Academic journal article Journal of Small Business Strategy

Leadership and Governance Decisions in Family Business Performance: An Application of Fuzzy Sets Logic

Academic journal article Journal of Small Business Strategy

Leadership and Governance Decisions in Family Business Performance: An Application of Fuzzy Sets Logic

Article excerpt

(ProQuest: ... denotes formulae omitted.)

INTRODUCTION

Leadership and governance are topics broadly addressed and discussed in family businesses. Leadership deals mainly with succession and business continuity, governance deals with agency or stewardship theories, as antecedents of business performance. Strategic leadership focuses on what top executives do, how they do it and their effects on the organization (Finkelstein, Hambrick, & Cannella, 2009, p. 4). The subject of strategic leadership research not only includes the executive leaders of organizations (i.e. the CEOs), but also other groups that have governance responsibilities and important influence. These include governing bodies like boards of directors. It is important to study strategic leaders because "the few people at the top of an enterprise have a major influence - through decisions and indecisions, boldness and timidity - on its form and fate" (Finkelstein, et al., 2009, p. 9). Moreover, if the unit of analysis is family businesses, it is necessary to include the family as a group that would influence decisions, as well.

Leadership, governance and performance in family businesses have been broadly studied, but results have been contradictory. Therefore, there is a need for deeper understanding of this relationship in family businesses since emotional, behavioral and organizational aspects are complex in these types of businesses. In addition, research on board process and functioning research is scarce, mainly due to lack of data or a focus on quantitative data. Thus, a balance between qualitative and quantitative methodologies is needed (Gersick and Feliu, 2014). Therefore, the purpose of this article is to explore fuzzy sets logic as an alternative methodology to examine the effects of board of directors and ownership on family business entrepreneurial performance.

Fuzzy-sets analysis is an analytic theory and method that extends on the concept of property space to bridge quantitative and qualitative approaches to measurement (Ragin, 2008, p. 82); it allows different configurations of cases conceived as combinations of qualitative attributes (Ragin, 2000, p. 181); and accounts for contingency and complex antecedent conditions (Woodside, 2010). While some researchers view cases with extreme values as outliers in conventional statistical methods such as regression, fuzzy-set analysis views these extreme cases as important and highly representative of the phenomenon under investigation (Sereikhuoch & Woodside, 2012, p.1).

Given that fuzzy set theory is case-oriented research, it contributes to explore feelings, and behaviors involved in decision-making. Therefore, it is a useful tool for family business literature, in particular, that related to leadership, governance, and their relationship to firm performance. The data we use in this article comes from the STEP Project (2016) for Family Enterprising, a global research project about entrepreneurial families' transgenerational entrepreneurship. We have access to an important amount of cases around the world that explores in detail, leadership and governance decisions and the outcomes in terms of entrepreneurial performance.

Specifically in this work, we ask the following research question: How can Fuzzy Sets Theory contribute to the understanding of family businesses' governance decisions and their relationship with entrepreneurial performance? Although we only use four of the STEP cases for the purpose of this paper, we suggest for future research to increase our sample and expand knowledge in the corporate governance and leadership fields in family businesses.

In this article, we review the literature, followed by the methodology and the illustration of the application of fuzzy sets on governance decisions and its discussion. We offer conclusions and suggest different venues for future research to take advantage of this methodological approach's potential in explaining family business managerial phenomena. …

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