and long-term objectives.

Family Influence: The capacity exercised by family members who participate in a family business and which is manifested through their presence in the governing and management boards, and in the transmission of family values and culture to the business.

Family Dynamic Capabilities: Family organizational routines based on knowledge derived from the family-business interaction.

Family Involvement: Refers to the presence of family members in the family business ownership and the direction and management boards.

Family Firms: Family-owned businesses with the participation of family members in their governing and management boards, where the need to maintain and project the company through family generations is an important objective.

Socioemotional Wealth: In the family business represents the family affective endowments that family members trust in the company. It manifests itself in need for the ownership of the company to remain in the family and to maintain the well-being of family members throughout the generations.

Dynamic Familiness: Family dynamic capabilities allow the intentional creation, renewal, or modification of a unique set of resources derived from the interaction between the family, its members, and the business.

Learning and Knowledge Management: Organizational process oriented to the systematization and internalization of knowledge that allows organizations to grow and project over time.

Family Essence: Refers to the transmission of values and family culture in the business and the need for the business to be projected through family generations.

Static Arguments: Arguments that are based on the specific resources and capacities derived from the family influence at a specific moment and not in their contribution and transmission throughout the family generations.

Organizational Routines: Organizational processes that allow the operation of the firm.

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