Personalism, particularism, and the competitive behaviors and advantages of family firms: an introduction.

Fundamental assumptions of any theory of the family firm are that family firms will behave in ways that differ from nonfamily firms, and that the behaviors of family firms will also exhibit substantial variations. This special issue includes a set of articles and commentaries that study such differences. This introduction synthesizes these articles using the concepts of personalism and particularism. We argue that the set of articles contained in this special issue contributes to the literature by explaining how the ability and willingness of family firms to behave in an idiosyncratic fashion leads to advantages and disadvantages that distinguish between family and nonfamily firms and between different types of family firms.

Introduction

The development of theories of family business presents a unique challenge to scholars. Not only is it necessary to deal with explanations of behavior, family business scholars must also be concerned with how and why behaviors might vary across different types of family businesses and between family businesses and nonfamily businesses. Thus, any useful theory of family business must include relative statements of how family firms will behave, the conditions that lead to that behavior, and the outcomes of behavior vis-a-vis both family and nonfamily businesses that possess different sets of fundamental characteristics. While this is a challenging task, due to the introduction of the family variable into the firm behavior--performance equation, it is interesting for the same reason. Understanding how the influence of a family might affect the economic decisions and performance of a business (and vice versa) opens up exciting new avenues of research. Importantly, such a line of inquiry further exposes the limitations of theories of behavior based primarily on assumptions of a self-interested rationality. Furthermore, it makes pursuit of existing areas of study more meaningful since the simple fact is that most businesses are organized as family businesses (La Porta, Lopez-de-Silanes, & Shleifer, 1999; Shanker & Astrachan, 1996).

Up until recently, most business scholars ignored family businesses. Those who did not implied that family firms were inefficient anachronisms (cf. Carney, 2005; Chrisman, Chua, & Steier, 2005). Although some family firms may suffer from nepotism, cronyism, agency problems between shareholders, and insufficient access to labor and capital markets (Carney, 2005; La Porta et al., 1999; Schulze, Lubatkin, Dino, & Buchholtz, 2001), research on their performance relative to nonfamily firms suggests that the family form of organization also may have advantages that more than offset its limitations (Anderson & Reeb, 2003; McConaughy, Walker, Henderson, & Mishra, 1998).

In our previous special issue on theories of family enterprise, Carney (2005) identified three characteristics of the family form of governance that distinguished it from managerial and alliance governance: parsimony, personalism, and particularism. Parsimony refers to the propensity of family firms to carefully husband resources, due to the fact that the family owns those resources. Personalism comes from the combination of both ownership and control held within a family. This concentration of power frees family firms, relative to nonfamily firms, from the need to account for their actions to other internal and external constituencies, giving them the discretion to act as they see fit. Particularism is the product of this discretion. Family firms have the ability to employ idiosyncratic criteria and set goals that deviate from the typical profit-maximization concerns of nonfamily firms (Chrisman, Chua, & Litz, 2004). Carney (2005) concludes that these characteristics of the family form of governance provide family firms with advantages in efficiency, social capital, and opportunistic investment. In this introductory article, we use Carney's personalism and particularism concepts to discuss the contributions of the articles and commentaries that follow.

We did not originally instruct the authors of the articles and commentaries in this special issue to employ the concepts of personalism and particularism or to explain how those characteristics of family firms might lead to competitive advantages. However, a careful perusal of the articles contained herein led us to conclude that these underlying concepts provide a unifying framework that explains and reconciles their contributions. Consequently, we decided to use this introduction to emphasize how personalism and particularism influence venturing, entrepreneurial investments, human resource practices, social responsibility concerns, and board structure in family firms. By doing so, we highlight questions concerning how and why the family form of governance is unique and what the outcomes of that uniqueness might be.

Before turning to a brief description of the articles and commentaries, we first discuss the origins and nature of the Theories of Family Enterprise conference that led to this special issue. We then summarize the articles and commentaries and tie them to the personalism and particularism of family businesses. We conclude with a short recap and a call for further research on the distinctive features of family firms.

Background of This Special Issue

This special issue disseminates a portion of the proceedings of a conference on Theories of Family Enterprise held in Edmonton, Alberta, at the University of Alberta, June 1-3, 2005. The University of Alberta School of Business and the University of Calgary Haskayne School of Business jointly sponsored the conference. This volume represents the fourth of an ongoing series of special issues of Entrepreneurship Theory and Practice devoted to exploring theories of family enterprise.

The mission of the conference series continues to be the advancement and development of theories of the family firm and expansion of the community of scholars doing research on family business management. As was true in the past, the conference in 2005 included both scholars who had previously studied family business, as well as those who were new to the field. These scholars prepared articles and commentaries for the conference, and some of these are found in this issue. After a double-blind review process and the assessments of the coeditors, six articles and seven commentaries were selected from among those submitted by authors who accepted the invitation to publish their work in this special issue. As with our previous efforts, we believe that the articles and commentaries contained herein significantly advance the study of family enterprise and its role in the world economy.

Topics and Articles in This Issue

The articles and commentaries included in this volume address issues important to understanding how the personalism and particularism of family businesses influence their decisions, behaviors, and consequent competitive advantages. Specific family business topics explored include: (1) governance and long-term orientation, (2) interlocking directorates, (3) social responsibility, (4) corporate entrepreneurship, (5) perceptions of justice, and (6) altruism and agency. We discuss each of these topics in turn. A special invited commentary on management education and family business studies is also included in this special issue and is discussed later.

Family Firm Governance and Long-Term Orientation

In their article, "Why do some family businesses out-compete? Governance, long-term orientations, and sustainable capability," Le Breton-Miller and Miller (2006) argue that family-controlled businesses (FCBs) are more likely to take a long-term orientation in making strategic investments and that the nature of these investments will help FCBs develop sustainable capabilities. Consistent with the arguments of Carney (2005) concerning personalism, the authors suggest there are at least four attributes of FCBs that make long-term investment orientations possible: (1) long CEO tenures, (2) concern for subsequent generations of the family, (3) discretion in decision making due to voting control, and (4) reduced information asymmetries due to intimate knowledge of the business. In addition, Le Breton-Miller and Miller (2006) contribute to further understanding FCBs' particularism by suggesting that such firms will invest in competencies, people, and outside relationships because of their focus on nonfinancial business missions, a paternalistic interest in providing a legacy for family and nonfamily stakeholders, and an ability to recognize and exploit the important linkages between the business and the family name.

Thus, Le Breton-Miller and Miller (2006) go a long way toward a more specific articulation of the factors that provide FCBs with advantages in making opportunistic investments (Carney, 2005), the underlying motivations that make such investments possible, and how such investments are translated into concrete competitive advantages. In addition, they effectively tie the social capital advantages that accrue from personalism and particularism to these investments, showing that these are interrelated rather than independent concepts. All in all, their article provides a level of specificity to Carney's prior work that should facilitate further research.