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Abstract

  1. Top of page
  2. Abstract
  3. Introduction
  4. Literature Review and Hypotheses
  5. Method
  6. Discussion
  7. Appendix: Scale Items and Reliabilities
  8. References

Family firms are essential for economic growth and development through new business startups and growth of existing family firms. Entrepreneurial behavior by the CEO is essential for such growth to occur. Entrepreneurial behavior can be influenced by inherent characteristics of the CEO, such as age and tenure, as well as by the degree of family influence in the firm, as indicated by the number of generations involved in the business. We assess the empirical relationships of these variables to both entrepreneurial behavior and subsequent firm growth.


Introduction

  1. Top of page
  2. Abstract
  3. Introduction
  4. Literature Review and Hypotheses
  5. Method
  6. Discussion
  7. Appendix: Scale Items and Reliabilities
  8. References

Entrepreneurial behavior can be a critically important factor in a firm's profitability and growth (Lumpkin & Dess, 1996; Zahra, 1991, 1996). Firm-level entrepreneurship may be particularly crucial to a family firm as it strives to identify and take advantage of opportunities in the dynamic and uncertain competitive environment of the 21st century (Sirmon & Hitt, 2003). Indeed, family firms that engage in the innovative, proactive, and risk-taking behaviors that characterize firm-level entrepreneurship (Miller, 1983) are major contributors to economic development and growth in the U.S. and world economies (Zahra, Hayton, & Salvato, 2004). In spite of this, a consideration of the potential effects of family characteristics and family involvement is largely absent from the general entrepreneurship literature (Aldrich & Cliff, 2003).

Indeed, since the seminal work of Miller (1983), much of the entrepreneurship literature has instead focused on the impact of environmental, strategic, and organizational contingencies on firm-level entrepreneurship (Zahra, Jennings, & Kuratko, 1999). Miller (1983) suggests, however, that the unique characteristics of different types of firms must be considered by researchers as they study firm-level entrepreneurship. A burgeoning literature suggests that family firms are indeed different from other firms due to the unique interplay among individual family members, the family “system,” and the business “system” (e.g., Gersick, Davis, Hampton, & Lansberg, 1997; Tagiuri & Davis, 1996). Further, a more complete understanding of the family firm CEO is necessary because family firms tend to be overly dependent on a single decision maker (Feltham, Feltham, & Barnett, 2005) and senior executives are key in promoting a firm's commitment and support of entrepreneurship (Zahra, Neubaum, & Huse, 2000). Thus, it would seem that researchers interested in entrepreneurial behavior in family firms should address (1) how the characteristics of family firm CEOs affect entrepreneurial behavior within those firms, (2) how different levels of family involvement in family firms affect entrepreneurial behavior within those firms, and (3) how entrepreneurial behavior affects organizational growth.

There seems to be little doubt that, worldwide, family businesses are critical in spurringeconomic development and growth by creating and funding new businesses as well as growing existing firms (Astrachan, Zahra, & Sharma, 2003). However, the impact of family involvement on entrepreneurial behavior is uncertain. Many researchers suggest that family firms provide particularly fertile grounds for essential entrepreneurial behavior needed in firm creation and growth (Aldrich & Cliff, 2003). Zahra (2005) identifies a variety of reasons that family firms may be adept at entrepreneurial behaviors, including (1) goal congruency between the firm and owners and (2) goal continuity across multiple generations involved in the firm. Family ownership also promotes a long-term planning perspective, necessary for the firm to continue successfully across multiple generations of the family (Zahra et al., 2004). Finally, family firms are often in a unique position to create valuable social capital in the form of lasting relationships with critical organizational stakeholders via the stability of key decision makers in the family (De Carolis & Saparito, 2006). Aligned, continuous goals, long-term perspectives, and valuable social relationships can potentially foster entrepreneurial behavior in the firm.

