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

Thus, the level of integration is high when family businesses have a strong association to the family name, image, and culture, where the family controls almost all the shares and employs family members in key decision-making positions. We now briefly consider the middle ground between extreme integration and segmentation.

Differential Permeability as Middle Ground on the Continuum

In addition to examining overall trends toward segmentation or integration, boundary theory can be used to examine the relative tendencies of multiple dimensions of an entity (Paulsen & Hernes, 2003). Identity scholars acknowledge, for example, that identity typically comprises multiple aspects and is rarely simply one monolithic representation (Cheney, 1991). Hence, the degree of family and business integration can be manifested to varying degrees along the different dimensions outlined earlier. So while we have generally spoken of the two extremes along the segmentation--integration continuum, clearly family businesses can exist toward the middle of this continuum, in a state we call "differential permeability." We define the state of differential permeability as the firm containing some elements of integration and some elements of segmentation. Our assertion of this phenomenon existing at the organizational level is consistent with previous research on identity and boundaries at the individual level, which has demonstrated how multiple identities can be both integrated and segmented within the same person (Kreiner, Hollensbe, & Sheep, 2006; Nippert-Eng, 1996).

Differential permeability can occur both within and between aspects of family business identity (image, culture, personnel, ownership/governance, and financial/contractual relations with family). As an example of differential permeability within an aspect (in this case, culture), a family firm might not manifest physical artifacts of the founding family in the business location (segmenting) yet have a clear family-like work atmosphere (integrating). As an example of differential permeability between aspects, a family firm might be highly integrated with their image as a family firm yet be highly segmented in their personnel policies. These ideas are illustrated in Figure 2 and the implications of this state will be addressed later in the paper.

Contingencies That Influence Segmentation--Integration

Within the family business context, two interrelated sets of factors may drive a family firm's position on the integration--segmentation continuum: individual factors and situational context. We discuss each of these sets of factors and outline their impact on firm governance.

Individual Factors

As noted, previous research (e.g., Kreiner, 2006; Nippert-Eng, 1996) has found that individuals vary widely in their preference for segmenting or integrating their work and home lives. We focus on three individual factors that are likely to influence intermingling business and family systems: founder's beliefs, age, and gender of the owner-managers. Each of these has been shown to cue identity salience and influence role integration (Ashforth, 2001; Hartmann, 1991).

Founder's Belief. Founders can have lasting effects on the cultures of their firms (Schein, 1983). It follows, therefore, that the beliefs of the founder regarding the interconnection between family and the business can be central in determining the level of identity integration manifested in a family firm. So if the founder strongly identifies with the roles in the family domain and sees the business as a means to fulfill these role obligations, the more likely it becomes for the founder to seek and find opportunities to express that role identity, leading to more integration of that role with others (Ashforth et al., 2000). Within the family business literature there are several examples of founders shaping the degree of integration between family and business (Ket de Vries, 1996; Ward, 2004). Adolph Ochs of The New York Times provides a good case in point. He believed that he owed his success to the entire family and often hired family members just because they were family; this sense of family involvement was carded on by his successor and son-in-law Arthur Sulzberger (Ward, 2004).

[FIGURE 2 OMITTED]

Age. Personality research has demonstrated that individuals tend to segment their roles and domains more as they grow older (Hartmann, 1991). In the family business context, younger managers are more likely to intermingle family and business; they are more likely to need financial and other resources from family to support their business endeavors because external lenders may be less willing to lend to younger, less experienced business managers. Indeed, Haynes et al. (1999) found that younger business managers engage in more intermingling of business and family resources, including financial and nonfinancial resources such as family member employment without pay.

Gender. Past research has demonstrated that women tend to integrate roles and domains more than men do (Hartmann, 1991) and that women typically identify more strongly with their family roles than men do (Eby, Casper, Lockwood, Bordeaux, & Brinley, 2005). Both of these factors would therefore encourage integration of their family identity with that of the business. Furthermore, evidence from several studies indicates that women starting businesses rely more on personal savings and contributions from family and friends because they have difficulty accessing external financing, fostering more family-to-business resource flow (Aronson, 1991; Buttner & Rosen, 1989; Changanti, DeCarolis, & Deeds, 1996; Fay & Williams, 1993; Haynes et al., 1999). Women also assign a greater strategic role in the firm for family investors and family employees (Gundry & Welsch, 1994).

Situational Context

While individuals may have a proclivity to integrate or segment different aspects of their life, situational contexts impose constraints and shape boundaries (Nippert-Eng, 1996). Cultural backgrounds have a significant influence on work behavior, the interrelationship between work and family, and role dynamics (Ashforth et al., 2000; Erez & Earley, 1993; Hofstede, 2001). Cultures at the national, regional, family, and firm level can shape how family businesses create, maintain, and negotiate role identities. In this section, we discuss the influence of the business family's national ethnic roots, its local urban/rural heritage, its family culture, and stage of development on the level of integration.

National Cultures. Building on Hofstede's (2001) ideas, Ashforth et al. (2000, p. 484) argue that individuals in collectivist cultures emphasize group needs over individual ones. Collectivist cultures such as Japan, Korea, and China focus considerably on the family, and therefore, individuals derive their self-definition from their family identity (Hwang, 1990). Confucian ethics underlie values of these cultures where the most important ties for an individual are those between family members and the family is a primary social unit (Hwang, 1990). Family businesses founded by members from such cultures are highly likely to integrate the family and business identities and roles with the family dominating. For instance, Hwang notes that the need rule dominates in Chinese family businesses where every member does their best in their work and takes resources to meet their needs. Formal rules of management are not valued and family members are appointed to key posts even as the business grows, and the firm "turns out to be a relation-oriented social unity" (Hwang, 1990, p. 607).

Rural/Urban Cultures. Marked differences in rural and urban cultures can also drive a family enterprise's location on the integration--segmentation continuum. Urban cultures typically promote individualism, self-seeking behaviors, and short-term orientation (Astrachan, 1988). Time and space are rigidly defined and compartmentalized, and family firms rooted in such cultures are more likely to segment the business and family domains. Conversely, rural cultures emphasize community and a diffuse sense of time and space. Vanek's (1980) studies of rural families indeed indicate that work, family, and leisure time and roles were not segregated, suggesting that family firms rooted in such cultures will tend to integrate the domains.

Family Culture. Families vary in their cultures too, encouraging differing levels of integration. Two aspects of family culture based on the Circumplex Model of Marital and Family Systems are particularly salient in this regard: family cohesion and flexibility (Olson & Gorall, 2003). Family cohesion pertains to the emotional bonding among family members ranging from enmeshed/overly connected, to very connected, to connected, to somewhat connected to disengaged/disconnected. In addition to emotional bonding, other dimensions of cohesion involve boundaries, coalitions, time, space, friends, decision making, interests, and recreation. Because integration enables additional connectedness, business families that tend to be overly connected will likely integrate family and business more than those that are on the other end of the cohesion anchor. Family flexibility, another cultural dimension, refers to the degree of change allowed in its leadership, role relationships, and relationship rules. Families can range from overly flexible/chaotic, to very flexible, to flexible, to somewhat flexible, to rigid/inflexible. Arguably, rigid family cultures are more likely to segment, whereas more flexible families are likely to have highly permeable boundaries and integration between family and business.