CORPORATE ENTREPRENEURSHIP AND FAMILY BUSINESSES
As remarked by Lumpkin, Brigham & Moss, “there has been a surprisingly small
amount of research on entrepreneurship in family firms” (2010: 245). Luckily,
however, we are in the growth stage of the life cycle of this literature. Only in
the last three years, several books were released on the topic (Nordqvist &
Zellweger, 2010; Stewart, Lumpkin, & Katz, 2010) and special issues on the
topic appeared of Entrepreneurship and Regional Development (Nordqvist
& Melin, 2010), the International Journal of Entrepreneurship and Innovation
Management (Sharma, 2011), the Strategic Entrepreneurship Journal (Lumpkin,
Steier, & Wright, 2011) and Small Business Economics (Uhlaner, Kellermanns,
Eddleston, & Hoy, 2012).
In the present paper, we focus on firm-level entrepreneurship, better known as
“corporate entrepreneurship” (CE). We adopt a wide definition of CE referring
both to the firm-level entrepreneurial content (Sharma & Chrisman, 1999) and
the firm-level entrepreneurial process (Lumpkin & Dess, 1996; Miller, 1983;
Zahra, 1991). The former refers to CE as strategic renewal and as corporate
venturing. The latter refers to entrepreneurial orientation and its components:
innovativeness, proactiveness, risk-taking, autonomy and competitive
aggressiveness. Similarly, we adopt a wide definition of family business. A
family business is a company characterized by a considerable involvement
of a family, in political, cultural or generational terms (Astrachan, Klein, &
Our interest in studying CE in family businesses is rooted in three reflections.
First, family businesses make up, worldwide, the largest form of business
organization (Faccio & Lang, 2002; Holderness, 2009; Lopez de Silanes, La
Porta, & Shleifer, 1999) and consequently make important contributions to
job creation, gross national product and wealth generation (Beckhard & Dyer,
1983; Feltham, Feltham, & Barnett, 2005; Kelly, Athanassiou, & Crittenden,
2000; Shanker & Astrachan, 1996).
Second, CE is of vital importance today due to the economic downturn that
European and US companies are facing. CE is especially beneficial for
firms operating in hostile environmental contexts (Zahra & Covin, 1995). In
particular, CE can positively affect firm performance through the accumulation
and combination of knowledge-based capital (Kuratko, Ireland, & Hornsby,
2001; Rauch, Wiklund, Lumpkin, & Frese, 2009; Simsek & Heavey, 2011).
Scholars agree on the facts that CE can innovate a company’s business model
by reducing R & D costs and by incorporating external knowledge (Chanal &
Caron-Fasan, 2010; O’ Sullivan, 2005) and that CE constitutes a source of
competitive advantage which needs to be considered and protected (Frechet
& Martin, 2011). Therefore, firms should devise processes that support and
foster innovation (López & García, 1999) and entrepreneurship (Fayolle &
Gailly, 2009), two levers that may truly influence the development and growth
of economies (Audretsch & Thurik, 2003).
Third, family firms are characterized by distinctive features, i.e. different decision-making processes (Ensley & Pearson, 2005), socio-emotional attachments
(Berrone, Cruz, & Gomez-Mejia, 2012), institutional overlaps (Tagiuri & Davis,
1996) and complex relational dynamics (Sharma, Chrisman, & Gersick, 2012),
that may drive CE in specific ways.
In the remainder of the manuscript, we review previous studies on CE in
family firms, distinguishing between older contributions (past research) and
more recent ones (current research). We then sketch possible avenues for
PAST RESEARCH: POSITIVE AND NEGATIVE VIEWS
Within the past literature on CE in family firms, scholars have adopted either a
negative or a positive perspective.
The traditional perspective is the negative one: to use a metaphor, we could say
that according to this view, the family is the ballast that impedes the balloon of
CE from properly flying. This view is rooted in the agency theory and has been
supported by some empirical studies. According to such a perspective, family
firms are less likely to engage in entrepreneurial risk-taking behaviors because
of the overlap between ownership and management (Naldi, Nordqvist, Sjöberg,
& Wiklund, 2007). Family owner-managers tend not to risk the family’s wealth
lest they jeopardize the financial and social well-being of future generations. A
recent content analysis run by Short, Payne, Brigham, Lumpkin and Broberg
(2009) on the S & P 500s’ letters to the shareholders also reveals that family
firms are less prone to communicating their entrepreneurial behavior, at least in
terms of autonomy, proactiveness and risk taking.