However, in spite of the seemingly rich conditions for entrepreneurial behaviors in family firms, some have argued that the family business context can be a distinct liability for entrepreneurial behavior (e.g., Schulze, Lubatkin, Dino, & Buchholtz, 2001). Perhaps the greatest concern is that in order to protect the firm over the long run, family leaders may become too strategically conservative, thereby minimizing entrepreneurial behaviors. Indeed, because many entrepreneurial ventures fail or take several years to be profitable, entrepreneurship poses substantial risks that can threaten the success, wealth, and survival of the firm (Zahra et al., 2000). Risk aversion, stagnation, or strategic comfort zones represent status quo behaviors that are indicative of diminished entrepreneurial behaviors needed to grow the family firm.

Thus, the impact of individual family members and overall family involvement in the family firm may be critical to entrepreneurial behavior and firm success (Astrachan, 2003). But, as Aldrich and Cliff (2003, p. 574) suggest, “very little attention has been paid to how family dynamics affect fundamental entrepreneurial processes.” They go on to state:

We need more research on how family systems affect opportunity emergence and recognition, the new venture creation decision, and the resource mobilization process. We need to learn more about the role that family characteristics and dynamics play in why, when, and how some people, but not others, identify entrepreneurial opportunities. (Aldrich & Cliff, 2003, p. 593).

What triggers some family firms to embrace and aggressively pursue continued entrepreneurial behaviors while other family organizations become entrenched and stagnant? We set out to address this important question by examining potential antecedents of entrepreneurial behavior in family firms, including the personal characteristics of the CEO (age and tenure), as well as the influence of the family over time, as indicated by the number of generations involved in the firm. CEO age and tenure may be particularly salient influences on family firm entrepreneurial behavior because family firm CEOs tend to remain in power much longer than CEOs in nonfamily firms (Gersick et al., 1997), and thus have an enduring impact on the firm's organizational culture and entrepreneurial disposition. Generational involvement may also be a key predictor of family firm entrepreneurial behavior given that founder-centered firms often lose their innovative momentum until the second or third generations join the firm, reviving and fostering entrepreneurship (Salvato, 2004). Hereby it is also very important to understand the consequences of entrepreneurial behavior. Although it has often been argued that entrepreneurial behavior affects employment growth at the macro and micro levels (e.g., Chang, 2007; Kirchhoff, Newbert, Hasan, & Armington, 2007), research has yet to show this as a consequence in family firms. However, we believe that as entrepreneurial behavior increases in family firms, organizational growth will likely follow. Indeed, entrepreneurship is believed to be a necessary component of family firm survival, profitability, and growth (Salvato, 2004). These relationships are depicted in Figure 1.

image

Figure 1. CEO Characteristics and Generational Antecedents of Entrepreneurial Behavior and Growth in Family Firms.

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Literature Review and Hypotheses

  1. Top of page
  2. Abstract
  3. Introduction
  4. Literature Review and Hypotheses
  5. Method
  6. Discussion
  7. Appendix: Scale Items and Reliabilities
  8. References

Chua, Chrisman, and Sharma (1999, p. 25) define the family firm as:

a business governed and/or managed with the intention to shape and pursue the vision of the business held by a dominant coalition controlled by members of the same family or a small number of families in a manner that is potentially sustainable across generations of the family or families.

In short, a family firm must meet three criteria: (1) be governed/managed by family, (2) have a vision for the firm consistent with the strategic direction held by the family, and (3) be potentially sustainable across multiple generations. The family influence can vary in the organization over time and can be manifested in many different ways in the organization (Astrachan, Klein, & Smyrnios, 2002; Klein, Astrachan, & Smyrnios, 2005).

Both the unique characteristics of individual family members and the nature and extent of family involvement in the firm may affect entrepreneurial behavior at the firm level (Zahra, 2005). In particular, personal characteristics of the CEO may be key factors in predicting entrepreneurial behavior since family firms tend to be overly dependent on a single decision maker (Feltham et al., 2005) and their CEOs tend to remain in power much longer than the CEOs of nonfamily firms (Gersick et al., 1997). Additionally, generational involvement may be a unique predictor of entrepreneurial behavior in family firms given that family members from newer generations tend to be a driving force for change (Kepner, 1991) and innovation (Litz & Kleysen, 2001).

