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Family rms are unique organizational forms as a result of the interactions between family members, the family, and the business. Distinctive familiness has been used as a notion to encompass these interactions and the consequent systemic synergies that could lead to competitive advantages. This introduction discusses the notion and reviews the papers and commentaries in this special issue within the context of their contributions to our understanding of the possible sources and consequences of distinctive familiness.
Introduction
Early 20th-century management thinking was greatly inuenced by powerful voices suggesting the optimality of professional management. For example, Alfred Chandler advocated managerial capitalismwherein salaried managers with little or no equity in a rm make most of the decisions regarding the production of goods and servicesas the most effective means of organizing a rm. Similarly, Max Weber recommends that managers should be separated from ownership and the means of the production. Clearly many rms (especially within the U.S. and the U.K.) are organized according to these principles, but the resurgence of discussions in the agency literature about problems arising from the separation of ownership and management have brought these earlier convictions into question. In fact, rms that are family owned and managed continue to dominate the economic landscape throughout the world (La Porta, Lopez-de-Silanes, & Shleifer, 1999; Shanker & Astrachan, 1996) and recent research suggests that many of these rms outperform their nonfamily counterparts (Anderson, Mansi, & Reeb, 2003; Miller & Le Breton-Miller, 2005; Villalonga & Amit, 2004). That family rms are unique as a result of the involvement of the family through ownership, governance, management, and vision is a basic premise of family business researchers; that these rms behave and, consequently, perform differently is the reason for research; explaining how and why they behave and perform differently is the objecPlease send all correspondence to: James J. Chrisman at jchrisman@cobilan.msstate.edu, to Jess H. Chua at chua@mgmt.ucalgary.ca, and to Lloyd Steier at lloyd.steier@ualberta.ca.
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tive. Thus, from a research perspective it is not sufcient to show whether or not family rms outperform their nonfamily counterparts. The contingencies and congurations wherein family provides a useful organizing context need to be identied, explained, and proven. A term that has been used to encompass why, when, and how the family form of business organization succeeds or fails is familiness. Habbershon, Williams, and MacMillan (2003) used the term to characterize those interactions between individual family members, the family unit, and the business that lead to systemic synergies, known as distinctive familiness or diseconomies, known as constrictive familiness, with the potential to create competitive advantages or disadvantages for the rm. Discussions about distinctive familiness, (e.g., Chrisman, Chua, & Litz, 2003; Habbershon & Williams, 1999; Habbershon et al., 2003) suggest that family rms are formed to institutionalize the unique resources, capabilities, and visions of families in pursuit of common economic and, potentially, noneconomic motives. By institutionalize we mean that the organization in question is not merely an expendable instrument but rather an entity with a value transcending its utilitarian purpose (Selznick, 1957). In other words, because a family business is an embodiment of the aspirations and capabilities of family members, it has a strong social element affecting the decisions that determine its strategy, operations, and administrative structure. Furthermore, because the social element itself has value to the organizing family, it tends to persist over time, giving the family organization a unique character and culture. Habbershon et al., following Chua, Chrisman, and Sharma (1999), suggest that the uniqueness is manifested through the purposeful transgenerational pursuance of a vision held in common by a family. Useful though it is as an abbreviation for what make family rms different and succeed or fail, familiness needs much further development as a concept before it can provide us with a structure for organizing research results or the foundation of a theory of the family rm. For example, we do not understand the conditions that give rise to familiness and the formation of family rms. Since empirical evidence suggests that the majority of family rms are born rather than made (Chua, Chrisman, & Chang, 2004), it seems clear that the formation of family rms is dependent upon a complex set of factors specic to both the family and the social, cultural, and economic environment of the region in which the family resides. Likewise, we do not yet fully understand sources or types of familiness. Questions about how ownership, management, and transgenerational intentionality interact to create characteristics unique to family organizations have not been answered yet, nor are the answers to questions concerning the types of familiness, both distinctive and constrictive, that emanate from those characteristics fully apparent. Finally, the organizational consequences of familiness in terms of the way decisions are made, functions are performed, and strategies and structures are set, are not known. In other words, we do not know much about what family rms look like, why they are often so successful, or why that success is often limited in terms of size and scope. Theory building about family business naturally leads to questions about how the organizational form is different, the sources of the differences, and the consequences. Thus, although we did not originally set out to create a forum on familiness, and the authors of the articles and commentaries contained in this special issue may not explicitly address familiness, they do provide a promising collection of approaches for further investigation of, and some answers to, the questions posed above. Consequently, we decided to use this introduction to highlight the contributions made by these articles in the context of familiness. In the next section we briey discuss the origins and nature of the Theories of Family Enterprise conference that led to this special issue. Then we
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summarize the articles and commentaries and tie them to the notion of familiness. We conclude with a short recap and a call for further development of the theoretical foundations of familiness.
