Map
Framework

Five theoretical lenses on family firms

The question it answers

When the owners of a family firm consider hiring outside managers or taking in outside shareholders, which theories explain how they weigh risk and why they treat relatives and outsiders differently?

Origin
Gómez-Mejía et al., 2007; Verbeke and Kano, 2012; Chrisman et al., 2005; Le Breton-Miller and Miller, 2009; Penrose, 1959
Diagram type
Hub diagram
Level of analysis
Firm
Topics
Entrepreneurship & innovationEthics & corporate governance
Rocket lifting off from a glass light bulb, icon for entrepreneurship and innovation

Diagram

Five theoretical lenses on family firms

Family firm
Agency theory: the family pursues its own utility, possibly at outside shareholders' expense
Stewardship: family owners invest deeply in the firm, to the benefit of all
Resource-based view
Socioemotional wealth: the family accepts business risk to avoid losing control
Bifurcation bias: asymmetric treatment of family and non-family assets, especially people

Pitfalls

Pitfall

Picking one lens and applying it to every family firm. Le Breton-Miller and Miller (2009) note that agency and stewardship theory conflict directly, so predictions need to be made in the context of each kind of family firm.

Sources

References

Listed A–Z by author surname, Harvard style. A source with a DOI links to https://doi.org/…; one without links to its page or says plainly that it has no DOI.

  1. Chrisman, J.J., Chua, J.H. and Sharma, P. (2005) ‘Trends and directions in the development of a strategic management theory of the family firm’, Entrepreneurship Theory and Practice, 29(5), pp. 555–575.doi:10.1111/j.1540-6520.2005.00098.xCited in 1 article
  2. Gómez-Mejía, L.R. et al. (2007) ‘Socioemotional wealth and business risks in family-controlled firms: evidence from Spanish olive oil mills’, Administrative Science Quarterly, 52(1), pp. 106–137.doi:10.2189/asqu.52.1.106Cited in 1 article
  3. Le Breton-Miller, I. and Miller, D. (2009) ‘Agency vs. stewardship in public family firms: a social embeddedness reconciliation’, Entrepreneurship Theory and Practice, 33(6), pp. 1169–1191.doi:10.1111/j.1540-6520.2009.00339.xCited in 1 article
  4. Penrose, E.T. (1959) The theory of the growth of the firm. Oxford: Basil Blackwell.No DOIopenlibrary.orgSource page
  5. Verbeke, A. and Kano, L. (2012) ‘The transaction cost economics theory of the family firm: family-based human asset specificity and the bifurcation bias’, Entrepreneurship Theory and Practice, 36(6), pp. 1183–1205.doi:10.1111/j.1540-6520.2012.00545.xCited in 1 article