Family Firm CEO Age

Entrepreneurial behavior is contingent on intrinsic characteristics of the organizational decision maker, that is, the CEO (Levesque & Minniti, 2006). The age of the CEO is considered a key antecedent of entrepreneurial behavior (Levesque & Minniti, 2006). Based on time allocation theory (Becker, 1965), Levesque and Minniti (2006) argued that a CEO's entrepreneurial efforts will decline over time. As CEOs grow older, they may limit decision making to commonly held norms of industry behavior, rather than seeking unique, yet risky, strategic directions (Hambrick & Finkelstein, 1987). Younger entrepreneurs have been found to adjust their expectations faster in response to new information than do older entrepreneurs, supporting the notion that older entrepreneurs are more complacent than their younger counterparts (Parker, 2006). For example, age has been found to be significantly negatively correlated with innovation and risk taking (Stewart, Watson, Carland, & Carland, 1999).

Age may be a particularly salient predictor of entrepreneurial behavior in family firms since their CEOs often become preoccupied with succession issues as they age (Feltham et al., 2005). As succession grows nearer, the aging CEO may place greater importance on a smooth, seamless transition than on the need to pursue entrepreneurial endeavors. Further, because leaders of family firms are often motivated to build a lasting legacy for their children, they often become conservative in their decisions because of the high risk of entrepreneurial ventures (Morris, 1998) and their fear of losing family wealth (Sharma, Chrisman, & Chua, 1997). Therefore, as CEOs of family firms age, they may naturally become less innovative and risky and also become more focused on succession issues and maintaining family wealth, thereby reducing their entrepreneurial behavior.

  • Hypothesis 1. The age of the family firm CEO will be negatively related to entrepreneurial behavior.

Family Firm CEO Tenure

Will the tenure of the CEO in the organization be beneficial or harmful to the pursuit of entrepreneurial behaviors in the family firm? There is some argument that long CEO tenures inspire entrepreneurial behavior. This perspective is based on the belief that long tenures allow the CEO to accumulate a wealth of knowledge and experience, making him or her better able to select appropriate entrepreneurial behaviors, thereby reducing risk while also pursing aggressive change (Levesque & Minniti, 2006). Long CEO tenure may also allow the CEO to build valuable relationships among organizational constituents. These relationships may give the CEO more knowledge and comfort to pursue the risky decisions necessary to entrepreneurship.

Alternatively, dominant, singular leadership over long tenures may make employees less likely to question ideas and practices (Zahra et al., 2004). Long tenures may create an internal organizational environment that stifles the creativity and innovativeness that result from cognitive conflict, the much needed and healthy questioning of ideas and concepts (Kellermanns & Eddleston, 2004). For example, CEOs with longer tenure have been found to be more likely to conform to industry norms, presumably because their firm-specific human capital keeps them from compromising the comfortable status quo (Finkelstein & Hambrick, 1990). Indeed, in a canonical analysis of family firm variables, Zahra (2005) found that CEO tenure was negatively related to innovativeness in his study of more than 200 family firms. Zahra (2005) also found that CEO tenure in family firms was inversely associated with risk taking. It appears that when family businesses are highly dependent on the CEO, suboptimal decisions can result because the family business has not planned for change or the leader dominates decision making (Feltham et al., 2005). The identity of CEOs with long tenure may become so interwoven with the family firm that the objectivity of the decision-making process is strained (Daily & Dollinger, 1992). Indeed, entrepreneurial family firms appear to continuously question and change their cultural patterns and ways of doing business (Hall, Melin, & Nordqvist, 2001). In contrast, the executive succession literature has shown that new top management is positively related to strategic change and innovation (Kesner, Shapiro, & Sharma, 1994). Therefore, family firm CEOs with long tenure may display less entrepreneurial behavior than their newer counterparts because of their resistance to change and support for the status quo.

  • Hypothesis 2. The tenure of the family firm CEO will be negatively related to entrepreneurial behavior.

