Strategic Management of Family Businesses: Current Findings and Directions for Future Research

Abstract

Numerous articles have focused on the activities, planning processes, and effectiveness of large firms. However, in recent years a growing amount of research has recognized the importance of small family-owned businesses. This special attention has been reinforced by studies showing that family businesses have particular attributes that provide them certain competitive advantages. They are nimbler, more customer-oriented and quality focused, and more active in the community. As a result, they tend to outperform non-family firms. This paper discusses five streams of research and writing about these companies. Some researchers have attempted to distinguish between family businesses and non-family businesses by developing conceptual and operational definitions. Others have focused on finding attributes that distinguish between the two groups. A third line of research has addressed the relationship between planning and performance among family businesses. A fourth area has examined strategic management in these firms. fifth stream of research has focused on a variety of topics such as succession, gender, non-family employees, and innovation. These studies provide many important insights; however, significant gaps in the literature remain. Thus important extensions of these research streams would be fruitful endeavors. paper concludes with a number of research questions that merit further study. Introduction While a large body of the management literature has concentrated on large publicly-owned businesses, in recent years a growing amount of research attention has been devoted to small firms. These companies play an increasingly crucial role in the U.S. economy. Approximately 22.9 million of all U.S. firms are classified as small businesses. They represent 99.7 percent of all employers. They employ more than one-half of the U.S. private sector work force, are responsible for about one-half of private sector output, generate more than one-half of all sales in the U.S., and create approximately 75 percent of net new jobs annually. Furthermore, they employ 39 percent of hightechnology workers, and represent 97 percent of all exporters. It is estimated that 550,000 new small businesses were established in the U.S. in 2002 alone (U.S. Small Business Administration, 2005). These statistics suggest a critical need to improve our understanding of these firms and ensure that they are managed effectively. Since the 1980s there has been general agreement that a major weakness of many studies of small businesses is their global nature, i.e., treating all firms alike, despite the presence of meaningful differences among them. Furthermore, prior to that time, the family firm was viewed as inherently flawed; its survival required the replacement of family members by professional management as quickly as possible (Levinson, 1971, p. 98). In the literature on organizations, it was treated as an aberration (Davis & Stern, 1980). Family business (FB) emerged as a field of study in its own right only recently (Lansberg et al., 1988). Today, the study of small FBs has become a prominent area of investigation among researchers. Given the private nature of most family businesses, accurate information about them is not readily available because of a lack of primary data. In addition, quantifying their collective impact on the economy is difficult since there is no consensus about the definition of a family business. According to Westhead and Cowling, The scale of family firm activity in any developed economy is highly sensitive to the family firm definition selected ( 1998, p. 31 ). Some estimates show that these businesses contribute 64 percent of the U.S. gross domestic product (GDP) and employ 62% of its work force (Astrachan & Shanker, 2003). Worldwide, family-managed businesses employ half of the world's workforce and generate well over half the world's GDP (Klein, 2000; Heck & Stafford, 2001 ; Morck & Yeung, 2003). …

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