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Family governance practices and teambuilding: paradox of the enterprising family

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Abstract

This paper explores the relationship between family governance practices and financial performance of the business and family assets of business-owning families. A business-owning family that shares a focus on preserving and growing wealth as a family is defined as the enterprising family. Results of the study are consistent with predictions about the functioning of the enterprising family derived from research using social capital theory and group dynamics, especially with respect to teams. Family governance practices (family constitution, family code of conduct, clear selection and accountability criteria, family council, formal family communication mechanisms and family reunions) are hypothesized to build a strong and unified business-owning family functioning as a team. Results show that these practices are positively associated with financial performance. This relationship is mediated by a focus on preserving and growing business wealth as a family. Analyses are conducted on a sample of 64 family businesses from 18 countries.

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Notes

  1. The full version of the questionnaire is available from the authors upon the request.

  2. A large number of respondents in particular skipped the entire section on family governance practices, which was towards the end of the survey. Overall survey length was probably one of the causes of the problem. An independent-samples t-test was conducted to check for a systematic error with respect to the business characteristics (control variables) for the respondents who answered the FGPs questions and the respondents who skipped those items. All parameters for both populations were the same except for the number of family owners. Respondents from firms with a smaller ownership group tended to skip the FGPs questions. It is plausible since in those companies the FGPs are less likely to be established and thus the respondent might consider the questions as irrelevant.

  3. Details of the factor analysis are available from the corresponding author.

  4. Control variables were included in all regressions requested for the Sobel test.

  5. Another item in the original scale, measuring sales growth, was dropped due to increased unreliability of the financial performance scale with its inclusion.

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Acknowledgments

This research was made possible by support of a variety of partners, including indirect support from Nyenrode Business Universiteit, Erasmus University Rotterdam, Fortis Bank and Grant Thornton, and direct financial support from Family Business Network International and JP Morgan Bank. The authors want to thank the guest editors of this issue, especially Franz Kellermanns, Frank Hoy and Kimberly Eddleston, as well as the anonymous reviewers for their helpful comments to earlier drafts of the paper.

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  1. Center for Entrepreneurship, Nyenrode Business Universiteit, P.O. Box 130, 3620 AC, Breukelen, The Netherlands

    Marta M. Berent-Braun & Lorraine M. Uhlaner

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  1. Marta M. Berent-Braun
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  2. Lorraine M. Uhlaner
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Correspondence to Marta M. Berent-Braun.

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Table 4 List of variables
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Berent-Braun, M.M., Uhlaner, L.M. Family governance practices and teambuilding: paradox of the enterprising family. Small Bus Econ 38, 103–119 (2012). https://doi.org/10.1007/s11187-010-9269-4

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