Generations Involved in the Family Firm

When multiple generations are involved in the family firm, the organization has greater input and a variety of individual perspectives—both valuable assets for entrepreneurial ideas. Newer generations tend to push for new ways of doing things (Kepner, 1991) and are often the driving force behind innovation (Litz & Kleysen, 2001) and entrepreneurial activities (Salvato, 2004). Although founders of family firms often base their firms on innovative ideas, over time they may lose their entrepreneurial edge (Corbetta, 1995; Salvato, 2004). The involvement of subsequent generations increases the firm's chance that entrepreneurial opportunities will be identified and pursued (Salvato, 2004). As Salvato explains, “the founder alone may find it difficult to have innovative ideas without the fresh momentum added to the firm by second-generation members” (2004, p. 73).

Several researchers suggest that multi-generational family involvement increases the chances that entrepreneurial opportunities will be recognized (Salvato, 2004) and entrepreneurial behavior fostered (Gersick et al., 1997). Indeed, a stewardship theory lens would suggest that the cohesion between the family is fostered and opportunities are sought out to provide for cross-generational sustainability and growth (e.g., Davis, Schoorman, & Donaldson, 1997; Eddleston & Kellermanns, 2007). A recent empirical study (Zahra, 2005) is consistent with this view, finding that the more generations of the family involved in a family firm, the more the firm focused on innovative behaviors. The involvement of multiple generations may foster entrepreneurial behavior because newer generations may put greater emphasis on enhancing business growth so as to ensure the firm's survival. Indeed, family firm survival through multiple generations requires renewal through innovation (Hoy, 2006) and greater focus on maintaining and enhancing business growth (McConaughy & Phillips, 1999). Multiple-generation firms must adapt to changes in their environments by rejuvenating and reinventing themselves over time if they are to sustain the same level of growth and financial inheritance of the previous generation (Jaffe & Lane, 2004). Furthermore, serial business families, families that repeatedly recreate new family business ventures, appear to be able to harness the fresh motivation and entrepreneurial spirit of each generation (Kenyon-Rouvinez, 2001). Accordingly, the involvement of multiple generations may increase entrepreneurial behavior because newer generations may be a driving force for change and innovation and they may also be more likely to perceive the importance of entrepreneurial behavior to the long-term survival of the firm.

  • Hypothesis 3. The number of generations involved in the family firm will be positively related to entrepreneurial behavior.

Entrepreneurial Behavior and Firm Growth

Entrepreneurship involves innovation and new venture creation (Steier, Chrisman, & Chua, 2004). More specifically, “entrepreneurship centers on recognizing and exploiting opportunities by reconfiguring existing and new resources in ways that create an advantage” (Zahra, 2005, p. 25). Entrepreneurial behavior is essential for firms to adapt and respond to environmental changes, such as consumer preferences, competitor actions, and technological developments. For example, Zahra and colleagues (2000) discussed how entrepreneurship can help a firm acquire new capabilities, launch new businesses, develop new revenue streams, and improve firm performance, profitability, and growth. In this way, entrepreneurial behavior is seen as an important element in the survival and growth of family firms because it helps create jobs and wealth for family members (Kellermanns & Eddleston, 2006a).

For example, an innovative strategy has been found to benefit a family firm's competitive market position (McCann, Leon-Guerrero, & Haley, 2001). Entrepreneurial behavior may promote the continuity and success of the family firm by increasing revenue streams and profitability that thereby encourage growth in employment (Kellermanns & Eddleston, 2006a). Indeed, Salvato (2004) argues that entrepreneurial behavior is important to family firm survival, profitability, and growth. Without entrepreneurial behavior, family firms will likely become stagnant, thereby limiting the potential for firm success and growth in the future.

  • Hypothesis 4. Entrepreneurial behavior will be positively related to firm growth.

Method

  1. Top of page
  2. Abstract
  3. Introduction
  4. Literature Review and Hypotheses
  5. Method
  6. Discussion
  7. Appendix: Scale Items and Reliabilities
  8. References

Our sample frame consisted of 232 family firms associated with the family business centers of two U.S. universities in the Northeast. The surveys were directed to the CEO, and as part of a larger data-collection effort the CEO was asked to distribute the questionnaires to other family members within the family firm. Overall, 50 CEOs returned surveys, representing a 21.4% response rate at the CEO level of analysis.

Measures

All items and the associated alphas of the constructs are reported in the Appendix.

