Family Businesses: Understanding non-family managers’ discretion, goal diversity, and intra-firm heterogeneity

This thesis focuses on family businesses. During the last years, research on family firms has gathered momentum and, today, is one of the fastest growing areas of research in management sciences. The high economic importance of family enterprises is ample justification for this development. That is, family firms represent the worldwide dominant form of organizations. This doctoral thesis consists of three independent studies comprising aspects of heterogeneity of family firms, decision-making, goal preferences of founder and later-generation family firms, and managerial discretion of non-family management. First, by analyzing variations in managers’ perceptions of how strong the family actually impacts both the characteristics of host country subsidiaries and the headquarters characteristics, this study explains heterogeneity not only between family firms but also within a single multinational enterprise. In particular, this study sheds some light on the perception differences regarding the guiding principles, goals, and values between managers working at the family firm’s headquarters and managers working at foreign subsidiaries. This study builds on a quantitative methodology, based on an online survey comprising 359 managers within an individual family business. The data was analyzed using linear regression models. This study finds a positive relation between increasing geographic distance and decreasing managers’ perceptions of the dominating characteristics within a single multinational family firm. Second, this thesis makes nuanced claims on the importance of non-financial and financial goals in family firm decision-making serving as an important step to explain behavioral heterogeneity among family firms. By shedding light on the different priorities attached to the various dimensions of financial and non-financial goals of founders and later-generation family managers, this study shows how the order of preference of goals alters as ownership and control is handed over to later generations. This study builds on a quantitative methodology, based on an online survey involving 167 founders and later-generation family-managers. The orders of preference were collected by a best-worst scaling approach and analyzed using multivariate regressions. This study finds that founder and later-generation family firms significantly differ in their orders of preferences of nonfinancial goals and financial goals. Third, this thesis sheds light on the complex social interaction processes within family firms. In particular, this study focuses on changes in the goal set of large German family firms caused by the influence of non-family CEOs. This study explains how formal and informal governance facilitate interaction between the family and the CEO and when this interaction expands or limits a non-family CEO’s level of discretion. This study builds on a qualitative methodology, based on interviews with non-family CEOs and family members holding an appointment at the firms’ supervisory committees. This study finds that non-family CEOs only exert weak influence on the overall goal set of family firms and that the degree of managerial discretion depends on the business understanding of family members. Overall, the three studies included in this thesis add to our understanding of family firm behavior, family firm heterogeneity, and the importance attached to various goals by founders and later-generation family members.