give rise to their long-standing success, noting the ubiquity across time and place of the family form of organization. Carney briey reviews the components of ownership, management, and succession that appear to have achieved some consensus in terms of delimiting family rms from nonfamily rms. To Carney, however, the key factor is that family ownership confers certain control rights and that these rights allow family owners to make decisions in ways that are largely unavailable to rms with other governance structures. After reviewing managerial and alliance methods of governance, he identies three unique characteristics of the family form of governanceparsimony, personalism, and particularismand explains how these characteristics can potentially give rise to competitive advantages and disadvantages. Parsimony in a family rm comes from the fact that resource deployment decisions are made with the familys own money. The family may follow practices that place limits on the funds available to maintain control, but the funds they do have would be used carefully and frugally because, as Carney suggests the link between ownership and managerial control reduces potential agency costs. This creates incentivesnot present to a similar degree in rms with managerial or alliance governance structuresto minimize costs. As a consequence, family rms should be well suited for the pursuit of costleadership strategies (Porter, 1980) and particularly well adapted to compete in environments of resource scarcity. Personalism of the family form of governance makes it possible for family rms to pursue their visions with relatively few encumbrances while particularism permits family rms to discriminate between arms length and relational contracting as they see t. Carney argues that the concentration of ownership and control in a single family or family leader greatly reduces the constraints to decision making imposed by other governance modes. In a dynamic environment, family rms have greater discretion in changing the vision, direction, and criteria governing their decisions and can do so more quickly. Carney suggests that the combination of personalism and particularism can provide two potential sources of competitive advantages for family rms. First, the fact that the business and family are intimately intertwined gives family businesses an edge in building social capital. Relationships can be initiated, developed, and ended more easily and with more discretion. Transactions carry more weight because they not only imply a business commitment but also a familial commitment. Carney sees the advantages of social capital to be especially important in emerging and closed markets where the rules of the game are either ill dened or controlled by governments or a small number of insiders. Second, personalism and particularism are important in making opportunistic investments. Family rms are better able to make rapid resource allocation decisions based on hunches or heuristics than rms operating under other governance structures, wherein the potential protability of the opportunity must be formally documented before resources can be committed. This gives family rms an advantage in markets where being the rst mover or pursuing opportunities for innovation with alacrity and focus is of critical importance. All in all, Carneys (2005) article goes a long way toward providing a foundation for the study of familiness. First, through his discussion of parsimony, personalism, and particularism, he identies three important sources of advantage that are possessed by family rms. In this instance it should be noted that entrepreneurial rms in general appear to possess similar characteristics. However, family rms are different because they are more likely to institutionalize these characteristics rather than allow them to dissipate by, for example, seeking venture capital and/or public nancing and the premature profession240 ENTREPRENEURSHIP THEORY and PRACTICE
alization of management. While Carney notes that some family rms have been able to overcome their capital and managerial disadvantages and grow to a large size, the key point is that they have done so using mechanisms that allow them to retain their distinctive familiness elements. In summary, Carney identies three types of competitive advantages that the family form of governance engenders: efciency, social capital, and opportunistic investment.1 He shows how these might develop from the unique governance characteristics of parsimony, personalism, and particularism. Finally, because he realizes that resources and capabilities only become advantages in a given context, he goes on to speculate on the specic environmental conditions that might cause family-governed rms to ourish. In this sense he addresses the important questions of why there are so many family businesses and why family businesses seem to dominate some elds and not others.1
1. The reader may wish to compare the potential competitive advantages of family rms Carney (2005) identies taking a governance perspective with those Sirmon and Hitt (2003) identify taking a resource-based perspective.
