Academic journal article Entrepreneurship: Theory and Practice

Personalism, Particularism, and the Competitive Behaviors and Advantages of Family Firms: An Introduction

Academic journal article Entrepreneurship: Theory and Practice

Personalism, Particularism, and the Competitive Behaviors and Advantages of Family Firms: An Introduction

Article excerpt

Fundamental assumptions of any theory of the family firm are that family firms will behave in ways that differ from nonfamily firms, and that the behaviors of family firms will also exhibit substantial variations. This special issue includes a set of articles and commentaries that study such differences. This introduction synthesizes these articles using the concepts of personalism and particularism. We argue that the set of articles contained in this special issue contributes to the literature by explaining how the ability and willingness of family firms to behave in an idiosyncratic fashion leads to advantages and disadvantages that distinguish between family and nonfamily firms and between different types of family firms.

Introduction

The development of theories of family business presents a unique challenge to scholars. Not only is it necessary to deal with explanations of behavior, family business scholars must also be concerned with how and why behaviors might vary across different types of family businesses and between family businesses and nonfamily businesses. Thus, any useful theory of family business must include relative statements of how family firms will behave, the conditions that lead to that behavior, and the outcomes of behavior vis-a-vis both family and nonfamily businesses that possess different sets of fundamental characteristics. While this is a challenging task, due to the introduction of the family variable into the firm behavior--performance equation, it is interesting for the same reason. Understanding how the influence of a family might affect the economic decisions and performance of a business (and vice versa) opens up exciting new avenues of research. Importantly, such a line of inquiry further exposes the limitations of theories of behavior based primarily on assumptions of a self-interested rationality. Furthermore, it makes pursuit of existing areas of study more meaningful since the simple fact is that most businesses are organized as family businesses (La Porta, Lopez-de-Silanes, & Shleifer, 1999; Shanker & Astrachan, 1996).

Up until recently, most business scholars ignored family businesses. Those who did not implied that family firms were inefficient anachronisms (cf. Carney, 2005; Chrisman, Chua, & Steier, 2005). Although some family firms may suffer from nepotism, cronyism, agency problems between shareholders, and insufficient access to labor and capital markets (Carney, 2005; La Porta et al., 1999; Schulze, Lubatkin, Dino, & Buchholtz, 2001), research on their performance relative to nonfamily firms suggests that the family form of organization also may have advantages that more than offset its limitations (Anderson & Reeb, 2003; McConaughy, Walker, Henderson, & Mishra, 1998).

In our previous special issue on theories of family enterprise, Carney (2005) identified three characteristics of the family form of governance that distinguished it from managerial and alliance governance: parsimony, personalism, and particularism. Parsimony refers to the propensity of family firms to carefully husband resources, due to the fact that the family owns those resources. Personalism comes from the combination of both ownership and control held within a family. This concentration of power frees family firms, relative to nonfamily firms, from the need to account for their actions to other internal and external constituencies, giving them the discretion to act as they see fit. Particularism is the product of this discretion. Family firms have the ability to employ idiosyncratic criteria and set goals that deviate from the typical profit-maximization concerns of nonfamily firms (Chrisman, Chua, & Litz, 2004). Carney (2005) concludes that these characteristics of the family form of governance provide family firms with advantages in efficiency, social capital, and opportunistic investment. In this introductory article, we use Carney's personalism and particularism concepts to discuss the contributions of the articles and commentaries that follow. …

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