Research Applied: An FBR Précis on Family Firms and Resilience

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FFI Practitioner: June 5, 2024 cover

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Thank you to this week’s contributors, Yasin Yilmaz, Sebastian Raetze, Julia de Groote, and Nadine Kammerlander for sharing their précis of “Resilience in Family Businesses: A Systematic Literature Review” – an article that appears in the March 2024 issue of FBR. In the précis, the authors provide a summary of the key findings from reviewing over 14 years of research to support the now conventional wisdom about family business resilience. The authors also share practical insights of the research for families, advisors, and researchers in the field.

 


 

Introduction

It is well understood that the unpredictable nature of all manner of global crises affect everyone, from individuals to families to corporations. However, family enterprise advisors are also aware that family-owned enterprises face a dual burden during these uncertain times. They not only grapple with the external adversities shared by all businesses but also contend with internal dynamics unique to their special organizational form (Tsoutsoura 2021). Internal conflicts, succession issues, and role ambiguities frequently plague these enterprises (De Massis et al. 2018; Harvey and Evans 1994; Morris et al. 1997; Schmidts 2013; Soluk et al. 2021). Consequently, family businesses require increased resilience to weather such storms effectively. Interestingly, previous research on family businesses indicates that they often demonstrate remarkable resilience (Azouz et al. 2022; Chrisman et al. 2011), even surpassing non-family enterprises (Amann and Jaussaud 2012; Ding et al. 2021; Eckey and Memmel 2022).

This raised a question for the research team behind the FBR article, “Resilience in Family Businesses: A Systematic Literature Review”:

According to existing research into enterprising families, how can family businesses exhibit resilience despite facing numerous and unique challenges?

Findings and Implications for Practice

Defining and Measuring Resilience

The authors analyzed dozens of articles across fourteen years of research into family enterprise resilience, which they defined as “the process of positive individual, family/non-family group, and organizational adjustment to persistent stressors and discontinuous events, supported by idiosyncratic resource endowments, leading to the functional and structural integrity and functioning of the family business in the short term and to family business longevity in the long term” (Yilmaz et al. 2024, 68).

The literature review showed that family businesses have a higher degree of resilience compared to non-family businesses. This resilience was often evidenced through direct comparisons of financial indicators before and after crises (for example, the return on investments after a natural disaster). The resilience of family businesses is derived from the distinctiveness of their resources, underscoring the importance for family business practitioners to cultivate and safeguard these characteristics:

  • Long-term orientation and family values
  • Sustained social capital
  • Capacity for strategic renewal

Research on resilience in family businesses underscores their possession of the following three unique resources and capabilities that serve as the bedrock of their resilience (Anggadwita et al. 2022; Crespo et al. 2023; Discua Cruz et al. 2019; Fischer-Kreer et al. 2021).

Long-Term View and Family Values

The underlying driver of this resilience primarily stems from the long-term orientation and deep-rooted family values characteristic of family businesses. The literature indicates that family enterprises are strengthened when they can effectively leverage these qualities. If advisors encourage their clients to incorporate this long-term orientation and family values into all aspects of their decision-making, strategic initiatives, resource allocations, and operational ethos, then it is likely to help those firms persevere through adverse and crisis-laden periods. This intrinsic motivation and passion set family businesses apart from non-family enterprises—which are often more likely to prioritize short-term gain (Miller et al. 2008)—instilling a resilience that endures amidst adversity.

Furthermore, studies indicate that the long-term focus inherent in family businesses promotes knowledge exchange, intergenerational learning, and the development of firm-specific practices to identify opportunities, all of which contribute to enhancing resilience (Conz et al. 2020).

While family businesses are often perceived as having more limited financial resources than their non-family counterparts (De Massis et al. 2018), the research team’s findings suggest that they possess increased patient financial capital (Campopiano et al. 2019; Mzid, 2017; Sirmon and Hitt 2003), serving as a buffer or reserve to help the businesses weather turbulent times. In addition to supporting financial capital, long-term orientation also fosters the development and maintenance of robust social capital within family businesses.