On the other side, some scholars claim family firms present a unique and
favorable setting for entrepreneurship (Aldrich & Cliff, 2003). This positive
perspective asserts that the family instead acts like “oxygen that feeds the fire of
entrepreneurship” (Rogoff & Heck, 2003: 559). According to Salvato (2004) and
Zahra, Hayton and Salvato (2004: 363), it is the long-term nature of family firms’
ownership that “allows them to dedicate the resources required for innovation
and risk taking, thereby fostering entrepreneurship”. Firms characterized by an
external, decentralized and long term oriented culture are also characterized by
higher levels of CE. Given that this kind of culture is typically present when a
family is involved in the ownership of the firm, it can be stated that family firms
are more inclined to CE. Zahra (2005) and Kellermanns, Eddleston, Barnett
and Pearson (2008) also argue that the number of generations involved in
the management of a firm positively influences CE because of an increased
knowledge heterogeneity. According to Salvato (2004) this effect is particularly
strong in founder-centered firms and, as Kellermanns and Eddleston (2006)
add, such a relationship is positively moderated by the use of formal strategic
planning techniques. To put it briefly, according to the promoters of this
positive view, both family ownership and family management are beneficial for
Both the positive and the negative perspectives are still alive in recent
publications that adopt a cognitive approach to CE. On the positive side of
the debate, in a theoretical paper by Patel and Fiet (2011) commented and
extended by Sharma and Salvato (2011), it is argued that family firms are
better positioned to discover entrepreneurial opportunities, both in static and
dynamic environments, than non-family firms. Family firms’ peculiar conditions
give them distinctive advantages in opportunity identification are abundant.
These conditions include elements such as family relationships, noneconomic
aspirations, low turnover, long leader tenures, prevailing socio-cognitive familial
bonds and long term orientation. More negatively, Hayton, Chandler and
DeTienne (2011) argue in an empirical paper that family firms are less likely to
engage in opportunity identification processes that are impulsive, spontaneous
and creative. As a consequence, the new opportunities identified by family
businesses are less innovative than those identified by non-family firms.
In conclusion, if we look at the past literature, two competing views on CE in
family firms characterized the academic debate.
PRESENT RESEARCH: MORE ARTICULATED VIEWS THAT MATCH POSITIVE AND NEGATIVE ASPECTS
Some more complex approaches have recently started to appear. They are
characterized by the capability to overcome the dichotomy between the
negative and the positive views of past research. In other words, they find a
way to combine positive and negative effects in the same model.
A first approach in this style was developed by Gomez-Mejia, Haynes, Núñez-Nickel, Jacobson and Moyano-Fuentes (2007) according to which family firms
can either be risk-takers or risk-adverse, depending on the possibilities of
preserving their families’ socio-emotional wealth. Social-emotional wealth refers
to all non-financial aspects of the firm that meet affective needs, for example,
a sense of identity, the ability to exercise influence and the perpetuation of the
family dynasty. In other words, the authors argue that emotions are the true
point of reference for family firms’ entrepreneurial behavior.
A second approach consists of separating the different dimensions of
entrepreneurial orientation to understand if some of them are positively affected
by the presence of the family and some other are negatively influenced.
Lumpkin, Brigham and Moss (2010), for example, argue that family firms
are characterized by a long term orientation that, in turn, is able to increase
innovativeness, proactiveness and autonomy and, at the same time, may
decrease risk taking and competitive aggressiveness.
Building on this approach, Zellweger and Sieger (2012) not only separate the
different dimensions of entrepreneurial orientation but also extend them and
introduce a dynamic perspective to approaching CE in family firms. They separate
autonomy into external autonomy (i.e. autonomy from external stakeholders)
and internal autonomy (i.e. empowering people) and argue that the former is
generally speaking high while the latter increases as the generations go on.