Dependent variable.  Employment growth was measured via a subjective self-reported assessment since objective measures relating to growth or other performance dimensions are often not available or obtainable from smaller, privately owned firms (Love, Priem, & Lumpkin, 2002). Prior research has shown that such subjective self-assessments are highly correlated with objective data (Dess & Robinson, 1984; Love et al., 2002; Venkatraman & Ramanujam, 1987). The respondents were given multiple options related to growth, ranging from a decrease in growth to increases in 2% increments up to 12% or more. Indeed, not only has entrepreneurial behavior in general been associated with employment growth at the macro and micro levels (e.g., Chang, 2007; Kirchhoff et al., 2007), it is widely utilized in measuring the success of small-scale businesses (e.g., Rauch, Frese, & Utsch, 2005).

Independent variables.  Entrepreneurial behavior was assessed with four items on a 7-point Likert scale. The measures were adapted from a seven-item scale developed by Miller (1983). Although other measures of entrepreneurial behavior exist in the literature (e.g., Zahra, 1996), we chose to utilize an adaptation of the Miller measure due to its better fit to the family firm context and its ability to produce meaningful inferences for smaller organizations (Kellermanns & Eddleston, 2006a). The measure demonstrated acceptable reliability, with an alpha of 0.86.

Tenure was measured via a self-report question asking how many years the individual had worked in the family firm. Age was similarly assessed via self-report. Lastly, we asked CEOs to indicate the number of generations currently working in the family firm (Kellermanns & Eddleston, 2006a).

Control variables.  Two controls were used in this study. First, we controlled for CEO gender since entrepreneurial roles are more often associated with men than women (Olson, Zuiker, Danes, Stafford, Heck et al., 2003). Second, we controlled for organizational size based on sales, since larger sales may allow the family firm to accumulate more organizational slack, which in turn may positively affect the ability to engage in entrepreneurship.

Results

The means, standard deviations, and zero-order correlations are shown in Table 1. The highest observed VIF equaled 1.64 and the highest value of the condition index equaled 24.84, far below values that might suggest multicollinearity concerns (Tabachnick & Fidell, 1995). We tested the hypotheses via multiple regression analysis. The results are shown in Table 2.

Table 1.  Descriptive Statistics and Correlations
VariablesMeanSD123456
  • N = 50

  •  

    p < 0.10

  • p < 0.05

  • ** 

    p < 0.01

  • *** 

    p < 0.001

1. Size (Sales)4.391.47      
2. CEO Age52.658.100.09     
3. CEO Gender0.770.420.33*0.36**    
4. Company Tenure22.410.210.270.51***0.41**   
5. Generations Involved1.680.550.180.270.120.35**  
6. Entrepreneurial Behavior14.226.540.38**0.110.130.31*0.45*** 
7. Employment Growth2.762.220.32*−0.110.14−0.090.290.53***
Table 2.  OLS Regression
 Employment GrowthEmployment GrowthEmployment GrowthEntrepreneurial Behavior
Model 1Model 2Model 3Model 4
  • N = 50

  •  

    p < 0.10

  • p < 0.05

  • ** 

    p < 0.01

  • *** 

    p < 0.001

Control
Size (Sales)0.31*0.29*0.140.30*
CEO Gender0.040.180.210.16
Independent Variables
CEO Age −0.13−0.10−0.07
Company Tenure −0.31−0.39*0.16
Generations Involved 0.36*0.170.36**
Entrepreneurial Behavior  0.51*** 
R20.1040.2640.4400.355
Adjusted R20.0850.1800.3610.290
F5.573*3.152*5.62***5.50***

