A Strategic Fit Perspective on Family Firm Performance

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Age of the child I gave this to:. Hours of Play:. Tell Us Where You Are:. Preview Your Review. Thank you. Your review has been submitted and will appear here shortly. Extra Content. This analysis indicates that with one exception, CA-values for the research constructs exceeded 0. The lone exception involved the GOs construct, which had a CA-value of 0.

In addition, the elimination of the most problematic items in this scale only marginally improved the overall CA; therefore, the GOs construct was eliminated from subsequent analyses.


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This research sought to identify non-financial drivers of family firm financial performance. As a result, the focus was on the explanatory power of the first- and second-order constructs on the firm performance DVs. For the most part, the values indicate clear discriminate validity among the independent variable constructs; however, two variable pairs did not exhibit clear differences. This is an area of concern when considering the possible impact on the predictive potential of the final model. Unclear discriminant validity suggests the possibility of redundant constructs.

As noted in further analysis below, the final model did not exhibit multicolinearity among the independent variables. Square root of AVE on bold diagonal. The paths from the interaction term to the dependent variables have negative path weights and are both significant at the 0. The strength of the moderating effect can be assessed by comparing the model R-Squared with and without the moderating variable Henseler and Fassott, The moderating variable seems to have a nearly moderate level impact of 0.

Using a two-way graphic, interpretation of this interaction is more clearly illustrated. While in the simultaneous presence of high Role Clarity combined with high Family Functionality, firm performance is slightly reduced. The data also indicate that when Role Clarity is low, the addition of high Family Functionality has only a slight positive effect on firm performance.

The effect of perceived family functionality on perceived relative firm performance vs. One of the advantages of PLS is in developing predictive models. The PLS blindfolding procedure, based on the Stone—Geisser test, can further evaluate the predictive validity of the final research model.

In PLS modeling with formative constructs, multicolinearity can be a significant issue. High levels of multicolinearity among the components of a formative index imply a redundancy among index variables and cloud assessment of the influence of a particular variable. Among the four independent variables that compose an EFBC, the second-order formative construct—the maximum variance inflation factor came to 2. So despite the lack of clear discriminant validity among some of the independent variables, the lack of multicolinearity indicates little construct redundancy in the final model.

The objective of this study was to investigate potential organizational drivers of financial performance in private family owned and managed companies through multivariate statistical techniques as suggested by Westhead and Cowling This research contributes to the understanding of family firm performance by using PLS and complex constructs operationalized at a higher level of abstraction Sarstedt et al.

The initial research model hypothesized that multiple independent variable constructs form a second-order formative factor, which can influence overall firm financial performance. The first of three findings of this research project involves the significant influence of a new second-order formative construct, effective family business culture EFBC.

Similar to Denison and Mishra , the EFBC construct is focused on cultural traits that influence long term family firm performance and is not fully inclusive of the domain of family firm culture Denison and Mishra, Analysis indicated that EFBC is highly significant and has a strong positive effect on overall firm performance. As a formative construct, the non-financial EFBC could be useful in predicting family firm performance since objective financial data is difficult to obtain from private family firms Mazzi, ; Carney et al. Relatively good results from the variance inflation factor and blindfold tests support the potential predictive power of this construct.

Another research contribution is the identification of the specific components of EFBC.

The constructs did not exhibit excessive cross correlation to the EFBC construct and were significant at the 0. This surprising finding suggests that Role Clarity in the context of family firms has a dampening effect on effective culture and, thus, firm performance.


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In addition, the integrity dimension of trust did not exhibit a significant impact on EFBC and therefore did not support the first hypothesis. While some research has linked integrity as a component of trust, with firm performance Davis et al. Trust in family firms may be different than non-family firms due to the presence of familial relationship-based trust Sundaramurthy, Schoorman et al. Family business may represent such a setting and further investigation may be needed to better understand the relationship between the elements of trust and firm performance.

The conceptual interpretation of the formative construct, EFBC, shows an interesting variety of components. Shared Vision, representing a desired future, shared across the organization, may represent a foundational element, giving direction and energy toward a desired and common organizational future.

