Family Social Capital in Family Businesses: A Stocks and Flows Investigation

By Gudmunson, Clinton G.; Danes, Sharon M. | Family Relations, July 2013 | Go to article overview

Family Social Capital in Family Businesses: A Stocks and Flows Investigation


Gudmunson, Clinton G., Danes, Sharon M., Family Relations


This study investigates family social capital "stock and flow" processes defined by social capital access and use at the family-firm nexus over time. We examined direction of effects in associations between family functional strength and business-related tension moderated by firm continuation status using National Family Business Panel data, grounded in the Sustainable Family Business Theory (SFBT). Families continuing ownership experienced greater family functional continuity, which was associated with less business-related tension over time. Families discontinuing ownership exhibited less functional continuity with a family and business disengagement pattern. Regarding bridging of family capital resources, differences were found in human, social, and financial capital that were associated with family functional strength and business-related tension for each ownership group. For both groups, however, making family a priority over firm was associated with stronger family functionality. Contributions include theoretical and methodological distinctions between family capital stocks and flows and support for SFBT theoretical propositions.

Key Words: business tension, family business, family capital, family functioning, social capital.

Family capital is defined by Danes, Stafford, Haynes, and Amarapurkar (2009) as the bridging of financial, human, and social capital. Of those three components, family social capital has received the least attention in the family firm literature. It is a complex construct with bonding and bridging characteristics that traverse family and firm (Adler & Kwon, 2002; Coleman, 1988; Davidsson & Honig, 2003). This study focuses on internal family capital. It contributes to Eddleston and Kellermans' (2006) call for research on complex family interactions that creates a greater understanding of how family capital contributes to or hinders, or both, family firm sustainability. It also contributes to Danes and colleagues' (2009) call for theoretical and empirical work on the distinctions between family capital stocks and flows.

Important work on family social capital has been accomplished by Pearson, Carr, and Shaw (2008), describing internal social capital, and Arregle, Hirt, Sirmon, and Very (2007), outlining propositions about family and organizational social capital connections. These theories are in keeping with the theory introduced in this study. We investigated family processes around social capital access and use at the family-firm nexus over time by striving to unravel the direction of effects in associations between family functional strength (FFS) and business-related tension (BRT) moderated by firm continuation status. These theories recognize that family social capital influences the family and the business.

Bonding is one way social capital impacts the family. When accessing and using bonding social capital, those actions can solidify owning family relationships that can build trust, internal cohesiveness, and solidarity in shared goal commitment. The use of bonding social capital builds family resilience capacity epitomized by functional strength, which assists owning families in tackling problems that cause tension at the family-firm intersection (Danes & Stafford, 2011). Bonding social capital assists in problem solving by providing secure and consistent access to resources, creating increased efficiency in the use of resources (Davidsson & Honig, 2003).

Much existing family firm research, however, uses indicators of structures such as presence of family councils rather than indicators of family processes to assess bonding social capital flows. The assumption is widely made in this research that if family capital stocks exist, that they can be readily accessed and used for the firm's good. We know little, however, about family capital flows and processes generating these flows. Furthermore, when investigating flows of bonding social capital, it is critically important to distinguish concepts of resilience capacity (a stock) and taking actions that draw on that capacity (a flow). …

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Family Social Capital in Family Businesses: A Stocks and Flows Investigation
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