Governing by managing identity boundaries: the case of family businesses.

In this paper we illustrate how boundary theory can be a useful perspective to understand the dynamics of family businesses. We integrate insights from the family business literature with the work--family and identity boundary literatures to describe degrees of integration between the family and business identities in family firms and outline contingencies that influence this integration. We also develop the notion of "differential permeability" as a state of being both integrated and segmented on various aspects of identity and articulate costs and benefits to this state, as well as to high integration and high segmentation. Finally, we invoke the research on "boundary work" as a means of managing family business boundaries and conclude by outlining additional avenues of research that stem from using such a boundary theory lens.

**********

Family businesses are unique in that two not necessarily compatible identities--the family and business--interact. The family system potentially provides the benefits of collaboration and stewardship in that it can foster strong identification among members and a long-term view of business (Corbetta & Salvato, 2004; Kets de Vries, 1993; Tagiuri & Davis, 1996)--major challenges confronting public corporations because of the separation of ownership and control. However, there is a dark side to strong identification and shared identity among members of a family firm (Levinson, 1971). It may foster a lack of business objectivity that can engender conflict and resentment, eventually negating the benefits of stewardship (Kets de Vries, 1993; Schulze, Lubatkin, Dino, & Buchholtz, 2001). The business system can provide the necessary controls, discipline, and objectivity but may dampen benefits of identification and shared identity (Chrisman, Chua, & Litz, 2004; Sundaramurthy & Lewis, 2003). Harnessing the benefits of the dual identities, therefore, is a critical governance dilemma for family businesses.

However, our understanding of this dilemma is surprisingly limited even though family businesses account for 40-60% of the U.S. gross national product (Gomez-Mejia, Nunez-Nickel, & Gutierrez, 2001). Family businesses include a gamut of enterprises where an entrepreneur or later-generation Chief Executive Officer (CEO) and one or more family members influence the firm via their participation, their ownership control or strategic preference (Poza, 2004). Hence, the defining characteristic is the involvement of family members in some form in the business, given our interest in the levels of involvement (Chua, Chrisman, & Sharma, 1999). Systems theory is a dominant theoretical perspective given that multiple systems intersect in the case of family businesses. This perspective has been useful in underscoring the need for the coexistence of the family and business subsystems even though they may have conflicting expectations and norms. However, it has not steered research attention to the notion that varying degrees of overlap between systems exist across family firms; this variance evokes diverse governance challenges and calls for different approaches to managing the dual systems. Furthermore, the systems theory perspective has not adequately addressed the uniqueness of any given family identity or business identity, which simplifies the complexity of interaction between systems. A deeper understanding of the nature of this overlap and its underlying governance implications can therefore provide a richer insight into how dual systems with varying levels of overlap can coexist effectively. This understanding is a critical governance challenge since organizational identity can provide an important and nonimitable source of sustainable competitive advantage (Fiol, 2001). This is particularly true in the case of family firms since family identity is unique and therefore impossible to completely copy.

Using a boundary theory lens and building on the systems theory premise that the multiple subsystems within a family business need to coexist, we explore in detail the varying degrees of overlap between the family and business systems and the consequent challenges. This perspective offers an excellent lens for describing the degree of overlap because it provides insights on the processes used by individuals and groups to create, maintain, and cross the various "mental fences" (Zerubavel, 1991) or boundaries used to simplify and categorize the environment. The theory provides a mechanism for studying the boundaries people use to negotiate the various domains (e.g., business and family) and roles (e.g., parent, coworker) of their lives (Ashforth, Kreiner, & Fugate, 2000; Nippert-Eng, 1996).

Specifically, in this paper, we integrate literature on boundaries and family businesses to illustrate how family firms can be arrayed on a continuum anchored by very high or very low levels of integration between family and business identities. We also develop the notion of "differential permeability"--a state between the two ends. Second, we describe individual and contextual factors that influence a firm's tendency to integrate or segment. Third, we discuss the costs and benefits to integration/segmentation and to differential permeability. Finally, we invoke the notion of "boundary work" from boundary theory as a means to strategically manage identity integration and propose avenues for future research from a boundary theory lens.

Boundary Theory and the Family Business

Boundaries can refer to the physical, temporal, and/or cognitive limits or perimeters that define entities as separate from one another and that define components within entities. Boundary theory explains the mechanisms through which individuals and collectives create and maintain these separations. Boundary theory has been employed in numerous disciplines across the arts and sciences. This includes political science (to explore the dynamics of geopolitical areas and "borderlands"; Martinez, 1994; Schofield, 1994), anthropology (to explain how individuals and cultures use space and time to make sense of and organize their surroundings) (Goddard, Llobera, & Shore, 1994; Hall, 1969), organization theory (to explain the dynamics of open systems) (Bertrand, 1972), and psychology (to delineate where an individual's self-concept begins and ends in order to diagnose the healthiness of interpersonal relationships) (Hartmann, 1991; Katherine, 1991). Boundary theory is premised on the notion that individuals and collectives have a natural tendency to simplify and order their environment by classifying everyday activities, events, people, and places into categories (Hartmann, 1991; Nippert-Eng, 1996; Rau & Hyland, 2002; Zerubavel, 1991). For example, individuals create meaning around their various domains of existence such as "home," "work," or "church." Based on these underlying assumptions, boundary theory is often used to predict the nature of interactions between social entities, including the benefits and liabilities of varying degrees of interaction. Hence, we propose that boundary theory offers a rich lens for studying family businesses dynamics.

The Nature of Boundaries

Within any given domain (and often across domains as well), individuals can construct a given role--a unique set of requirements, responsibilities, and even identities associated with one or more domains (Ashforth, 2001). For example, within the home domain an individual might carve out a role of "parent" that also spills over into the church or school domains. These role identities comprise the "goals, values, beliefs, norms, interaction styles, and time horizons that are typically associated with a role" (Ashforth, 2001, p. 6). Cognitive boundaries tend to be drawn around the roles within these domains. Although these boundaries are cognitive, they also result in physical manifestations (such as walls, doors, or other borders) that reinforce these mental distinctions. Individuals engage in the process of negotiating, placing, maintaining, and transforming boundaries to allow them to focus on whatever role or domain is salient (Nippert-Eng, 1996). For instance, an individual's policy of not taking personal calls at work may provide the necessary boundary to enable the individual to concentrate on the "work" domain.

The flexibility and permeability of boundaries, along with the degree of contrast in identities, determine the extent to which a given pair of roles or domains are segmented or integrated (Ashforth et al., 2000; Rau & Hyland, 2002). Flexibility refers to the "when" of a boundary--the degree to which an individual is adaptable to when a particular role or domain is invoked. For example, a family business owner is typically able to perform some tasks for the company business even during what are traditionally nonbusiness hours (weekends, late at night, etc.), thereby having role flexibility. Permeability refers to the "what" of a boundary--the degree to which a role allows elements of another role to integrate and assimilate with it. For example, an individual bringing his or her child to work, a person working in the same office as his or her spouse, or someone working at home are all signs of permeable work-home boundaries. Inflexible and impermeable role boundaries tend to be associated with high contrast in identities between roles because there are very few avenues for the values and beliefs of one role to influence the other, thereby promoting "thick" boundaries or highly segmented roles (Ashforth et al., 2000). Conversely, highly flexible, permeable boundaries enable low contrast between sets of roles and thereby foster "thin boundaries" or more integration.