A Strategic Fit Perspective on Family Firm Performance

286 Pages·2013·6.234 MB·English

by  Corinna M. Lindow (auth.)

A Strategic Fit Perspective
on Family Firm Performance
Corinna M. Lindow
A Strategic Fit
Perspective on Family
Firm Performance
Foreword by Joseph H. Astrachan, Ph. D.,
and Torsten M. Pieper, Ph. D.
RESEARCH
Corinna M. Lindow
Leipzig, Germany Bernhard Schmidt
Voestalpine Langenhagen, Deutschland
Linz, Österreich
Dissertation HHL – Leipzig Graduate School of Management, Leipzig
ISBN 978-3-8349-3356-0 ISBN 978-3-8349-7167-8 (eBook)
DOI 10.1007/978-3-8349-7167-8
Library of Congress Control Number: 2012947323
The Deutsche Nationalbibliothek lists this publication in the Deutsche Nationalbibliografie;
detailed bibliographic data are available in the Internet at http://dnb.d-nb.de.
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Foreword

Family businesses represent the prevailing form of business around the world. No other form
of business produces more and employs more people than family businesses. In Germany in
particular, family businesses constitute over 90% of all businesses and the rapid German
recovery after the recent economic crisis can be largely attributed to the resilience and per-
formance of family businesses. Hence, understanding the intricate relationship between
family influence and firm performance is of critical importance. Paradoxically, however,
research has not yet found conclusive evidence on the performance of family businesses,
much less the links among family influence, business structure, strategy and performance.
Many scholars have been calling for this type of research for years, but their calls have been
unheard. Dr. Lindow’s study provides long-awaited answers to these calls.

In her research, Dr. Lindow builds on the established concept of strategic fit and applies it to
family business to determine if and in what ways strategic fit may contribute to family firm
performance and what role family influence plays. Several findings of her study stand out and
are noteworthy discussing in more detail.

First, employing a solid theoretical foundation and sophisticated statistical analyses, Dr.
Lindow established a curvilinear (S shaped) relationship between family influence along the
power dimension (i.e., family ownership, as well as family involvement in top management
and the board of directors) and firm performance measured as EBIT. This finding supports the
notion that family influence and firm performance form a complex relationship and that future
research needs to recognize this complexity to yield new insights. Further, the results demon-
strate that strategic fit and firm performance are not as strongly related in family business as it
has been established for non-family businesses. In family business, the results show, family-
specific factors such as family business governance and family culture are stronger predictors
of firm performance than strategic fit.

Another important finding of Dr. Lindow’s study is that family businesses prefer centralized
decision-making, particularly with regard to financial and strategic decisions. This preference
rises with increasing levels of family influence (power dimension). More centralized decision-
making may result in a greater ability to implement strategy more rapidly and successfully
compared to other (non-family) businesses. In fact, the ability to rapidly and successfully im-
plement strategy may be more important than the adequacy of strategic fit. This is demon-
strated by the fact that over 90% of prospector firms in the sample lack fit, but do not
underperform as conventional theory would suggest.
VI Foreword
In addition, Dr. Lindow found that cultural overlap between family and business (culture
dimension of family influence) results in greater alignment, which in turn enhances
performance. These findings support the view that family and business performance should
not be viewed as separate. Instead, family business performance maximization entails both
family and business dimensions simultaneously. This finding is supported by recent empirical
research from Spain showing that businesses, which simultaneously emphasize the objectives
of both family and business enjoy better family and business results than those that limit their
attention only to the business. Hence, combining both family and business orientations in
strategic decision-making leads to above-average family business performance outcomes.

An important aspect of Dr. Lindow’s study is its contribution to mainstream management
research, and strategy and contingency theory in particular, by showing that extant theories do
not apply in a uniform fashion to family business and need to be adjusted, or even re-
developed, to match their particular characteristics. As the findings show, strategic fit does
not operate in a simple manner nor does it operate in a similar fashion to previous research on
non-family firms. Direct and indirect (moderated) relationships intertwine in family business
and make the relationship more complex. Further, Dr. Lindow appropriately hints that contin-
gency theory regarding strategic fit neglects the idea that businesses shape the environment,
as much as they are shaped by the environment, in a dynamic, non-sequential fashion.

Dr. Lindow’s study represents an important milestone in family business strategy research
and offers many exciting avenues for future research on this important topic. Not only were
we privileged to work with Dr. Lindow on her study. We were also blessed with becoming
friends with her during her research stay at Kennesaw State University and look forward to
many more interactions in the future.