We tested four models. In Model 1, we controlled for size and gender. Although the size effect was significant (β = 0.31, p < 0.05), CEO gender did not affect employment growth. To assess full or partial mediation of the hypothesized relationships, we tested three more models. First (Model 2), we regressed employment growth in family firms onto CEO age, company tenure, and generations involved. Although CEO age did not have a significant impact on employment growth, tenure was marginally significant (β = −0.31, p < 0.10), and generations involved showed a significant relationship with employment growth (β = 0.36, p < 0.05), thus providing initial partial support for Hypotheses 2 and 3, but not for Hypothesis 1. We also tested if the hypothesized main effects existed on entrepreneurial behavior (Model 4). Here, only generations involved was found significant (β = 0.36, p < 0.01), while both CEO age (β = −0.07, ns) and company tenure (β = 0.16, ns) were not. This suggested that only the relationship between generational involvement and employment growth was mediated by entrepreneurial behavior, which did not support Hypothesis 1 and only partially supported Hypothesis 2. Indeed, Model 3 confirms full mediation, supporting Hypothesis 3. When entrepreneurial behavior (β = 0.51, p < 0.001) is added to the main effects (supporting Hypothesis 4), generational involvement loses its significance (β = 0.17, ns) indicating full mediation. In addition, company tenure was significant in this step (β = −0.39, p < 0.05).

Since the data were collected via a cross-sectional survey design, common method bias was a potential problem. To address this concern, we performed a test suggested by Podsakoff and Organ (1986) and entered all items of the main effect variables in a factor analysis. Two factors emerged that explained 67.8% of the variance. The first factor consisted of the four entrepreneurial behavior items and explained 47.5% of the variance, while the remaining three single indicator items explained 20.3% of the variance. Since no single method factor emerged, common method variance did not appear to be a significant problem.

In addition, we performed checks for potential nonresponse biases by dividing our respondents into early and late respondents. This procedure is performed under the assumption that late respondents are more similar in nature to nonrespondents than early respondents. No statistical differences between the early and late respondents were observed, which suggests that nonresponse bias was not a major problem (e.g., Kanuk & Berenson, 1975).

To further mitigate concerns, we compared our overall sample with two national samples in terms of respondent age, gender, and size. A comparison with the 1997 National Family Business Survey (NFBS) (Winter, Danes, Koh, Fredericks, & Paul, 2004) and the Federal Reserve Board's 2003 Survey of Small Business Finances (SSBF) (Winter, Fitzgerald, Heck, Haynes, & Danes, 1998) revealed that our respondents were similar in age and gender composition to CEOs in the national sample. However, the respondent firms tended to be significantly larger in size. Since we control for size effects, however, we do not believe this to be a significant concern in our study.

Discussion

  1. Top of page
  2. Abstract
  3. Introduction
  4. Literature Review and Hypotheses
  5. Method
  6. Discussion
  7. Appendix: Scale Items and Reliabilities
  8. References

Our study provided the first empirical test in family firms of the age hypothesis proposed by Levesque and Minniti (2006) and expands on work from Zahra (2005) by testing antecedents of entrepreneurial behavior as well as its growth consequences in a holistic model. Our findings were mixed. Overall, the entrepreneurial behavior of family firm CEOs was strongly related to our performance variable, employment growth. As such, this study adds to findings in the family firm literature that have linked corporate entrepreneurship to important outcome variables like financial performance in family firms in particular and nonfamily firms in general (e.g., Barrett & Weinstein, 1998; Gudmundson, Tower, & Hartman, 2003; Lumpkin & Dess, 1996; Zahra, 1996, 2005).

Contrary to expectations, we did not find a significant relationship of CEO age with either entrepreneurial behavior or employment growth. It is possible that this may be a unique finding for family firms. Although entrepreneurial behavior in general may be strongly associated with age, it is possible that pressures in family firms may mitigate such an effect. So even if a family firm member becomes a CEO at a young age, he or she may not have the power to enact entrepreneurial behavior; such may be the case in family firms organized as cousin consortiums (Gersick et al., 1997). Accordingly, future research may want to examine the effect of the ownership share of the CEO on entrepreneurial behavior. Alternatively, because the welfare of the entire family is at stake, the family firm CEO may not lose the desire for entrepreneurial behavior as he or she ages. Knowing that the benefits of his or her behavior will accrue to future generations of the family, the CEO may be highly motivated to continue to pursue entrepreneurial ventures.

