A Review of Theoretical Perspective on Family Business Governance

Kussudyarsana Kussudyarsana

DOI: https://doi.org/10.23917/benefit.v4i1.8111

Abstract

The purpose of this paper is to review governance issue in family firms from several perspectives and discuss about the contribution of transaction cost theory to explain governance mechanism in family firm. In family business literature, the explanation about the governance mechanism movement can be found in Agency theory and Transaction cost Theory. Agency theory supports a foundation for understanding formal control mechanism through hierarchy within firm. Transaction cost economy frequently use to explain governance mechanism for formal control in inter-firm relationship By addressing governance issue in family SMEs, this study contributes to an understanding of connection between characteristic of family SMEs, economic business activities, environmental factors, and governance mechanism.

Keywords

Theoretical Perspectives, Family Business

Full Text:

PDF

References

Arranz, N and Arroyabe, J. C. Fdez. De, (2013), Effect of Formal Contracts, Relational Norms and Trust on Performance of Joint Research and Development Projects, British Journal of Management, Vol. 23, 575–588 (2012).

Artz, K. W., &, Brush, T. H. 2000. Asset specificity, uncertainty and relational norms: An examination of coordination costs in collaborative strategic alliances. Journal of Economic.

Abor, J & Adjasi, CKD 2007, 'Corporate governance and the small and medium enterprises sector: theory and implications', Corporate Governance, vol. 7, no. 2, pp. 111-22.

Arregle, J. L., Hitt, M. A., Sirmon, D. G., & Very, P. V. (2007). The development of organizational social capital: Attributes of family firms. Journal of Management Studies, 44(1), 73–95.

Arosa, B., Iturralde, T., & Maseda, A. (2010). Ownership structure and firm performance

in non-listed firms: Evidence from Spain. Journal of Family Business Strategy, 1(2010), 88–96.

Aronoff C and Ward J. (2000) Family business value: How to assure a legacy of continuity

and success. Family business leadership series. Marietta, GA.

Astrachan, J. H. (2010). Strategy in family business: Toward a multidimensional research agenda. Journal of Family Business Strategy, 1(2010), 6–14.

Astrachan, J. H., & Jaskiewicz, P. (2008). Emotional returns and emotional costs in privately held family businesses: Advancing traditional business valuation. Family Business Review

Abor, J & Biekpe, N 2007, 'Corporate governance, ownership structure and performance of SMEs in Ghana: implications for financing opportunities', Corporate Governance, vol. 7, no. 3, pp. 288-300.

Anderson, R.C. and Reeb, D.M. (2003). Founding-family ownership and firm performance. Evidence from S&P 500. Journal of Finance, 58, pp. 1301–1328.

Arrow, K.J (1985). The economic of agency in principals and agents: the structure and American Business. Boston: Harvard Business School Press.

Barney, J. & Hesterly (1996). Organizational economic: understanding the relationship between organizations and economic Analysis. Hand book of organization studies. Sage.

Bourdieu, P. 1985. The forms of capital. In J. G. Richardson (Ed.), Handbook of theory and research for the sociology of education: 241-258. New York: Greenwood

Bourdieu, P. (1986). The forms of capital. In J.G. Richardson (Ed.), Handbook of theory and research for sociology education (pp. 241–258). New York: Greenwood.

Bourdieu, P., & Wacquant, L. J. D. 1992. An invitation to reflexive sociology. Chicago: University of Chicago Press.

Bubolz, M. (2001). Family as source, user, and builder of social capital. Journal of Socio- Economics, 30(2), 129–131.

Bartholomeusz, S & Tanewski, GA 2006, 'The relationship between family firms and corporate governance', Journal of Small Business Management, vol. 44, no. 2, pp. 245-67.

Berle, Adolf A., and Means, Gardiner C. The Modern Corporation and Private Property. New York: Macmillan Publishing Co., 1932.

Bammens, Y., W. Voodeckers, and A. Van Gils (2011). “Board of Directors in Family Businesses: A Literature Review and Research Agenda,” International Journal of Management Reviews 13, 134–152.

