Academic journal article Entrepreneurship: Theory and Practice

Culture of Family Commitment and Strategic Flexibility: The Moderating Effect of Stewardship

Academic journal article Entrepreneurship: Theory and Practice

Culture of Family Commitment and Strategic Flexibility: The Moderating Effect of Stewardship

Article excerpt

The ability of family firms to identify and respond to changes in their external environments can be a key source of competitive advantage leading to success and survival. Some research, however, has suggested family firms are conservative and often lack the ability to adapt to their changing competitive environments. Using data from 248 family firms, we found a family firm's culture of commitment to the business is positively associated with its strategic flexibility--the ability to pursue new opportunities and respond to threats in the competitive environment. Further, we found stewardship-oriented organizational culture positively moderated the family commitment-strategic flexibility relationship.

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Changes in the competitive, technological, and global landscapes have challenged family firms to devise new systems and strategies to innovate and retain their market positions. In these dynamic and competitive environments, companies must attain and sustain a high level of strategic flexibility in order to assemble, bundle, and deploy their assets and resources in ways to take advantage of emerging opportunities. As such, firms must develop, execute, and effectively time their new strategies to achieve and maintain their competitive advantages. Even though strategic flexibility is valuable to all firms, it may be particularly important to family firms, which have often been described as conservative and slow to recognize and respond to changes in their environments. Those family firms that are sluggish and inflexible are likely to miss valuable opportunities for profit and growth. The literature, however, has not examined the conditions contributing to family firms' strategic flexibility, making it difficult to appreciate why some family firms are more adaptive to their environments than others.

This paper, consequently, examines the factors associated with family firms' strategic flexibility, defined as the degree to which firms react to opportunities and threats within their competitive environments (Barringer & Bluedorn, 1999; Sanchez, 1995). Using stewardship theory, this paper proposes characteristics of family firms that are associated with the degree to which they exhibit strategic flexibility. We suggest a family firm's ability to respond to strategic contingencies is shaped by the family's commitment to the firm, as well as the adoption of stewardship-oriented practices designed to engage and bond members to the organization (Eddleston, Kellermanns, & Sarathy, 2008). We test these propositions empirically using data collected from 248 family firms competing in the food services industry.

The paper makes the following contributions to the literature. First, we highlight the role family culture plays in influencing strategic flexibility. Family cultures exert a powerful influence on what individuals within the family businesses do and how they interpret and respond to environmental challenges. In the paper, we argue that family culture has a bearing on the firms' abilities to be strategically flexible (Zahra, Hayton, & Salvato, 2004). Specifically, we propose those family firms with a strong family member commitment to the business will be more flexible than those family firms where such a commitment is not as prominent. Thus, we extend recent research that has suggested the attitudes and values of family members, particularly commitment to the family firm, can significantly influence firm outcomes and performance (e.g., Eddleston et al., 2008). Second, we discuss stewardship theory and examine how a stewardship-oriented culture might be associated with strategic flexibility, allowing us to establish the efficacy and limits of this theory, which has received considerable attention in the growing literature on family firms (e.g., Corbetta & Salvato, 2004; Eddleston et al.; Miller & Le Breton-Miller, 2006).

Theory and Hypotheses

Family Firms and Competitive Advantage

Recent research suggests family firms often possess unique characteristics and sources of competitive advantage relative to nonfamily firms. …

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