Other research found that Shared Vision influences firm performance Calantone et al. Confidence in Management ability, suggests the importance of having talent and experience to achieve that vision within the organization's management team. Owners with management and industry experience are positively associated with firm performance Dyke et al. In their study, Dyke et al. Role Clarity is typically viewed as a positive attribute and on an individual level is positively related to job performance Tubre and Collins, Other research indicates that a lack of Role Clarity is a source of tension among business-owning couples Danes and Olson, The negative impact of Role Clarity on firm performance in this research might suggest that Role Clarity may have an element of rigidity and is therefore detrimental to an EFBC.

Finally, the contribution of Professional Networking suggests that to the extent that such activity develops human capital Hitt et al. Networking activity may also reflect an external orientation that supports entrepreneurship through increased knowledge, aiding opportunity recognition Zahra et al. So while greater Role Clarity is a common recommendation from family business research and practitioners Dana and Smyrnios, , the data suggest that high Role Clarity is not universally positive.

These findings illustrate the importance of the boundary between family and firm Davis and Stern, , where roles and rules are negotiated Danes et al. The inclusion of the APGAR construct also addresses a need in family business research to specifically include family-related variables Dyer, Given the prominence of the family in the context of family owned businesses, it was anticipated that Family Functionality would play a meaningful role in firm culture; however, analysis revealed that while Family Functionality did not display a direct influence on the second-order construct—EFBC—the effect seemed to be fully absorbed by three of the independent variables; Confidence in Management, Shared Vision, and Role Clarity.

Family Functionality exhibited very strong positive influence on these independent variables with highly significant path weights. While the presence and impact of family in the family firm context is foundational to the field, these findings suggest a more nuanced impact. This relationship may illustrate the manner in which family firms differ from non-family owned firms. The researcher acknowledges certain limitations of this study. First, it examined only private firms that were family owned and family operated.

While these companies compose a significant portion of family firms, the findings may not be generalizable to all family firms. Also, any comparison with non-family firms is beyond the scope of this research. Third, the majority of respondents were male, and data on ethnicity was not collected. The sample, therefore, may not be diverse. A fourth limitation of the study is its cross-sectional design.

The theoretical focus of the SFBM is the long-term performance and sustainability of the family firm. While this study contributes to the development of the SFBM, future research using longitudinal designs may be necessary to fully understand the longer-term sustainability of family owned firms. Finally, the study examines performance perceptions over a 3-year timeframe, not actual performance over that time-frame. Respondents' performance recollections may be imperfect or biased.

The results of this study have implications for theory and practice. The study identified four significant non-financial organizational traits as firm performance drivers, which addresses a need in the development of the SFBM. The performance index, composed of these traits, impacted long-term firm performance and exhibited some predictive potential.

Further development of this model may provide a tool for the evaluation of private family firm performance without the need for detailed financial records which is an ongoing challenge for researchers Mazzi, Future research using multiple respondents from each family firm may add to the understanding of findings revealed in this study.

This may allow, for example, evaluation of the extent to which vision within an organization is truly shared. Also, further research is needed to fully understand the implications of the SFBM's focus on long-term sustainability rather than on long-term financial performance. Additional understanding of the dynamic between the family and business systems is needed from the perspective of long-term sustainability, such as the role of family capital Danes et al. For practitioners who work with family firms, such findings may prove helpful in the development of family firms.

For example, creation of a meaningful Shared Vision, as well as developmental and Professional Networking activity, may represent important processes for the continued success of their family firm clients. This study represents an initial exploration and specification of some components necessary for a successful and sustainable family business.

Shared vision promotes family firm performance

While study findings may contribute to the intermediate-term financial success of family businesses, additional work is also needed to broaden its scope to include non-financial goals of family firms, such as family harmony or satisfaction with the business. Finally, the surprising finding regarding Role Clarity, role rigidity, and family relationship dynamics merit further investigation.

One possibility might be to inquire about the potential non-linear impact of Role Clarity on firm performance similar to the findings of family involvement and firm performance Sciascia and Mazzola, In addition, the culture or ethnicity of the family may influence the flexibility or rigidity of work roles in a family business. So while this exploratory study identified some organizational traits associated with long-term family firm performance, further research is needed for a complete understanding of the long-term success of family firms.

The author declares that the research was conducted in the absence of any commercial or financial relationships that could be construed as a potential conflict of interest. National Center for Biotechnology Information , U. Journal List Front Psychol v. Front Psychol. Published online May John E.

