Academic journal article Entrepreneurship: Theory and Practice

An Exploratory Comparison of the Behavioral Dynamics of Top Management Teams in Family and Nonfamily New Ventures: Cohesion, Conflict, Potency, and Consensus

Academic journal article Entrepreneurship: Theory and Practice

An Exploratory Comparison of the Behavioral Dynamics of Top Management Teams in Family and Nonfamily New Ventures: Cohesion, Conflict, Potency, and Consensus

Article excerpt

While some researchers propose that the combination of family and business creates a need for trade-offs in family and business demands, we argue that the social system of the family creates a synergy in the top management team (TMT) that is not present in TMTs with less "familiness." We argue that the unique dynamics created by the social aspects of the family-owned firm will result in higher cohesion, potency, task conflict, and shared strategic consensus than those TMTs with less "familiness." Discriminant analysis of three groups of TMTs (parental, familial, and nonfamily) was conducted on a sample of 224 TMTs of new ventures to explore our propositions.

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The family business creates a unique management situation that results in both advantages and disadvantages to the firm. Chrisman, Chua, and Sharma (2003) state that "the family firm exists because of the reciprocal economic and noneconomic value created through the combination of family and business systems. In other words, the confluence of the two systems leads to hard-to-duplicate capabilities of 'familiness' that make family business particularly suited to survive and grow" (p. 6).

Habbershon, Williams, and MacMillan (2003) define the term "familiness" as the unique combination of involvement and interactions that create a competitive advantage for the firm. However, Chrisman et al. (2003) noted the challenge and complexity of identifying the degree of familiness in family firms. We propose that it is within this complex web of social involvement and interactions embedded in the social structure of the family that the advantages of the family firm can be identified.

Even though the concept of familiness may be difficult to capture, researchers have established clear differences in family and nonfamilyfirms. For example, Chrisman, Chua, and Steier (2002) provided empirical evidence of the differences in family and nonfamily firms on the basis of ownership, management, and the intention for family succession. Further, Anderson, and Reeb (2003) found that family firms under the direction of the founding family outperform other firms. Chrisman et al. (2003) report the results of several additional studies that establish differences in family and nonfamily-owned business, including succession and post-succession performance (Gomez-Mejia, Nunex-Nickel, & Gutierrez, 2002); perceptions of threats and opportunities (Chrisman et al., 2002); and corporate governance (Randoy & Goel, 2003).

However, additional research has yielded no differences between family and nonfamily firms (e.g., Welsh, Gerald, & Hoy, 1995). These conflicting findings led Chrisman et al. (2003) to challenge researchers to further explore "the extent and nature of the differences" (p. 13) between family and nonfamily firms. They further conclude that "... family business research needs to identify the nature of family firms' distinctions, if any, and the process by which these distinctions result from family involvement" (p. 13). Thus, the general purpose of our exploratory research is to examine the behavioral differences of the top management teams (TMTs) across three levels of familiness of new venture firms: parental, familial, and nonfamily firms.

Chrisman et al. (2003) suggest that unanswered questions regarding differences in family and nonfamily firms are best addressed by applying mainstream theories of the firm. We heed their advice and draw on the upper echelon perspective (Hambrick & Mason, 1984) to examine the TMT of the new-venture firm. Further, we draw on the area of group dynamics to introduce critical behavioral constructs, including conflict, cohesion, potency, and strategic consensus in order to gain a better understanding of the behavioral dynamics of the family firm. We contend that familiness in TMTs will yield more effective critical behavioral dynamics, including cohesion, conflict, potency, and shared strategic consensus, than TMTs in nonfamily firms, or those TMTs in family firms with lower levels of familiness. …

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