Bertrand, M & Schoar, A 2006, 'Role of Family in Family Firms', The Journal of Economic Perspectives, vol. 20, no. 2, pp. 73-96.

Carson SJ, Madhok A, & Wu T (2006). Uncertainty, opportunism, and governance: the effects of volatility and ambiguity on formal and relational contract. Acad Manage J 2006;49:1058–77.

Crook, Combs, Ketchen, & Aguinis (2013), Organizing around transaction cost what have we learned and where do we go from here. Academy of Management Perspectives 2013, Vol. 27. No. 1. 63-79.

Coase, R. H. (1937). The nature of the firm. Económica, 4, 386-405.

Carney, M 2005, 'Corporate Governance and Competitive Advantage in Family‐Controlled Firms', Entrepreneurship Theory and Practice, vol. 29, no. 3, pp. 249-65.

Chrisman, J.J., Kellermanns, F.W., Chan, K.C. and Liano, K.(2010). Intellectual foundations of current researchin family business: an identification and review of 25 influential articles.Family Business Review,23, pp. 9–26.

Chrisman, J. J., J. H. Chua, and R. A. Litz (2004). “Comparing the Agency Costs of Family and Non-Family Firms: Conceptual Issues and Exploratory Evidence,” Entrepreneurship Theory & Practice 28 (4), 335–354.

Ferguson, R.J., Paulin, M. and Bergeron, J. (2005). Contractual governance, relational governance, and the performance of interfirm service exchanges: the influence of boundary-spanner closeness. Journal of the Academy of Marketing Science, 33, 217–234.

Carson SJ, Madhok A, Wu T (2006). Uncertainty, opportunism, and governance: the effects of volatility

and ambiguity on formal and relational contract. Acad Manage J 2006;49:1058–77.

Coleman, J. S. 1988. Social capital in the creation of human capital. American Journal of Sociology, 94(Supplement): S95-S120.

Coleman, J. S. 1990. Foundations of social theory. Cambridge, MA: Harvard University Press.

Corbetta G, Salvato C. 2004. Self-serving or selfactualizing? Models of man and agency costs in

different types of family firms: a commentary on ‘comparing the agency costs of family and nonfamily firms: conceptual issues and exploratory evidence.’ Entrepreneurship Theory and Practice

(4): 355–362.

Davis, J.H., Schoorman, F.D., & Donaldson, L. (1997).Toward a stewardship theory of management.

Academy of Management Review, 22(1), 20–47.

Davis, J.H, Allen, M.R., Hayes, H.D (2010), Is Blood Thicker than Water? A Study of Stewardship Perceptions in Family Business, Entrepreneurship Theory and Practice, 1093-1115.

Eddleston, K. &Kellermanns, F.W. (2007). Destructive and productive family relationships: A stewardshiptheory perspective. Journal of Business Venturing, 22(4), 545–565.

Dyer W. Gibb, Jr (2006). Examining the Family effect on firm performance, Family Business Review.

Vol.XIX. no 4.pp 253-273.

Davidsson, P., & Honig, B. (2003). The role of social and human capital among nascent entrepreneurs. Journal of Business Venturing, 18, 301 – 331.

Danes, S. M., & Stafford, K. (2011). Family social capital as family business resilience capacity. In R. Sorenson (Ed.), Family business and social capital (pp. 79 – 105). Northampton, MA: Edward Elgar.

Danes, S. M., Stafford, K., Haynes, G., & Amarapurkar, S. (2009). Family capital of family firms:

Bridging human, social, and financial capital.

Danes, S. M., Zuiker, V. Z., Kean, R., & Arbuthnot, J. (1999). Predictors of family business tension and goal achievement. Family Business Review, 12, 241 – 252.

Das, T.K., Teng, B.-S., 1998. Between trust and control: developing confidence in partner

cooperation in alliances. Academy of Management Review 23 (3), 491–512.

Demsetz, H & Lehn, K 1985, 'The structure of corporate ownership: Causes and consequences', Journal of Political Economy, vol. 93, no. 6, pp. 1155-77.

