Family Business Ethics: At the Crossroads of Business Ethics and Family Business

Vazquez, Pedro. 2018. “Family Business Ethics: At the Crossroads of Business Ethics and Family Business.” Journal of Business Ethics 150 (3): 691–709.

In spite of the considerable development of research in the fields of business ethics and family business, a comprehensive review and integration of the area where both disciplines intersect has not been undertaken so far. This paper aims at contributing to the call for more research on family business ethics by answering the following research questions: What is the status of the current research at the intersection of business ethics and family business? Why and how do family firms differ from nonfamily firms regarding business ethics? And, what are the key directions for further research? To answer these questions, this study combines a systematic approach for the selection of articles, resulting in a sample of 31 articles over 35 years, with a narrative review to analyze the literature. This paper finds that research on family business ethics is scarce but increasing and that family firms are considerably different from non-family firms regarding ethical issues. Particular stakeholders, goals, relationships, and practices are found to be the forces behind the peculiarity of family business ethics. Ultimately, research development on family business ethics is encouraged and future research directions flowing from the key findings and reflections of this review are provided.

Values, Spirituality and Religion: Family Business and the Roots of Sustainable Ethical Behavior

Astrachan, Joseph H., Claudia Binz Astrachan, Giovanna Campopiano, and Massimo Baù. 2020. “Values, Spirituality and Religion: Family Business and the Roots of Sustainable Ethical Behavior.” Journal of Business Ethics 163 (4): 637–45.

The inclusion of morally binding values such as religious—or in a broader sense, spiritual—values fundamentally alter organizational decision-making and ethical behavior. Family firms, being a particularly value-driven type of organization, provide ample room for religious beliefs to affect family, business, and individual decisions. The influence that the owning family is able to exert on value formation and preservation in the family business makes religious family firms an incubator for value-driven and faith-led decision-making and behavior. They represent a particularly rich and relevant context to re-assess the relationship between ethical beliefs, decision-making processes and behaviors in business organizations at the interface between family and professional logics. This Special Issue is dedicated to deepening our understanding of the role religious values and spirituality play in the formation of organizational ethical practices in faith-led family firms and resulting organizational and family-related outcomes. In this editorial, we introduce the 10 papers included in this Special Issue, which investigate the relationship between religion or spirituality and family firm ethical behavior in various geographical, cultural and religious contexts, using a multitude of qualitative and quantitative methodologies. By focusing on the effects of religious or spiritual orientations on both the business and the family, as well as on the values, norms and goals present in the family business system, further research can gain a more nuanced understanding of the relationship between religious and spiritual believes, and sustainable ethical behavior in family firms.

Exploring a Faith-Led Open-Systems Perspective of Stewardship in Family Businesses

Carradus, Angela, Ricardo Zozimo, and Allan Discua Cruz. 2020. “Exploring a Faith-Led Open-Systems Perspective of Stewardship in Family Businesses.” Journal of Business Ethics 163 (4): 701–14.

The purpose of this study is to examine how faith-led practices in family firms affect organizational stewardship. Current studies highlight the relevance of religious adherence for family businesses, yet provide limited understanding of how this shapes the key traits of these organizations. Drawing on six autobiographies of family business leaders who openly express their adherence to their faith, and adopting an open-systems analysis of these autobiographies, we demonstrate that faith-led values influence organizational and leadership practices. Overall, our study suggests that the influence of religious beliefs in the organizational practices of family businesses have greater repercussions than previously thought. By introducing a faith-led approach to stewardship, we enrich the theoretical discussion around stewardship and the relevance of religion in family business.

Christian Family Businesses: Opportunities for Future Research

Discua Cruz, Allan. 2013. “Christian Family Businesses: Opportunities for Future Research.” Journal of Biblical Integration in Business 16 (2).

Family businesses dominate the business landscape around the world. Traditionally, research has concentrated on understanding the complex processes that underpin the creation, development, and survival of family businesses. To date, however, a Christian perspective on family business research has been largely overlooked. The aim of this paper is to explore the connections between a Christian perspective and the most prevalent business form worldwide. This paper contributes by reviewing relevant literature in the family business field and by suggesting future research paths.