Sustained Social Capital

Social capital has emerged as a pivotal factor in promoting resilience (Amaral and Da Rocha 2023), facilitating advantageous information exchange (Alonso and Kok 2021), and bolstering connections with financial institutions (Mahto et al. 2022). These robust social networks enable family businesses to secure vital support, such as loan extensions or additional financing, even in challenging times. Importantly, amidst crises, these social networks offer invaluable opportunities for learning from others and adeptly adjusting to evolving circumstances.

The authors recommend that family enterprise practitioners should increase their attention to helping their clients to develop their social capital. Individual exchanges within familial and professional circles nurture personal resilience, while broader interactions with business partners, suppliers, and customers fortify resilience at the organizational level.

Moreover, the pivotal role of the owner-manager—the nexus of ownership and management—becomes evident, with their actions and decisions exerting profound influence over the trajectory of the family business during crises.

Capacity for Strategic Renewal

Another key resource identified in family businesses is the capacity for strategic renewal, synonymous with the ability to innovate. Proactive resilience strategies enable family businesses to mitigate risks and pivot to alternative approaches when conventional methods fail in times of crisis. By mobilizing and leveraging these resources and capabilities, family businesses effectively demonstrate resilience, seizing opportunities for learning and growth in the process. These adaptive processes not only ensure the short-term survival of both the family and the business but also contribute to the longevity of the family enterprise in the long run. With increasing experience, the pool of resources and capacities expands, strengthening the resilience of the family business and increasing its prospects for sustainable success. Finally, diversification emerges as a strategic imperative for family businesses, offering avenues to mitigate risk and enhance resilience in an ever-changing business landscape.

Methodology

These findings were supported by using a systematic literature review (Tranfield et al., 2003), the authors analyzed and systematically categorized 87 articles published in peer-reviewed journals between 2009 and 2023. The selection criteria encompassed articles that centrally focused on resilience in the context of family businesses and constituted full-length conceptual or empirical studies. Upon completion of the search process, the authors analyzed and categorized all articles within our dataset. Four pivotal themes emerged from the literature:

  1. Defining family business resilience
  2. Long-term orientation and family values
  3. Resource and capability endowments
  4. Demonstration of resilience and learning

A Framework to Consider: Sustainable Family Business Theory

Despite the general lack of theoretical underpinnings in the family business resilience literature, one theory emerges as prominently featured and considered in thirteen instances: the Sustainable Family Business Theory (SFBT). This theory, formulated by Danes et al. (2009), places emphasis on the sustainability of family businesses, achieved through the intertwining dynamics of short-term business viability and family functionality. SFBT highlights the complex relationship between family and business systems, particularly focusing on their interface where disruptions occur, resources are allocated, and roles are negotiated. According to the theory, any imbalance, characterized by the disproportionate allocation of resources within one system, jeopardizes the integrity of the other system, ultimately leading to its failure. The Sustainable Family Business Theory, as highlighted by the research analyzed in this literature review, underscores that it is crucial for both family advisors and their clients to recognize the need to support both the family system and the business system if the business is to be resilient enough to persevere through generations.

Conclusion

The research gathered and considered in “Resilience in Family Businesses: A Systematic Literature Review” indicates that some of the most salient characteristics of family enterprises are in fact their unique strengths: their focus on the long term, their emphasis on the family’s values, and their robust social capital. The authors also found that a dynamic owner-manager and a capacity for strategic renewal both contribute to a family firm’s resilience. While theoretical frameworks were not commonly applied to family business resilience research, the theory that emerged most often was Sustainable Family Business Theory, which focuses on the importance of balancing support and resources across both the family system and the business system. Advisors who can help their client families maintain balance on both sides of the scale will also be contributing to their long-term resilience.

References

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Amaral, Priscila C. F., and Angela Da Rocha. “Building Resilience during the Covid-19 Pandemic: The Journey of a Small Entrepreneurial Family Firm in Brazil.” Journal of Family Business Management 13, no. 1 (2023): 210–225, https://doi.org/10.1108/JFBM-02-2022-0017.

