Family Business / Family Business Review / Finance / Governance / Research in the Field / Trends in Family Enterprise

Research Applied: FBR Summaries for The Practitioner

Practitioner-banner11-2012The Practitioner

Karen Vinton’s Executive Summaries recap three articles from the March 2013 issue of FBR, ranging from 1) a look at a report that analyzes the connection between innovative capacity and small family firm performance and its implication for practitioners; 2) a review of 23 articles on technological innovation in family firms and 3) a review of a study of 532 Belgian family businesses that looks at professionalism in the family firm.

These summaries of each article, as well as the articles themselves, serve as tip sheets for the practitioner facing challenges in an engagement. Please don’t forget to share these summaries with friends and colleagues.

SUMMARY 1:  

Too Many Cooks in the Kitchen:  Innovative Capacity, Collaborative Network Orientation, and Performance in Small Family Businesses
Mark Spriggs, Andy Yu, David Deeds and Ritch L. Sorenson

Using data from 199 small family firms, this article explores the connection between innovative capacity and small family firm performance and how ownership dispersion and network orientation have an impact on that relationship.

  • “Innovative capacity” is the set of behaviors, routines, and capabilities used by the firm to identify opportunities, openly share information, promote discussion, and implement new ideas that enable the creation of new products, processes, and organization forms.
  • “Collaborative network orientation” is defined as a firm’s preference to develop and build collaborative relationships between  networks both inside (employees, family members) and outside (customers, community members) the firm.

The authors found support for a link between innovative capacity and performance that was moderated by the collaborative network orientation and the dispersal of ownership of the family firm.  Findings indicate that two configurations enhanced innovation and firm performance:  1) concentrated ownership combined with high collaborative network orientation; and 2) dispersed ownership and low collaborative network orientation.  These findings suggest that the dynamics of family firm ownership and collaborative network orientation hold the potential to influence firm innovation and performance.

These findings have numerous managerial implications and implications for practitioners working with family businesses.  For example, firms with many owners could benefit from a more selective use of collaboration such as having an annual discussion of overall business strategy.  The section entitled “Managerial Implications” is recommended reading for practitioners and family business owners and managers.

Download article here

SUMMARY 2:

Research on Technological Innovation in Family Firms:  Present Debates and Future Directions
Alfredo De Massis, Federico Frattini and Ulrich Lichtenthaler

The authors conducted a review of existing literature and found 23 research articles that looked at technological innovation in family firms and then identified the major gaps in the research and made recommendations for future research. The article highlights the importance of technological innovation for the competitive advantage of family firms. “Technological innovation” is defined as the set of activities through which a firm conceives, designs, manufactures, and introduces a new product, service, system or technique.

The authors provide several interesting implications for practitioners in the “Implications for Practice” section of the paper. Family firm decision-makers and consultants to family firms should exercise caution in generalizing best practices about technological innovation from non-family business settings, because those best practices may not leverage the distinctive resources of a family business and in fact may provide barriers to technological innovation. For example, much of the literature on innovation argues for establishing a formalized and systematic process for managing technological innovation projects, but this may be counterproductive for family firms and hinder innovation.

Consultants should be wary of automatically recommending best practices in this field without a careful examination of the unique characteristics of the family firm.  This is obviously an area that still needs considerable research and practitioners should consider partnering with researchers to investigate this important area of study.

Download article here

SUMMARY 3: Family Firm Types Based on the Professionalization Construct:  Exploratory Research
Julie C. Dekker, Nadine Lybaert, Tensie Steijvers, Benoît Depaire and Roger Mercken

Using data from 532 Belgian family businesses, the authors develop a way to distinguish among family businesses using dimensions of professionalization. This study found that professionalization of a family firm does not mean just adding non-family managers, but can involve a number of other dimensions. The study found five factors which were the underlying dimensions of professionalization:

  • Financial control systems
  • Nonfamily involvement in governance systems
  • Human resource control systems
  • Decentralization of authority
  • Top level activeness

Using these dimensions, the authors were able to distinguish four different types of family businesses in their sample:

  • Autocracy:  limited formal financial control systems, low nonfamily involvement, low human resource control systems, moderate centralization of authority and low top level activeness. 42.67% of the businesses studied were in this category.
  • Domestic Configuration:  high formal financial control systems, low nonfamily involvement, moderate human resource control systems, high decentralization, and low top-level activeness.  41.35% of the businesses were in this category.
  • Administrative Hybrid:  high formal financial control systems, high human resource control systems, high decentralization, lower than average top level activeness, and higher nonfamily involvement. 11.28% of the businesses were in this category.
  • Clench Hybrid:  low formal financial control systems, high nonfamily involvement, moderate human resource control systems, low decentralization, and high top level activeness.  Only 4.7% of the businesses were in this category.

This study has important practical implications for both practitioners and family businesses.  Even though more research has to be done to determine if these findings can be replicated, the study clearly shows that there are many ways for a family business to professionalize beyond just hiring nonfamily managers.  For example, a family CEO can decentralize authority to subordinates, improve the objectivity of performance evaluation or selection criteria by introducing formal systems of control, and encourage the board and management team to fulfill a more active role in the governance of the company.

Download article here

For additional perspectives on professionalizing the family firm, practitioners should also find Stewart and Hitt’s article, Why Can’t a Family Business Be More Like a Nonfamily Business? Modes of Professionalization in Family Firms, (March 2012 Family Business Review) interesting.

About the Contributor
Karen Vinton 2012Karen L. VintonPh.D. is a 1999 Barbara Hollander Award winner and Professor Emeritus of Business at the College of Business at Montana State University, where she founded the University’s Family Business Program. An FFI Fellow, she has served on its Board of Directors and also chaired the Body of Knowledge committee. From 1997 through 2011, Vinton served on the editorial board of Family Business Review, and is the current assistant editor. Before retiring, Vinton served as director for her own family’s business (negotiating its eventual sale) and had her own family business consulting practice, Vinton Consulting Services. Karen can be reached at klvinton700@gmail.com.

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Yours in Practice,

The Practitioner

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