Socioemotional Wealth in Family Firms: Theoretical Dimensions, Assessment Approaches, and Agenda for Future Research

Berrone, Pascual, Cristina Cruz, and Luis R. Gomez-Mejia. 2012. “Socioemotional Wealth in Family Firms: Theoretical Dimensions, Assessment Approaches, and Agenda for Future Research.” Family Business Review 25 (3): 258–79.

This article makes the case for the socioemotional wealth (SEW) approach as the potential dominant paradigm in the family business field. The authors argue that SEW is the most important differentiator of the family firm as a unique entity and, as such, helps explain why family firms behave distinctively. In doing so, the authors review the concept of SEW, its different dimensions, and its links with other theoretical approaches. The authors also address the issue of how to measure this construct and offer various alternatives for operationalizing it. Finally, they offer a set of topics that can be pursued in future studies using the SEW approach.

A Resource-Based Framework for Assessing the Strategic Advantages of Family Firms

Habbershon, Timothy G., and Mary L. Williams. 1999. “A Resource-Based Framework for Assessing the Strategic Advantages of Family Firms.” Family Business Review 12 (1): 1–25.

The Resource-Based View (RBV) of competitive advantage provides a theoretical framework from the field of strategic management for assessing the competitive advantages of family firms. The RBV isolates idiosyncratic resources that are complex, intangible, and dynamic within a particular firm. The bundle of resources that are distinctive to a firm as a result of family involvement are identified as the ?familiness? of the firm. This approach provides a research and practice method for assessing the specific behavioral and social phenomena within a firm that provide an advantage. Using a familiness model for assessing competitive advantage overcomes many of the problems associated with the generic claim that family companies have an advantage over nonfamily companies. It also provides a unified systems perspective of family firm performance.

Family Influences on Firms: An Introduction

Chrisman, James J., Pramodita Sharma, and Simon Taggar. 2007. “Family Influences on Firms: An Introduction.” Journal of Business Research 60 (10): 1005–11.

Starting with a historical review of the developments in family business studies, the articles in this special issue emphasize the differential influences of family on the managerial behaviors and financial performance of family firms. This introduction explains why such investigations are important for the development of a theory of the family firm, provides a brief review of the contents and contributions of the articles, and concludes with a call for additional research on how and why families influence managerial behaviors and firm performance.

Socioemotional Wealth and Business Risks in Family-Controlled Firms: Evidence from Spanish Olive Oil Mills

Socioemotional Wealth and Business Risks in Family-Controlled Firms: Evidence from Spanish Olive Oil Mills.” Gómez-Mejía, Luis R., Katalin Takács Haynes, Manuel Núñez-Nickel, Kathyrn J. L. Jacobson, and José Moyano-Fuentes. 2007. Administrative Science Quarterly 52 (1): 106–37. 

This paper challenges the prevalent notion that family-owned firms are more risk averse than publicly owned firms. Using behavioral theory, we argue that for family firms, the primary reference point is the loss of their socioemotional wealth, and to avoid those losses, family firms are willing to accept a significant risk to their performance; yet at the same time, they avoid risky business decisions that might aggravate that risk. Thus, we propose that the predictions of behavioral theory differ depending on family ownership. We confirm our hypotheses using a population of 1,237 family-owned olive oil mills in Southern Spain who faced the choice during a 54-year period of becoming a member of a cooperative, a decision associated with loss of family control but lower business risk, or remaining independent, which preserves the family’s socioemotional wealth but greatly increases its performance hazard. As shown in this study, family firms may be risk willing and risk averse at the same time.

Toward a Stewardship Theory of Management

Davis, James H., F. David Schoorman, and Lex Donaldson. 1997. “Toward a Stewardship Theory of Management.” The Academy of Management Review 22 (1): 20–47.

Recent thinking about top management has been influenced by alternative models of man. Economic approaches to governance such as agency theory tend to assume some form of homo-economicus, which depict subordinates as individualistic, opportunistic, and self-serving. Alternatively, sociological and psychological approaches to governance such as stewardship theory depict subordinates as collectivists, pro-organizational, and trustworthy. Through this research, we attempt to reconcile the differences between these assumptions by proposing a model based upon the subordinate’s psychological attributes and the organization’s situational characteristics.