Innovativeness is not always high but increases with generational changes. Risk
taking is extended into performance hazard risk, control risk (i.e. debt/equity
ratio) and ownership risk (i.e. undiversified assets). The authors then argue
that the first and second types of risk are generally low in family firms, while
the third one is generally high. Proactiveness can be high or low, depending
respectively on the presence or absence of non-active owners. Competitive
aggressiveness starts at high levels but generally decreases over time due to
reputation concerns (Zellweger & Sieger, 2012).
Cruz and Nordqvist (2012) propose a generational perspective on CE and
contribute to this research stream by arguing that opening management teams to
non-family managers makes a positive difference for entrepreneurial orientation,
albeit only in firms that have been in a family for three or more generations.
Similarly, the significance of non-family investors on entrepreneurial orientation
is particularly strong in firms of the third generation and beyond.
This approach is in line with Miller and Le Breton Miller (2011), according to
whom the social context of ownership can shape owner identities and their
entrepreneurial preferences. Hence different types of ownership (for example,
lone founder, post-founder family, and founder family) induce different levels
of entrepreneurial orientation. The scholars used identity theory to argue that
lone founder owners and CEOs will embrace entrepreneurial identities and
consequently their firms display high levels of entrepreneurship. Meanwhile,
post-founder family firms, because of the ties to family in their businesses, tend
to assume identities as family nurturers that limit entrepreneurship. Finally,
family firm founders exhibit combined identities and run companies that reveal
intermediate levels of entrepreneurship.
The fifth current approach to CE in family firms has been developed by Zahra
(2012) and is learning-based. Zahra argues that CE is enhanced by the depth,
speed and breadth of learning, but that not all of these features are increased
by the presence of the family. Family ownership has a negative impact on the
depth of learning and a positive effect on both its speed and breadth. The latter
is also positively moderated by family cohesiveness.
In addition to the above, some scholars have started to study the effects of
the family on the effectiveness of CE, i.e. on the relationship between CE and
performance. More precisely, Casillas and Moreno (2010) and Casillas, Moreno
and Barbero (2010) have explored the effect of the family on the relationship
between the three main dimensions of entrepreneurial orientation and growth.
They found that the generation in charge has a negative moderating effect
on the relationship between risk taking and growth but a positive one on the
relationships between proactiveness and growth and between innovativeness
and growth. Even when analyzing the effectiveness of CE, the family presence
appears to be beneficial or detrimental on the basis of the entrepreneurial
dimension being referred to.
Chirico, Sirmon, Sciascia and Mazzola (2011) suggest that realizing the
benefits of firm-level entrepreneurship in family firms is a complicated matter
affected by the synchronization of entrepreneurial orientation, generational
involvement and participative strategy. Entrepreneurial orientation provides
the mobilizing vision to use the heterogeneous yet complementary knowledge
and experiences offered by increased generational involvement to support
entrepreneurship. However, without a coordinating mechanism, generational
involvement leads to conflict and negative outcomes. When, instead, it is also
coordinated via a participative strategy, performance gains are achieved.
The last line of current research we identified focuses on corporate venturing
(the only case in which CE is conceived in terms of content). Marchisio,
Mazzola, Sciascia, Miles and Astrachan (2010) argue that corporate venturing
has positive and negative effects, both at the individual and the collective level.
On the one hand, corporate venturing activities can be a useful tool to better
select and develop the successor, as well as to increase the next generation’s
human capital. On the other hand, corporate venturing can also have negative
effects: it can decrease the affective commitment of the next generation if the
new venture is strategically distinct from the parent company. It can also reduce
family cohesion if the financial impact of corporate venturing is high and there
are several non-active family owners (that are usually risk adverse and more
interested in dividends than investments).
In this last research stream, we can include a paper by Sieger, Zellweger,
Nason and Clinton (2011) who studied the process through which family firms
simultaneously own and engage in various entrepreneurial interests (portfolio
entrepreneurship). They analyzed four in-depth, longitudinal family firm case
studies to develop a resource-based process model of portfolio entrepreneurship
in family firms. Six distinct resource categories were identified as relevant in
the portfolio entrepreneurship process: industry-specific social capital and
reputation (which had constant relevance over time), industry-specific human
capital (which had increasing relevance at later stages of the process), meta-industry human capital, social capital and reputation (which also had increasing
relevance at later stages of the process).