Joseph H. Astrachan, Ph.D.
Wachovia Eminent Scholar Chair of Family Business
Executive Director, Cox Family Enterprise Center
Kennesaw State University, Kennesaw, Georgia, U.S.A.

Torsten M. Pieper, Ph.D.
Research Director, Cox Family Enterprise Center
Kennesaw State University, Kennesaw, Georgia, U.S.A.
Acknowledgements

This thesis is the result of my doctoral studies at the Chair of Strategic Management and
Organization at HHL – Leipzig Graduate School of Management between 2008 and 2011 and
my visiting fellowship at the Cox Family Enterprise Center, Kennesaw State University in
2011. It focuses on understanding the role that family influence plays in firm strategic
behavior and firm performance.

Yet such an undertaking could not take place without the generosity of many selfless people
who give hours of their time to listen, to encourage with, and to improve upon the works of
others. First, I want to thank Prof. Dr. Torsten Wulf for his supervision throughout my time at
the Chair of Strategic Management and Organization.

In addition, I would like to express my deep gratitude to Prof. Dr. Joseph H. Astrachan at the
Cox Family Enterprise Center, Kennesaw State University, for the insightful discussions. He
gave me a well-needed boost to complete this work as well as valuable encouragement and
guidance in my academic career. Further, my appreciation goes to Dr. Torsten M. Pieper, who
mentored me with invaluable guidance, encouragement, and unabated enthusiasm throughout
the final stages of my candidature, and to Prof. Dr. Joseph F. Hair Jr., who was always
available to lend a helping hand. This work has benefited greatly from their valuable and
helpful comments, and I thank them all for providing me with opportunities to research and
learn at the Cox Family Enterprise Center.

Special thanks go to all my colleagues and friends at Kennesaw State University, who always
made me feel at home, contributing in many different ways to making my experience in
Kennesaw immensely rich and rewarding. In particular, I wish to express my gratitude to
Kristi and Kirk McMillan for their precious and friendly assistance and hospitality!

I also want to thank several other colleagues and friends. It was a pleasure to exchange ideas
with Professor Alan L. Carsrud, Ph.D., Ec.D. (h.c.) (Ryerson University, Toronto, Canada),
Prof. Dr. Franz Kellermanns (University of Tennessee, Knoxville, USA), Prof. Dr. Sabine
Klein (WHU, Vallendar, Germany), Professor Lloyd Steier, PhD, and Dr. Peter Jaskiewicz
(University of Alberta, Edmonton, Canada). To all these people I am highly grateful; you
have made the completion of this project possible and the journey memorable.
VIII Acknowledgements
Special thanks also to my soul mate and best friend Matthias. Without his unconditional
support as well as his blind confidence in me, I would never have achieved what I have done
so far.

I want to deeply thank my partner Timo for his ongoing support, encouragement, personal
advice and love throughout the recent years.

Last but not least, I am especially indebted to my parents Angelika and Dirk Lindow for their
constant encouragement and total support throughout my academic education and all my life.

