Academic journal article Family Relations

The Theory of Social Systems as a Framework for Understanding Family Businesses

Academic journal article Family Relations

The Theory of Social Systems as a Framework for Understanding Family Businesses

Article excerpt

There is a long tradition of systemic approaches in family business research, but recent developments have been widely ignored. This article gives a brief overview of these approaches and models and then introduces the modern theory of social systems. This theory no longer considers individuals as parts of the system but assumes that the basic elements of a social system are acts of communication. In each system (family, business, ownership), a specific communication pattern evolves and each system operates within a specific functional logic. Families process relationship communication, businesses process decision communication, and ownership operates on the basis of legally secured communication. Each of these three structurally coupled systems provides a specific context. The functional logics are context markers and assign meaning to the communicative acts. To understand how a family business functions, it is important to understand the concrete functional logics and the structural coupling of the three systems.

Key Words: business, family, family business, ownership. systems theory.

In addition to principal-agent theory (e.g., Schulze, Lubatkin, Dino, & Buchholtz, 2001), the resource-based view (e.g., Habbershon & Williams, 1999), and stewardship theory (e.g., Eddieston & Kellermanns, 2007; for an overview see Siebels & zu Rnyphausen-Aufseß, 2012), systems theory has played an important role in family business research and teaching since the early 1980s (Distelberg & Sorenson, 2009; Frank, Lueger, Nosé, & Suchy, 2010; Habbershon, Williams, & MacMillan, 2003; Pieper & Klein, 2007; Rautiainen, Pihkala, & Ikävalko, 2012; Simon, 2012; Simon, Wimmer, & Groth, 2005; Tagiuri & Davis, 1996; Wimmer, Domayer, Oswald, & Vater, 2005). An important reason why systems theory is attractive is that it promises a comprehensive understanding of the complexity and specificities of family businesses, helping to overcome the fragmentation of the field. Although there is no one theory of the family firm as yet, family businesses are usually conceptualized as systems comprising different subsystems (family, business, and ownership). This conceptualization is broadly accepted (Sharma & Nordqvist, 2008). Approaches employing systems theory aim at understanding the interactions between the subsystems and between system and environment as well as the dynamics resulting from these interactions. In addition, different levels of analysis are distinguished: environment, organization, group, and individual. Individuals are seen as the basic level of analysis, and their mutual interaction is to be analyzed (Pieper & Klein, 2007).

The term "system" itself is, however, rarely denned in detail and hardly ever analyzed critically, resulting in diverse systemic approaches rather than a uniform theory (Plate, 2010). Most papers employ a systems approach that conceptualizes family businesses as a system with the properties of all the subsystems involved. To date, family business research (and teaching) has widely ignored recent theoretical developments in systems theory. In contrast, modern systems theories - especially the theory of social systems (Bakken & Hemes, 2003; Luhmann, 1995; Seidl & Becker, 2005)- may offer alternative, interesting, and promising perspectives on family businesses, as recent publications show (Frank et al., 2010; Simon, 2012; Simon et al., 2005; Wimmer et al., 2005). The theory of social systems that will be the focus here is based on a definition of a social system and provides an explicit strategy for coping with the complexities inherent in family businesses.

Acknowledging that family businesses are heterogeneous, we propose this specific systems theory as a theory of great scope that can handle this heterogeneity and therefore significantly benefit family business research. According to Luhmann (1995, 2000), social systems can be defined as autopoietic, operatively closed systems that are constituted through communication. …

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