The Influence of Family Business Size on Management Activities, Styles and Characteristics

Article excerpt

This is an empirical study of family firm size, as measured by the number of employees, and the relationship of a firm's size to a variety of management activities, styles, and characteristics. A statistical analysis of data drawn from 159 American family businesses indicates significant differences by size with regard to the number of nonfamily members in top management, use of outside advisors, time spent engaged in strategic management, use of sophisticated methods of financial management, proportion of women family members involved in firm management, and level of conflict between family members. Implications are offered for family firm ownermanagers, for those who assist such businesses, and for researchers in the field of family business.

In almost all countries, families are central to the ownership and management of the majority of businesses (Dennis 2002). Within the U.S. economy, family businesses comprise an estimated 80 percent of the total 15 million businesses (Carsrud 1994; Kets de Vries 1993). They contribute more than 50 percent of the total Gross National Product (McCann, Leon-Guerrero, and Haley 1997), 50 percent of employment (Morris et al. 1997), and have higher total annual sales than nonfamily businesses (Chaganti and Schneer 1994). Furthermore, it is estimated that 35 percent of Fortune 500 firms are family owned (Carsrud 1994) and one-third of S&P 500 companies have founding families involved in management (Weber and Lavelle 2003).

Certainly an understanding of the various issues and aspects of family business are of interest to those who own and manage such companies, to those who advise and assist them, and to those who study them. Yet most of the family business literature is conceptual or involves nonquantitative research (Dyer and Sanchez 1998; Litz 1997).

Searches of the family business literature find little prior and specifically focused investigation of issues of firm size, as measured by number of employees or any other measure. Even a broader search of the literature in business and management in general generates only modest results .All of these studies were preliminary investigations, and the total set of quite mixed results underline the complexity of this basic issue. While a company's number of employees may influence managerial and firm activity and performance, considerably more research is needed before solid conclusions and meaningful implications can be reached, and theories can be generated.

The purpose of this current study was to investigate how family businesses change as they grow, as measured by the number of employees. Do management activities, styles, and characteristics change with growth, and if so how? Answering these questions can help family businessowners and managers as they grow their own businesses. It can also help those who advise and assist them, as well as researchers who study family business.

Literature Review

Family Business Research Foundation

The nature of family business research has changed considerably over the years. From modest beginnings it has grown to the point where a substantial conceptual and theoretical body of knowledge existed at the start of the 21st century. Prior to 1975, a few theorists, such as Christensen (1953), Donnelley (1964) and Levinson (1971), investigated family firms, yet the field was largely neglected (Lansberg, Perrow, and Rogolsky 1988).These early studies were generally conceptual rather than empirical, with a focus on the more fundamental issues, such as what makes a business a "family business" or a "family firm" (the terms are used interchangeably), the dynamics of succession, intrafamily conflict, and consulting to such firms (Handler 1989; Sharma, Chrisman, and Chua 1997). In 1988, with the launching of the journal Family Business Review, the first and only scholarly publication devoted specifically to family business, the field reached a level of maturity to foster a significant progression and resulting body of research and findings. …