Academic journal article Entrepreneurship: Theory and Practice

Unleashing the Relationship Power of Family Firms: Identity Confirmation as a Catalyst for Performance

Academic journal article Entrepreneurship: Theory and Practice

Unleashing the Relationship Power of Family Firms: Identity Confirmation as a Catalyst for Performance

Article excerpt

This paper adopts a broad perspective on identity and identity relations and argues that family businesses can develop identity confirmation as a unique, hard to imitate competitive resource that unleashes and leverages the relational capabilities that differentiate them from nonfamily businesses. A person's identities are "confirmed" in a business, to the extent they are supported therein. Identity and identity confirmation research is marshaled to consider the impact of identity confirmation on succession. Implications for other relational challenges family businesses face are explored. The potential for family business research to contribute to a general theory of the firm is illustrated.

Introduction

Relationships should be a source of considerable strength in family businesses. Family ties should provide these businesses with valuable, unique, and hard-to-imitate resources--resilient resources that are not substitutable and that are long-term sustainable sources of competitive advantage (Barney, 1991). One way in which they may do so is by contributing to the familiness of family firms, which is the unique bundle of resources created by the interaction of the family and the business (Habbershon & Williams, 1999) that creates economic and noneconomic value for the firm (Chua, Chrisman, & Sharma, 1999). Thus, for example, because of their ties to one another, family members may pool resources to invest patient capital in industry environments in which nonfamily firms are unable or ill-equipped to compete. In these and other ways interpersonal connections that differentiate family from nonfamily businesses may contribute to the unique competitive resources (Sirmon & Hitt, 2003), profitability, and long-term business survival of family firms.

Yet, just as families break down, family businesses often struggle with performance and long-term survival. While many explanations are possible, evidence suggests that inasmuch as familiness may be a source of strength, it may also be destructive. Family dynamics and relations between family and nonfamily members may undermine family firms (e.g., Cabrera-Suarez, De Saa-Perex, & Garcia-Almeida, 2001). Warring factions of the same family that built a business may even destroy it.

Despite considerable research that has investigated factors that affect the performance and long-term survival of family businesses--businesses that continue to dominate the economies of most nations (Astrachan & Shanker, 2003; Miller, Le Breton-Miller, Lester, & Cannella, 2007; Morck & Yeung, 2004), there continues to be a strong need for research that illuminates conditions that give rise to excellence in family firms. This paper uses identity theory to focus on relationship advantages that can differentiate family from nonfamily firms and make family firms more competitive. As I will show, identity theory provides both a conceptual justification for many commonly observed behaviors in family firms and a new lens through which other hard-to-explain behaviors can be investigated.

Family firms are more complex than nonfamily firms (Pieper & Klein, 2007), and as a consequence so are the relationship challenges that affect their long-term survival. This is particularly problematic in family firms wherein family ties underscore unique resources that help family firms achieve a competitive advantage. Relationship challenges are partly due to the nature of roles and identities involved in a family business setting. The potential of family dynamics and family-based identities to affect family business survival has been recognized and largely focused on family-based identities as sources of unity or subgroup division. This paper takes the identity perspective a step further by considering how to employ the potential of identity-based motivations and states to unleash the relationship advantages of family firms.

This paper contributes to knowledge in family business theory in four ways. …

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