Dyer, WG 2006, 'Examining the family effect on performance ', Family Business Review, vol. 19, p. 20.

Eddleston, K. A., & Kellermanns, F. W. (2007). Destructive and productive family relationships: A stewardship theory perspective. Journal of Business Venturing, 22(4), 545–565.

Eisenhardt, K. M. 1989. Agency theory: An assessment and review. Academy of Management Review, 14(1): 57-74.

Fama, E & Jensen, MC 1983, 'Agency problems and residual claims', J. Law and Economy, vol. 26 pp. 325-44.

Fama, EF 1980, 'Agency Problems and the Theory of the Firm', The Journal of Political Economy, pp. 288-307.

Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3, 305-360.

Jensen, M. C. 1993. The modern industrial revolution, exit, and the failure of internal control systems. Journal of Finance, (July): 831-880.

Goel, S., Jussilo, L., Ikahoimonen, 2014, Governance in family firms: A review and research agenda, in SAGE Handbook of Family Business. Eds. L. Melin, M. Nordqvist and P. Sharma. Thousand Oaks, CA: SAGE, 196–225.

Gomez-Mejia, L.R., Hynes, L.R., Núnez-Nickel, M. and Moyano-Fuentes, H. (2007). Socio-emotional wealth and business risk in family-controlled firms: evidence from Spanish olive oils mills. Administrative Science Quarterly, 52, pp. 106–137.

Goméz-Mejía, L.R., Núnez-Nickel, M. and Guiterrez, I. (2001). The role of family ties in agency contracts. Academy of Management Journal, 44, pp. 81–95.

Gedajlovic, E. & Carney, M. (2010). Markets, hierarchies, and families: Toward a transaction cost theory of the family firm. Entrepreneurship Theory and Practice, 34(6), 1145–1171.

Gedajlovic, E., Lubatkin, M.H., & Schulze,W.S. (2004). Crossing the threshold from founder management to professional management: A governance perspective. Journal of Management Studies, 41, 899–912.

Geyskens, L, Steenkamp, J. B., & Kumar, N. (2006). Make, buy, or ally: A transaction cost theory metaanalysis. Academy of Management fournal, 49, 519-543.

Ghoshal, S. & Moran, P. (1996). Bad for practice: A critique of the transaction cost theory.

Academy of Management Review, 21, 13–47.

Gudmunson, C.G & Danes, S.M. (2013), Family Social Capital in Family Businesses: A Stocks and Flows Investigation

López de Silanes, F, La Porta, R & Shleifer, A 1999, 'Corporate ownership around the world', Journal of finance, vol. 54, no. 2, pp. 471-517.

Moores, K 2009, 'Paradigms and theory building in the domain of business families', Family Business Review, vol. 22, no. 2, pp. 167-80.

Morck, R., Shleifer, A., & Vishny, R. W. (1988). Management ownership and market valuation. Journal of Financial Economics, 20, 293-315.

Morck, R., & Yeung, B. (2003). Agency problems in large business groups. Entrepreneurship Theory and Practice, 27, 367-382.

Miller, D., and Minichilli, A., (2013), Is family leadership always beneficial? Strategic Management Journal, 34:553-571.

Miller D, Le Breton-Miller I. 2005.Managing for the Long Run. Harvard Business School Press: Boston,

MA.

Miller D, Le Breton-Miller I. 2006. Family governance and firm performance: agency, stewardship, and capabilities. Family Business Review 19(1): 73–86.

Miller D, Le Breton-Miller I, Lester RH. 2012. Family firm governance, strategic conformity and performance: Institutional vs. strategic perspectives. OrganizationScience. Advance Online Publication. DOI: 10.1287/orsc.1110.0728.

Miller, D., and Minichilli, A., (2013), Is family leadership always beneficial? Strategic Management Journal, 34:553-571.

Miller D, Le Breton-Miller I, Lester RH, Cannella AA Jr. 2007. Are family firms really superior performers? Journal of Corporate Finance 13(5): 829–858.