Our findings pertaining to CEO tenure in the organization only partly supported our hypotheses. Organizational tenure was not related to entrepreneurial behavior by the CEO. However, organizational tenure of the CEO was negatively related to employment growth. Our findings are thus somewhat consistent with Zahra (2005), who found CEO tenure to be negatively related to investments in new technologies and innovation. A possible explanation for the finding is that the behavior of longer-tenured CEOs may be reflecting greater caution as they focus on succession issues, which in turn would lead to lower growth. The nonsignificant main effect on entrepreneurial behavior further suggests that many constraints may be imposed on the CEO by the family, which may limit his or her engagement in such behavior.

Our hypothesis relating to generational involvement received strong support. Indeed, the relationship between generational involvement and employment growth was fully mediated by entrepreneurial behavior in family firms. As such, generational involvement was the only strong predictor of entrepreneurial behavior in our family firm sample. This is an important finding, since the main effect of generational involvement on corporate entrepreneurship has been found nonsignificant at the firm level (Kellermanns & Eddleston, 2006a), indicating the importance of individuals to make innovation in organizations a reality (Kanter, 1983).

Indeed, some researchers suggest that the involvement of family in the firm can cause potential agency conflicts resulting from the ongoing paternalistic care some family members receive, regardless of their contribution to the firm (e.g., Schulze et al., 2001). If, indeed, examples of dysfunctional altruism exist in the family firm, this could be even more problematic in multi-generational family firms. Here, excessive altruism may result in free riding and shirking that could substantially hinder the entrepreneurial efforts of the family firm. However, this is not what we found in this study. Generational involvement increased entrepreneurial behavior. As such, our findings add to the growing evidence that although agency costs in family firms exist, they may be lower than agency costs in nonfamily firms (Chrisman, Chua, & Litz, 2004). Indeed, if reciprocal altruism and stewardship behavior are present in family firms (e.g., Davis et al., 1997; Eddleston & Kellermanns, 2007), a positive impact on entrepreneurial behavior, growth, and success of the family firm can be expected.

Our study therefore contributed to the literature in two ways. First, we added to the growing corporate entrepreneurship literature (e.g., Barrett & Weinstein, 1998; Levesque & Minniti, 2006; Lumpkin & Dess, 1996; Sharma & Chrisman, 1999; Zahra, 1996) by following Miller's (1983) early call for research into the impact of firm types on entrepreneurial behavior. Indeed, we were able to show that unique family firm characteristics impact entrepreneurial behavior. Second, we added to the literature on entrepreneurial behavior in family firms (e.g., Hall et al., 2001; Kellermanns & Eddleston, 2006a; Zahra, 2005). Specifically, we contributed to initial research focusing on CEO behavior (Zahra, 2005).

Limitations and Implications

Before discussing the implications of our findings, a few limitations of our study should be noted. As mentioned in the method section, our study employed a cross-sectional design. Accordingly, we cannot infer causality in our study. Common method bias is also a limitation of our study, although the test for common method bias did not indicate significant concerns (Podsakoff & Organ, 1986) and the unambiguous nature of the self-reports for age, tenure, and generational involvement should reduce the potential for common method bias. However, future studies should investigate the relationship between entrepreneurial behavior and growth via a longitudinal design. Additional measures of growth should also be examined, such as growth in market share and profit margins.

A further limitation of our study is the small sample size and the sample origination in the northeastern United States. A small sample size may always cause a Type II error (Mazen, Graf, Kellogg, & Hemmasi, 1987). However, since the majority of our hypotheses were supported, this does not seem to be a significant concern in this study. Furthermore, we compared our sample with larger national studies and found that the organizations in our sample were larger than the national average; thus, our generalizability may be more prevalent for larger family firms.

Entrepreneurial behavior has been identified to be of paramount importance for the U.S. economy (e.g., Chang, Kellermanns, & Chrisman, 2007), and given the dominance of family firms in the United States and other economies (e.g., Chua, Chrisman, & Chang, 2004), it is crucial to understand entrepreneurial behavior in family firms. Indeed, our study adds to the developing research in this area (Kellermanns & Eddleston, 2006a; Zahra, 2005). However, future research needs to develop a better understanding of the facilitating conditions in family firms that allow such behavior. In this regard, future research may want to extend the current research by initially focusing on more organizational-level predictors. Furthermore, future empirical research needs to expand the content domain of corporate entrepreneurship. Although our article focuses exclusively on entrepreneurial behavior within the firm, this area of investigation needs to be expanded to include new ventures that are facilitated by the family (Steier, in press).