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family rms for good or ill. Second, echoing the work of authors such as Gersick, Davis, Hampton, and Lansberg (1997), it appears that the strengths and weaknesses of a family management team are contingent upon the relationships between the members of that team. Third, these strengths and weaknesses imply that we might expect different types of behavior from different types of family teams. For example, using the Miles and Snow (1978) terminology, we might theorize that parental family teams will tend to follow defender strategies, emphasizing efciency, consistency, and reliability. Conversely, family teams without parental inuence are likely to be either prospectorsexhibiting a great deal of innovative behavior when the multitude of ideas emanating from such teams can be harnessedor reactorsexhibiting erratic or inconsistent behaviors when the lack of cohesion, shared vision, and other valuable team attributes override rational decision making. Clearly, many research questions ow from Ensley and Pearsons ndings. Nordqvists (2005) commentary highlights three important directions for extending Ensley and Pearsons study. First, Nordqvist suggests that the next step in studying family top management teams is to identify the contingent relationship between the family rms environment and the composition of the top management team. As he correctly points out, different environments require different skills and strategies, and different kinds of top management teams will be more or less likely to succeed in divergent circumstances. Second, Nordqvist suggests that future research should seek to gain a better understanding of how the social structure of family businesses affects their behaviors. In other words, Nordqvist calls for studies that investigate how the norms and values originating in different spheres of a family rm create economic and noneconomic value. He suggests, as we did in an earlier section, that researchers must not only determine whether the interactions arising from family involvement affect performance but must also identify how these interactions lead to the specic constituent and synergistic elements that create competitive advantages or disadvantages. Finally, Nordqvist suggests that family businesses must be viewed as heterogeneous and can be more nely classied. While a denition is needed to delimit the boundaries of our investigations, we must not lose sight of the fact that the boundaries encompass many populations rather than a single population of family rms. He argues that characterizing the different types of family businesses that exist and determining the nature and consequences of those differences is as important as comparing family rms with nonfamily rms. In keeping with the theme of this issue we suggest that understanding the sources and types of familiness may be one effective method of distinguishing populations of family rms. And as noted above, the studies by Ensley and Pearson (2005) and Nordqvist (2005) indicate that examining top management teams may assist us in this endeavor since differences among them may lead to differences in the familiness that develops as these organizations evolve and grow.
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(Hofstede, 2001) inuence resource divestment decisions. They argue that family businesses in cultures that place greater value on individualism will take less time to make divestment decisions, once the potential need for divestment becomes apparent, than family businesses in collectivist cultures. Sharma and Manikutty also argue that resource divestment decisions are affected by the norms of liberty versus authority in the relationships between members of senior and junior generations of a family, and norms of equality versus inequality in terms of how the senior generation treats the various members of the junior generation. Specically, absolute nuclear families with norms of liberty and inequality are expected to make divestment decisions quicker than all other types of families. Conversely, community families with norms of authority and equality would make divestment decisions the slowest. Sharma and Manikutty then complete their model by proposing the interactive effects of societal culture and family structure. For example, they suggest that absolute nuclear families in individualistic societies will make divestment decisions faster than those in collectivist societies. Kellermanns (2005) extends Sharma and Manikuttys (2005) model in the following ways. First, he incorporates resource accumulation decisions and makes the model applicable to the two kinds of resource management decisions facing family rms. In doing so he arrives at the proposition that although absolute nuclear families may be the quickest in divestment, it also might be the slowest in accumulation. On the other hand, community families may be the opposite, slowest in divestment but quickest in accumulation. Second, he discusses how family involvement, in the form of ownership, management, and intentions for transgenerational succession (Chua et al., 1999), can inuence resource management. In line with the notion of familiness, his contribution here is to suggest that the key ingredients differentiating family and nonfamily rms can all impact resource management. Third, he brings in the concept of power distance as another cultural variable that might moderate the relationship between family involvement and resource evaluation. His arguments suggest that the inuence of culture may be even more important than Sharma and Manikutty (2005) suggest. Taken together, the articles by Sharma and Manikutty (2005) and Kellermanns (2005) suggest three conclusions with regard to familiness. First, their conceptual work implies that whether a family business develops distinctive or constrictive familiness, and the form that its familiness takes, will be a function of the structure or culture of the family unit. Second, their work also explains how the essential features of a family business (ownership, management, and transgenerational sustainability) will inuence familiness. In both cases what they have done is provide a more concrete conceptualization of the antecedents of familiness than have been available hitherto. Third, by explaining how those factors lead to decisions to acquire new resources or divest old ones, they begin to provide hints about the strategic consequences of familiness in such organizations. We think it is particularly interesting to combine the conceptual insights of Sharma and Manikutty (2005) and Kellermanns (2005) with the empirical evidence provided by Ensley and Pearson (2005). While the latter shows that family business structure changes behavioral dynamics, the former suggest that structure must be characterized by more than just the composition of the top management team; the norms of the top management team may also play an important role. Furthermore, the external environment, here in the form of societal values, may be one of the moderating or mediating contingencies. By taking the two studies together, we may have the beginnings of a behavioral model for explaining a wide range of decisions in the family business context. However, there is still much more work to be done.