Dr. Corinna M. Lindow
Table of Contents

List of Tables ......................................................................................................................... XIII(cid:3)
List of Figures ......................................................................................................................... XV(cid:3)
List of Abbreviations ............................................................................................................ XVII(cid:3)
1 Introduction ........................................................................................................................... 1(cid:3)
1.1(cid:3) Research Problem and Objectives ........................................................................... 1(cid:3)
1.2(cid:3) Structure and Scope of the Study ............................................................................ 3(cid:3)
2 Family Firms as Research Objects ...................................................................................... 7(cid:3)
2.1(cid:3) Relevance of Family Firms ..................................................................................... 7(cid:3)
2.2(cid:3) Definition of Family Firms ...................................................................................... 9(cid:3)
2.2.1(cid:3) Definitional Approaches ........................................................................... 9(cid:3)
2.2.2(cid:3) Definitional Developments ..................................................................... 10(cid:3)
2.3(cid:3) Characteristics of Family Firms ............................................................................ 14(cid:3)
2.3.1(cid:3) Systemic Overlap .................................................................................... 14(cid:3)
2.3.2(cid:3) Family Influence as Result of Systemic Overlap .................................... 17(cid:3)
2.3.2.1(cid:3) Power: Ownership, Management, Supervision .................. 17(cid:3)
2.3.2.2(cid:3) Experience: Generation and Family Involvement .............. 19(cid:3)
2.3.2.3(cid:3) Culture: Family and Business Values ................................ 20(cid:3)
2.3.3(cid:3) Unique Characteristics as a Result of Family Influence ......................... 21(cid:3)
2.4(cid:3) Research on Family Firms ..................................................................................... 24(cid:3)
3 Literature Review on Family Firm Performance Research ............................................ 27(cid:3)
3.1(cid:3) Rationale of the Review ........................................................................................ 27(cid:3)
3.2(cid:3) Methodology of the Review .................................................................................. 28(cid:3)
3.2.1(cid:3) Identifying Family Firm Performance Studies ........................................ 28(cid:3)
3.2.2(cid:3) Selecting Family Firm Performance Studies ........................................... 29(cid:3)
3.2.3(cid:3) Coding Family Firm Performance Studies .............................................. 30(cid:3)
3.2.3.1(cid:3) Underlying Theory and Type of Modeling ........................ 31(cid:3)
3.2.3.2(cid:3) Type of Definition and Comparison ................................... 31(cid:3)
3.2.3.3(cid:3) Type of Predictor ................................................................ 32(cid:3)
3.3(cid:3) Findings of the Review .......................................................................................... 33(cid:3)
3.3.1(cid:3) Overview ................................................................................................. 33(cid:3)
3.3.2(cid:3) Underlying Theory and Type of Modeling ............................................. 33(cid:3)
X Table of Contents
3.3.3(cid:3) Type of Definition and Comparison ........................................................ 36(cid:3)
3.3.4(cid:3) Type of Predictor ..................................................................................... 39(cid:3)
3.4(cid:3) Discussion of the Review ...................................................................................... 42(cid:3)
3.4.1(cid:3) Underlying Theory and Type of Modeling ............................................. 42(cid:3)
3.4.2(cid:3) Type of Definition and Comparison ........................................................ 43(cid:3)
3.4.3(cid:3) Type of Predictor ..................................................................................... 45(cid:3)
3.5(cid:3) Conclusion of the Review ..................................................................................... 46(cid:3)
4 A Strategic Fit Perspective on Family Firm Performance .............................................. 49(cid:3)
4.1(cid:3) Theoretical Foundations of a Strategic Fit Perspective on Family Firm
Performance........................................................................................................... 49(cid:3)
4.1.1(cid:3) Theories of Fit ......................................................................................... 51(cid:3)
4.1.1.1(cid:3) Contingency Theory ........................................................... 52(cid:3)
4.1.1.2(cid:3) Configuration Theory ......................................................... 54(cid:3)
4.1.2(cid:3) Forms of Fit ............................................................................................. 56(cid:3)
4.1.2.1(cid:3) Cartesian Form ................................................................... 57(cid:3)
4.1.2.2(cid:3) Configuration Form ............................................................ 58(cid:3)
4.1.3(cid:3) Approaches of Fit .................................................................................... 60(cid:3)
4.1.3.1(cid:3) Congruence Approach ........................................................ 60(cid:3)
4.1.3.2(cid:3) Contingency Approach ....................................................... 60(cid:3)
4.1.4(cid:3) Conceptualizations of Fit ........................................................................ 61(cid:3)
4.1.4.1(cid:3) Selection Conceptualization ............................................... 61(cid:3)
4.1.4.2(cid:3) Interaction Conceptualization ............................................ 62(cid:3)
4.1.4.3(cid:3) Systems Conceptualization ................................................ 63(cid:3)
4.1.5(cid:3) Types of Fit ............................................................................................. 66(cid:3)
4.1.5.1(cid:3) Structural Fit ....................................................................... 66(cid:3)
4.1.5.2(cid:3) Strategic Fit ........................................................................ 67(cid:3)
4.2(cid:3) Underlying Model of a Strategic Fit Perspective on Family Firm
Performance........................................................................................................... 70(cid:3)
4.2.1(cid:3) Reasoning the Strategic Fit Model by Miles and Snow .......................... 70(cid:3)
4.2.2(cid:3) Reviewing the Strategic Fit Model by Miles and Snow .......................... 72(cid:3)
4.2.2.1(cid:3) Origins ................................................................................ 72(cid:3)
4.2.2.2(cid:3) Conceptualization ............................................................... 72(cid:3)
4.2.2.3(cid:3) Empirical Validation .......................................................... 75