In addition, other variables such as family support and norms (Chang et al., 2007) and financial, contact, and resource support (Dyer & Handler, 1994) could be investigated as antecedents of entrepreneurial behavior in family firms. It would also be beneficial to identify and understand inhibitors that curb entrepreneurial behavior. For example, Kellermanns and Eddleston (2004) and Eddleston and Kellermanns (2007) identified relationship conflict as a devastating strategy process. Indeed, it is likely that such negative forms of conflict and the lack of its proper management (Kellermanns & Eddleston, 2006b) would significantly reduce entrepreneurial behavior. In addition, constraints such as financial and time pressures may mitigate entrepreneurial behavior in family firms (Dyer, 1992).

In particular, succession and its management may be a potential avenue of future research pertaining to entrepreneurial behavior in family firms (Sharma, Chua, & Chrisman, 2005; Stavrou, 1999). If there are multiple potential successors within the family firm, or if it is foreseeable that the family firm will need to generate revenue and provide employment for future generations, entrepreneurial behavior may be more likely. However, if no successor is available, the CEO may lack incentives beyond his or her personal motivation to engage in such behavior.

Future research may also want to consider the type of entrepreneurial behavior that is initiated by the CEO. Although initial research on radical change has been conducted in family firms (Hall et al., 2001), more research on incremental change (Quinn, 1980) and strategic initiatives is needed (Floyd, Ortiz-Walters, Wooldridge, & F., forthcoming). Indeed, no studies to date have addressed this topic in family firms.

Lastly, we need to discuss the implications of our study to the growing body of literature on family-based social capital in family firms (Arregle, Hitt, Sirmon, & Very, 2007; Bubolz, 2001; Dyer, 2006). Particularly, our finding pertaining to the direct effect of generational involvement on entrepreneurial behavior of the CEO suggests that the family can be the source of social capital (Bubolz, 2001) and innovation. By having multiple generations involved, the family is in a position of power that allows the family to better control decision making and implementation (Arregle et al., 2007) and may thus facilitate entrepreneurial behavior. As such, generational involvement can be seen as an integral component that allows for the creation of “familiness” in family firms (Habbershon & Williams, 1999; Habbershon, Williams, & MacMillan, 2003).

In conclusion, the study of entrepreneurial behavior of family firm CEOs can provide additional insights in understanding why some family firms grow while other family firms stagnate. Our study showed that organizational tenure and generations involved were important predictors of entrepreneurial behavior and employment growth. Indeed, our study suggests that the entrepreneurial behavior of CEOs is a key factor in explaining employment growth in family firms.

Appendix: Scale Items and Reliabilities

  1. Top of page
  2. Abstract
  3. Introduction
  4. Literature Review and Hypotheses
  5. Method
  6. Discussion
  7. Appendix: Scale Items and Reliabilities
  8. References
ConstructItemsα
Independent Variables
Entrepreneurial BehaviorOver the past three years, our firm has pioneered the development of breakthrough innovations in its industry0.86
Our firm has introduced many new products or services over the past three years 
Our firm has emphasized making major innovations in its products and services over the past three years 
Our firm has emphasized taking bold, wide-ranging actions in positioning itself and its products or services over the past three years 
Generations InvolvedHow many generations are currently working in the family firm (one generation, two generations, three generations) 
TenureWorked in the family firm since: ____ (fill in) 
AgeAge: ____ years 
GenderGender: ____ Male ____ Female 
Dependent Variable
Employment GrowthPlease indicate growth in employment over the past three years: 
____ No growth or decrease in growth 
____ Less than 2% 
____ 2.00%–3.99% 
____ 4.00%–5.99% 
____ 6.00%–7.99% 
____ 8.00%–9.99% 
____ 10.00%–11.99% 
____ 12.00% or more 

References

  1. Top of page
  2. Abstract
  3. Introduction
  4. Literature Review and Hypotheses
  5. Method
  6. Discussion
  7. Appendix: Scale Items and Reliabilities
  8. References
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