Anggadwita, Grisna, Anggraeni Permatasari, Dini T. Alamanda, & Werda B. Profityo. “Exploring Women’s Initiatives for Family Business Resilience during the COVID-19 Pandemic. Journal of Family Business Management 13, no. 3 (2022): 714-736, https://doi.org/10.1108/JFBM-02-2022-0014.

Azouz, Ali, Nicolas Antheaume, and Brigitte Charles-Pauvers. “Looking at the Sky: An Ethnographic Study of How Religiosity Influences Business Family Resilience.” Family Business Review 35, no. 2 (2022): 184–208, https://doi.org/10.1177/08944865221095323.

Campopiano, Giovanna, Alfredo De Massis, and Josip Kotlar. “Environmental Jolts, Family-Centered Non-economic Goals, and Innovation: A Framework of Family Firm Resilience.” In The Palgrave Handbook of Heterogeneity among Family Firms, edited by Esra Memili and Clay Dibrell, 773–789. London: Palgrave Macmillan, 2019, https://doi.org/10.1007/978-3-319-77676-7_28.

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Conz, Eliza, Peter W. Lamb, and Alfredo De Massis. “Practicing Resilience in Family Firms: An Investigation through Phenomenography.” Journal of Family Business Strategy 11, no. 2 (2020): 100355, https://doi.org/10.1016/j.jfbs.2020.100355.

Crespo, Nuno F., Cátia F. Crespo, and Maria Calado. “Strategic Responses of the Family Businesses in Accommodation Industry: Lessons for Overcoming Crises.” Journal of Family Business Management 13, no. 1 (2023): 118–145, https://doi.org/10.1108/JFBM-03-2022-0045.

Danes, Sharon M., Jinhee Lee, Sayali Amarapurkar, Kathryn Stafford, George Haynes, and Katherine E. Brewton. “Determinants of Family Business Resilience after a Natural Disaster by Gender of Business Owner.” Journal of Developmental Entrepreneurship 14, no. 04 (2009): 333–354, https://doi.org/10.1142/S1084946709001351.

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Yilmaz, Yasin, Sebasian Raetze, Julia de Groote, and Nadine Kammerlander. “Resilience in Family Businesses: A Systematic Literature Review.” Family Business Review 37, no. 1 (2024): 60-88, https://doi.org/10.1177/08944865231223372.

 


 

About the Contributors

Yasin Yilmaz headshot

Yasin Yilmaz, PhD, is a doctoral candidate at the Chair of Family Business at WHU–Otto Beisheim School of Management. His research focuses on resilience of family businesses and business families. His specific focus delves into identifying the multifaceted factors and intricate processes that underpin resilience in family-owned enterprises. He previously worked as a management consultant in the automotive industry and is currently a strategic innovation consultant in investment management at Volksbank BRAWO. He can be reached at [email protected].

Sebastian Raetze headshot

Sebastian Raetze, PhD, is an assistant professor at the Institute of Leadership and Change Management at Johannes Kepler University Linz. He received his PhD in business administration from TU Dresden in 2020. His research is focused on resilience and adaptation at and across multiple organizational levels. His work has been published in journals such as Business Research, Group and Organization Management, and the Journal of Applied Psychology. He can be reached at [email protected].

Julia de Groote headshot

Julia de Groote, PhD, is a Merck Finck Assistant Professor of Family Business at WHU–Otto Beisheim School of Management. Her research focuses on how companies can be sustainably successful in ever-changing environments by leveraging innovation and leadership. Her work appears regularly in academic journals such as Organization Studies, Journal of World Business, Family Business Review, and Long Range Planning. She can be reached at [email protected].

Nadine Kammerlander headshot

Nadine Kammerlander, PhD, FFI Fellow, is a professor at WHU–Otto Beisheim School of Management. She holds the Chair of Family Business. She was previously an assistant professor at the University of St. Gallen. Her research focuses on innovation, employees, and governance in family businesses and family offices. Her scientific contributions have been published in international journals. She can be reached at [email protected].

FFI Practitioner: June 5, 2024 cover

View this edition in our enhanced digital edition format with supporting visual insight and information.