Miller D, Le Breton-Miller I, Scholnick B. 2008. Stewardship vs. stagnation: an empirical comparison of small family and non-family businesses. Journal of Management Studies 45(1): 50–78.

Miller D, Lee J, Chang S, Le Breton-Miller I. 2009. Filling the institutional void: the social behavior and

performance of family vs non-family technology firms in emerging markets. Journal of International BusinessStudies 40

Macneil, lan R. (1978), Under Classical, Neo-Classical, and Relational Contracting Law." Northwestern University Law Review 72 (6): 854-905.

Macneil, lan R. (1981), "Economic Analysis of Contractual Relations: Its Shortfalls and the Need for a 'Rich Classificatory Apparatus'," Northwestern Law Review, 75 (6), 1018-63.

Mustakallio, M., E. Autio, and S. A. Zahra (2002). “Relational and Contractual Governance in Family Firms: Effects on Strategic Decision Making,” Family Business Review 15, 205–222.

Noordewier, Thomas G., George John, and John R. Nevin (1990), "Performance Outcomes of Purchasing Arrangements in Indus-trial Buyer-Vendor Relationships," Journal of Marketing, 54 (October), 80-93.

Noorderhaven, N. G. 1994. Transaction cost analysis and the explanation of hybrid vertical interfirm relations. Review of Political Economy, 6: 19-36.

Noorderhaven, N. G. 1997. Effects of trust and governance on relational risk. Academy of Management Journal, 40: 308-338.

Nooteboom, B., de Jong, G., Vossen, R. W., Helper, S., & Sako, M. 2000. Network interactions and mutual de pendence: A test in the car industry. Industry and Innovation, 7: 117-144.

Schulze, W. S., Lubatkin, M. H., & Dino, R. N. (2003b). Toward a theory of agency and altruism in family firms, Journal of Business Venturing, 18, 473–490.

Schulze, W. S., Lubatkin, M. H. and Dino, R. N. (2002). ‘Altruism, agency, and the competitiveness of family firms’. Management and Decision Economics, 23, 247–59.

Schulze, W.S., Lubatkin, M.H., Dino, R.N., & Buchholtz, A.K. (2001). Agency relationships in family firms, Organization Science, 12(2), 99–116.

Siebel, J.F and Aufseb, D.K, (2011), a review of theory in family business research: the implication for corporate governance, International Journal of Business Review, Vol 14, P.280-304.

Sirmon, D.G. and Hitt, M.A. (2003). Managing resources: linking unique resources, management, and wealth creation in family firms. Entrepreneurship: Theory & Practice, 27, pp. 339–358.

Shukla, P.P, Economic Theories of Family Firms, (2014), in Handbook Family Business. Melin, L., Nordvist, M., Sharma, P. The Sage Handbook.

Uzzi, B., 1997. Social structure and competition in interfirm networks: the paradox of embeddedness. Administrative Science Quarterly 42 (1), 35–67.

Villena, V.H., Revilla, E., Choi, T, (2011), The dark side of buyer-supplier relationships: a social capital perspective, Journal of Operation Management, 29, 561-576.

Walker, G., Kogut, B., & Shan, W. (1997). Social capital, struc-tural holes and the formation of an industry network. Organization Science, 8: 109-125.

Wallevik K. (2009) Corporate Governance in Family Firms: The Norwegian Maritime Sector: Copenhagen

Business SchoolCopenhagen Business School, Institut for International Økonomi og

VirksomhedsledelseDepartment of International Economics and Management.

Warren, D.E. (2003). Constructive and destructive deviance in organizations. Academy of Management Review, 28, 622–632.

Verbeke, A. & Kano, L. (2010). Transaction cost economics (TCE) and the family firm. Entrepreneurship Theory and Practice, 34, 1173–1182.

Verbeke, A. & Kano, L. (2012). Transaction cost economics (TCE) and the family firm: Family-Based Human Asset Specificity and the Bifurcation Bias, Entrepreneurship Theory and Practice, 1183-1205.

Article Metrics

Abstract view(s): 24 time(s)
PDF: 20 time(s)

Refbacks

  • There are currently no refbacks.