The Family Effect: A Compass for Research on Heterogeneity of Family Businesses in Embedded Contexts

2.1 The Entrepreneurial Dimension

An important, yet largely underexplored topic in the field of family business, is whether and how family business contexts exert a positive or negative effect on the entrepreneurial intentions, mindsets, and activities of family members (Jaskiewicz et al. 2017; Krueger et al. 2021; Michael-Tsabari, Labaki, and Zachary 2014; Minola et al. 2016; Nordqvist and Melin 2010).

Conventional wisdom and an increasing body of evidence suggest that growing up in an enterprising family and being exposed to firm-specific family business experience certainly shapes the entrepreneurial intentions, role identities, and capabilities of family members (Canovi et al. 2022; Criaco et al. 2017; Pittino, Visintin, and Lauto 2018; Zellweger, Sieger, and Halter 2011). Since family members may be overly exposed to entrepreneurial opportunities, simply because of their kin association with a family enterprise, they may be in a better position to undertake forms of emergent entrepreneurship by creating a new firm (Sieger and Minola 2017). However, several factors may stand against the development of entrepreneurial career intentions such as the family’s available financial support (Sieger and Minola 2017) and the perceived parents’ performance in entrepreneurship due to upward social comparison mechanisms (Criaco et al. 2017).

Extending those findings, this Special Issue features an ethnographic study of the career choices of young family members from middle-class families in India. Accounting for contextual factors, Gaur et al. (2023) revealed that these members’ strong identification with the family matters. The background of the families and the presence of a wider entrepreneurial circle tend to influence their perception of an entrepreneurial career and the level of support, which in turn has repercussions on the young adults choices. In particular, generational congruence to maintain harmony and the pressure to conform to a social image can either inhibit or foster the development of their entrepreneurial intentions. Adopting a novel approach by studying hybrid entrepreneurs, Dvouletý and Bögenhold (2023) found how family structures and the need to maintain them can hamper the decision of women to engage in entrepreneurial activity. Drawing on sample of 4046 individuals across 30 European countries, Dvouletý and Bögenhold (2023) showed how having caring responsibilities for children can dampen the entrepreneurial activities of women. Accordingly, the study of Dvouletý and Bögenhold (2023) resonates strongly with recent calls by Maseda et al. (2022) to better understand how family firm environments and dynamics influence the uniqueness, recognition, and contributions of female family members. By embracing a contextual lens, they also respond to recent calls to explore entrepreneurship in rural areas – also referred to as agri-entrepreneurs – (Labaki, Cherni, and Sauvée 2022). Their contribution adds to recent entrepreneurship studies showing similar gender capabilities (skills, ability to detect opportunities, and networks) to engage in corporate entrepreneurship and explaining gender differences by the influence of country-level conditions (gender equality levels, culture, and social norms) based on a sample of employees from 50 countries (Ruiz, Amorós, and Guerrero 2023).

Moving from intention to implementation, an important outcome of entrepreneurial activities pertains to performance. The long and controversial debate about whether family business performance is superior to that of non-family businesses (Wagner et al. 2015) is still ongoing (Reddy and Wellalage 2023). Looking into the heterogeneity of family businesses through different levels of family ownership is, however, increasingly allowing researchers to debunk existing mixed results. A quadratic inverse-U relationship has been recently suggested between family ownership and the performance of entrepreneurial firms when moderated by the presence of family management and external blockholding (Reddy and Wellalage 2023).

Extending past research, the articles by Sorama and Joensuu-Salo (2023) seek to build onto such literature by exploring the effects of family and family ownership on family business performance and growth in both domestic and international markets. The concept of entrepreneurial orientation (EO) has been employed in studying family business growth (Casillas and Moreno 2010). However, evidence regarding this relationship remains inconsistent (Stenholm, Pukkinen, and Heinonen 2016). In trying to resolve this tension, Sorama and Joensuu-Salo (2023) examined the effects of two dimensions of EO (innovativeness and risk taking) on performance and growth of 260 family and non-family SMEs. Their findings showed that the innovativeness and risk-taking dimensions of EO can have differential relationships with firm growth and performance. Specifically, they suggested that family business owners who are willing to take risks in rapidly changing environments are more likely to see growth in their enterprises.

2.2 The Strategic Dimension

Prior research has well recognized the fact that a mixture of family, ownership, and management can manifest itself in unique behaviour and decision-making process (Palma-Ruiz, Barros-Contreras, and Gnan 2020). Among strategic decisions, a large number of studies have explored how the family factors can affect both internationalization and its performance in family businesses. However these remain mixed to date (Dawson, Balderrama, and Sandig 2020; Graves and Shan 2014; Stadler et al. 2018).