Bivalent Attributes of the Family Firm

 “Bivalent Attributes of the Family Firm.” Tagiuri, Renato, and John Davis. 1996 Family Business Review 9, no. 2 (June 1, 1996): 199–208. 

Although family-owned and managed firms are the predominant form of business organization in the world today, little systematic research exists on these companies. This paper builds upon insights found in the emerging literature on these enterprises and upon our own observations to provide a conceptual framework to better understand these complex organizations. We introduce the concept of the Bivalent Attributes, a unique, inherent feature of an organization that is the source of both advantages and disadvantages? to explain the dynamics of the family firm.

Comment on ‘Family Values or Crony Capitalism?

“Comment on ‘Family Values or Crony Capitalism?’ (Harold James)” 2008 Randall Morck Capitalism and Society 3 (1).

The 20th century ran countless experiments to see what form of government works least badly. Unless things turn around unexpectedly, James I would have lost money betting on the absolute monarchy. The 21st century now gets to sort out what form of corporate governance works least badly; and I suspect Prof. James is premature in declaring for family firms.

Family Values or Crony Capitalism?

“Family Values or Crony Capitalism?” Harold James Capitalism and Society 3 (1) 2008 

Family firms are very prominent in many parts of the world, including in many of the most dynamic emerging markets. They are often thought to be associated with poor corporate and political governance. This article examines the debate about their durability and efficiency, using material drawn from the long experience of continental Europe and sketches out an ideal type of the family, in which there is a historical experience of entrepreneurship, a brand, and a network built around family enterprise. It then tests various common explanations for the prevalence of family firms, including Roman law versus common law traditions, tax incentives, share voting privileges, and inheritance law; and finds that each applies only in a quite particular historical epoch. Finally, the article suggests that family businesses offer advantages that are most apparent at times of shocks and discontinuities, and that they are thus a response to uneven development.

The Bind that Ties: Socioemotional Wealth Preservation in Family Firms

“The Bind that Ties: Socioemotional Wealth Preservation in Family Firms”

Luis R. Gomez-Mejia, Cristina Cruz, Pascual Berrone & Julio De Castro The Academy of Management Annals 5 (1): 653–707. 2011

A growing body of research shows that family firms are different from other organizations in significant ways. In this paper we review this literature by examining how family firms differ from nonfamily firms along five broad categories of managerial decisions. These categories encompass a set of key organizational choices concerning management processes, firm strategies, corporate governance, stakeholder relations and business venturing. We argue that socioemotional wealth or affective endowment of family owners explain many of these choices. We also examine some contingency factors (namely family stage, firm size, firm hazard, and the presence of nonfamily shareholders) that moderate the influence of socioemotional wealth preservation as a point of reference when making managerial decisions in family firms. Lastly, we explore the firm performance consequences of family ownership.

The Role of Family in Family Firms

“The Role of Family in Family Firms,”  Marianne Bertrand and Antoinette Schoar, The Journal of Economic Perspectives 20, no. 2 (2006): 73–96. (Open Access) 

History is replete with examples of spectacular ascents of family businesses. Yet there are also numerous accounts of family businesses brought down by bitter feuds among family members, disappointed expectations between generations, and tragic sagas of later generations unable to manage their wealth. A large fraction of businesses throughout the world are organized around families. Why are family firms so prevalent? What are the implications of family control for the governance, financing and overall performance of these businesses?

Corporate Ownership Around the World

Corporate Ownership Around the World” Rafael La Porta, Florencio Lopez-De-Silanes, Andrei Shleifer The Journal of Finance 54 (2): 471–517. 1999 (Open Access) 

We use data on ownership structures of large corporations in 27 wealthy economies to identify the ultimate controlling shareholders of these firms. We find that, except in economies with very good shareholder protection, relatively few of these firms are widely held, in contrast to Berle and Means’s image of ownership of the modern corporation. Rather, these firms are typically controlled by families or the State. Equity control by financial institutions is far less common. The controlling shareholders typically have power over firms significantly in excess of their cash flow rights, primarily through the use of pyramids and participation in management.