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one might be able to garner information regarding the factors that lead to different levels of family inuence. Furthermore, they draw on Aldrich and Cliffs (2003) family embeddedness framework to show how the F-PEC scale might be used to investigate the dynamics of family inuence. Finally, Cliff and Jennings (2005) conclude their commentary of Klein et al.s scale (2005) by calling for further efforts to operationalize the nature of family inuence as well as its extent.
Conclusions
In conclusion, this special issue contains four articles and three commentaries that, taken together, advance our understanding of family businesses and how they are organized. Albeit a signicant organization form, family rms are highly idiosyncratic. Familiness (Habbershon & Williams, 1999; Habbershon et al., 2003) represents a useful all-encompassing term for the sources, processes, and consequences of family involvement in terms of ownership, management, and intergenerational intention. The purpose of this introductory article has been to highlight the key contributions of the articles and commentaries in the special issue and to illustrate how they t into the notion of familiness. Agency theoretic studies of family business focus mainly on the interaction between ownership and management as drivers of competitive advantages or disadvantages. Resource based views of the family rm have, so far, not associated the valuable, rare, inimitable, and nonsubstitutable resources and capabilities with the individual dimensions of family involvement. In this regard, the articles in this special issue make an important contribution; they have begun the work of explaining how these different dimensions of family involvement may singly create uniqueness and contribute to distinctive familiness. Of course, much remains to be done. Each article and commentary, by necessity, has only been able to deal with a small piece of a very complex area of study. However, each has provided insights as well as numerous directions for future research. Our intention was to bring together scholars to enhance the development of theories of family enterprise. Our contention is that the combined work of these scholars can be integrated under the umbrella notion of familiness. Our hope is that the contents of this special issue will inspire other scholars to build on these precedents in their attempts to ll the many gaps that remain in our knowledge of family businesses.
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Sirmon, D.G. & Hitt, M.A. (2003). Managing resources: Linking unique resources, management, and wealth creation in family rms. Entrepreneurship Theory and Practice, 27, 339358. Villalonga, B. & Amit, R. (2004). How do family ownership, management, and control affect rm value? Paper presented at the Academy of Management Annual Conference, New Orleans, LA.
James J. Chrisman is a professor of management at Mississippi State University and holds a joint appointment with the Centre for Family Business Management and Entrepreneurship in the Haskayne School of Business at the University of Calgary. Jess H. Chua is the director of the Centre for Family Business Management and Entrepreneurship, holds an endowed professorship in family business management, and is a professor of nance in the Haskayne School of Business at the University of Calgary. Lloyd P. Steier is the academic director for both the Centre for Entrepreneurship and Family Enterprise and the Alberta Institute of Family Enterprise. He holds a chair in entrepreneurship and family business, and is a professor in the Department of Strategic Management and Organization at the University of Alberta School of Business. The guest editors acknowledge an anonymous family for supporting the conference at which the articles in this special issue were originally presented. The assistance of Corrina Nakskov in organizing the conference and Shelley Schindell in editing the articles is also gratefully acknowledged.
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