Drawing on a resource-based view of the firm, the article of Lobo et al. (2023) investigated how the family business resources, capabilities and market orientation influence internationalisation performance. Using a sample of 988 family-SMEs from Spain, Lobo et al. (2023) found that not only do resources and capabilities return a positive impact on internationalisation motivations of family firms, but also the combination of resources and capabilities and internationalisation motivations can positively influence their international performance. Lobo et al. (2023) provide a novel contribution to the family business heterogeneity literature when it comes to internationalization by considering different levels of contexts – from the micro, the meso to the macro –. They also highlighted the need for scholars to consider more deeply the owning family’s internationalisation motivations when analysing antecedents of internationalisation performance.

In addition to the family, a stakeholders’ view has been considered as valuable to our understanding of strategic decisions in family businesses. Strategic decision-making in family business has been identified as involving family managers, family members as well as non-family managers (De Massis et al. 2015; Kallmuenzer, Hora, and Peters 2018; Lazzarotti and Pellegrini 2015). It can be of individual or collective nature, based on key stakeholders’ expectations and potential actions along with the need to balance economic and non-economic goals (Vazquez 2018; Zellweger and Nason 2008). Along similar lines, the next two studies by Yu (2023) and Doucet, Requejo, and Suárez-González (2023) explored how both the pursuit of financial and non-financial considerations can impact their strategic decisions, relative to innovation and to diversification.

Drawing on a select sample, listed on the A-shares market in China, Yu (2023) examined how the family business willingness and ability to purchase financial products influence their innovation strategies. Specifically, after purchasing financial products Yu (2023) showed the design patents of family firms increase significantly, while R&D investment, invention patents and utility patents do not change significantly. Moreover, the effect of purchasing financial products on design patents is governed by institutional ownership, government subsidy, and R&D personnel ratio. Institutional ownership positively moderates the relationship between purchasing financial products and design patents, but government subsidy and R&D personnel ratio negatively moderate the relationship. Broadly, the study by Yu (2023) indicated that Chinese family business are sensitive to technological innovation risks when the potential resources at their disposal are insufficient and that such sensitivities may prompt family business to reduce the purchase of financial products and change their direction of technological innovation towards higher quality innovation. By addressing the interconnections between the meso and macro levels of context, the author contributes to our understanding of heterogeneity of family businesses.

It is widely accepted in the literature that family SMEs’ diversification decisions are negatively affected by the pursuit of noneconomic goals, as those strategies collide with the achievement of such goals—due to diluted family influence that derives from the greater involvement of both external expertise and capital (Gomez-Mejia, Makri, and Kintana 2010). Adopting a mixed-gamble approach, Doucet, Requejo, and Suárez-González (2023) studied 988 Spanish family-SMEs by contemplating the possibility that the decision to expand into new areas of activity could also generate SEW gains in some situations. Specifically, their findings showed that Spanish family SMEs which prioritised nonfinancial goals alter their propensity to undertake diversification decisions. In other words, Spanish family SMEs that prioritise nonfinancial goals seem to exhibit an “irrational” risk aversion. As such, they inform us about heterogeneous strategic behavior of family businesses relative to diversification at the meso level and which are rooted in family logics at the micro level of context.

2.3 The Psychological Dimension

Calls for including the psychological dimensions in entrepreneurship and family business research have been proliferating in the past years (Humphrey 2013; Humphrey et al. 2021; Javadian et al. 2022; Labaki 2020). Scholars have seized this opportunity to explore the facets of heterogeneity of entrepreneurs and family businesses through concepts derived and or adapted from the psychology and organizational behaviour literatures – among others – as determinants and outcomes of the decision-making process. This included their entrepreneurial role in terms of transformation of latent entrepreneurs into nascent entrepreneurs (Hatak and Snellman 2017) as well as their role in stimulating key family business stakeholders, such as the owners to engage in responsible business practices (Bernhard and Labaki 2021), the Top Management Teams to contribute to decisions conducive to continuity (D’Allura 2019) and the Top Governance Teams to act as stewards of the family enterprise towards harmony and performance (Labaki and Feliu 2023). In particular, emphasis on family owners’ emotions brought a finer understanding of strategic decisions such as the divestment and valuation of business entities in different archetypes of family businesses (Labaki and Hirigoyen 2020). Additionally, the management and governance of emotions were highlighted as heterogenous relative to the emotional level of interaction between the family, the ownership and the business (Labaki and D’Allura 2021; Randerson and Radu-Lefebvre 2021).

Surfing on this promising trend, Mustafa, Labaki, and Henssen (2023) offered an analysis of the family business heterogeneity from an ownership perspective. Building on a literature review, they chose to focus on the concept of psychological ownership and explore its dynamics, processes, and implications. Among their suggestions, they recommended accounting for the diversity of targets of psychological ownership, its connections with various governance systems, and embracing different levels of analysis (individual and collective). As such, they considered the embedded contexts of the key family player(s) with an impact on the meso and macro levels.

Taking it one step further, Danes, Zachary, and Balabram (2023) elevated the family as an object of study that manifests itself into the supra-system, that is a reflection not only of organizational but also relational realities. Embeddedness of context proves again as an interesting grid of analysis as the authors emphasize the salience of the family given the interconnectedness and interdependencies of family, business, and family/business interface subsystems.