Author information Article notes Copyright and License information Disclaimer. This article was submitted to Personality and Social Psychology, a section of the journal Frontiers in Psychology. Received Oct 2; Accepted May 3. The use, distribution or reproduction in other forums is permitted, provided the original author s or licensor are credited and that the original publication in this journal is cited, in accordance with accepted academic practice.

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9783834933560 - A Strategic Fit Perspective on Family Firm Performance by CORINNA M. LINDOW

Abstract A clear picture of the influential drivers of private family firm performance has proven to be an elusive target. Keywords: shared vision, family business, effective culture, firm performance, predictive model, family functionality, role clarity. Introduction Family owned firms represent a significant portion of the U. Nature and performance of family owned firms The most distinguishing characteristic of the family owned business is the presence and interaction of the family system with the business system Beckhard and Dyer, ; Kepner, ; Chua et al.

Spectrum of motivation There are families who are in business primarily to make a profit; however, other families may run their business mostly for the private benefit of the family or other non-economic outcomes. Family firm culture In addition to the owners' motivations, a family's culture can have a significant effect on how its business operates.

Long-term performance and family business sustainability The sustainable family business model SFBM , which guided this study, creates a framework for assessing the long-term performance of private family business. Material and methods Current research The key questions driving this research are: What organizational traits influence financial performance in family owned firms?

Open in a separate window. Figure 1. Trust Inherent in the nature of family owned businesses is the intense emotional connection among family members Tagiuri and Davis, and when that connection is based on deep trust, the family system and the company benefit Sundaramurthy, Confidence in management In a family business, employees' confidence in management is a key factor. Shared vision Shared Vision is central to the long-term success of any organization. Professional development and networking The education and experience that individuals bring to an organization can affect how successful the organization is—so can the extent to which they are able to continue to learn and grow.

Growth orientation A firm's orientation toward growth may be a factor in its long run performance.

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Family functionality Fundamental to the SFBM is the recognition of the interplay between family and business. Firm culture effectiveness This is a second-order construct of the seven independent constructs discussed above. Table 1 Research hypotheses. Control variables It has been widely discussed that family firms vary in size and complexity. Data collection and preparation Research participants were identified from private databases, and responses were collected through an online survey.

Survey response rates The graphic arts industry database maintains an opt-in e-mail list of approximately individuals. Sample The research sample consisted of senior executives from firms that self-identified as being family owned and having family members active in firm management. Table 2 Survey respondent and firm characteristics. Level of analysis Characteristic Sample data Respondent Gender Measures The survey contained questions and all of the independent variable construct items were adapted from previously established scales.

Missing values and normalcy of the data In almost all cases, missing values were replaced by the mean of the particular item. Exploratory factor analysis first-order factors Due to the relatively high number of constructs and survey items compared to the sample size of , an EFA on all constructs could not be performed simultaneously.

Table 3 Summary EFA analysis on first-order constructs. CON 0. Table 4 Construct reliability. Role conflict RCN 0. Confidence in management CON 0. Trust integrity TI 0. Professional networking OLN 0. Signs of growth GOs 0. Measurement model This research sought to identify non-financial drivers of family firm financial performance. Figure 2. Table 5 Hypotheses test outcomes. Table 6 Convergent and discriminant validity.

Table 7 Construct correlations matrix. FB culture Perf. Figure 3. Figure 4. Model predictive value One of the advantages of PLS is in developing predictive models. Table 8 Construct cross-validated redundancy. Table 9 Variance inflation factors. Discussion The objective of this study was to investigate potential organizational drivers of financial performance in private family owned and managed companies through multivariate statistical techniques as suggested by Westhead and Cowling Limitations The researcher acknowledges certain limitations of this study.

Conclusion, contribution, and future research The results of this study have implications for theory and practice. Conflict of interest statement The author declares that the research was conducted in the absence of any commercial or financial relationships that could be construed as a potential conflict of interest. References Anderson R. Founding-family ownership and firm performance: evidence from the SandP Finance 58 , — Family businesses' contribution to the U.

Performance of family firms: a literature review and guidance for future research. KMU Entrep. Managing work and family: the decision to outsource child care in families engaged in family-owned businesses. Issues 21 , — Organizational culture: can it be a source of sustained competitive advantage? Managing continuity in the family-owned business. The role of family in family firms. Skip to main content. Lindow , Paperback Be the first to write a review. About this product. Stock photo. Brand new: lowest price The lowest-priced brand-new, unused, unopened, undamaged item in its original packaging where packaging is applicable.

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