Does Increased Generational Involvement Foster Business Growth? The Moderating Roles of Family Involvement in Ownership and Management

Author:Bart Henssen, Daniel Pittino, Wouter Broekaert, Francesco Chirico
DOI:http://doi.org/10.1111/emre.12366
Publication Date:01 Sep 2020
Does Increased Generational Involvement
Foster Business Growth? The Moderating
Roles of Family Involvement in Ownership
and Management
DANIEL PITTINO,
1,2
FRANCESCO CHIRICO,
4,1
BART HENSSEN
3
and WOUTER BROEKAERT
3
1
Center for Family Enterprise and Ownership (CeFEO), Jönköping International Business School, Sweden
2
Università degli Studi di Udine, Italy
3
KU Leuven, Center for Sustainable Entrepreneurship (CenSE), Odisee University of AppliedSciences
4
Macquarie University, Macquarie Business School, Sidney, Australia
Buildingupon the upper echelon perspective,we examine the effect of generationalinvolvement in managementon
various measures of business growth and considerdifferent levels of family participation. Specifically, we argue that
generational involvement and the participation of family actors in ownership and management foster cognitive
diversity at the TMT level, which may ultimately positively or negatively impactfamily business growth. Our theory,
which is tested using a longitudinal sample of unlisted Belgian family firms, contributes primarily to the literature
related to the determinants of family firm growth, which, to date, has paid limited attention to the combined effect
of different family involvement factors.
Keywords: family firms; generational involvement; growth; ownership; top management team
Introduction
Firm growth among family firms is a critical topic given
the predominance of these types of organizations
worldwide (e.g., Astrachan and Shanker, 2003; Claessens
et al., 2002) and their contribution to both regional and
global economies (e.g., Basco, 2015). Previous studies
suggest that family involvement affects family decision
makersattitude towards growth and related firm growth
performance (e.g., Bjuggren et al., 2013; Hamelin, 2013;
Yordanova, 2011). On the one hand, firm growth appears
to contrast withfamily decision makersemphasison non-
economic goals (e.g., Chrisman et al., 2012) and their
willingness to maintain control in the hands of the family
(e.g., Gómez-Mejía et al., 2007). In fact, some
prerequisites of growth, such as the participation of
external investors or the relianceon equity funding or debt
financing (Chrisman & Patel, 2012),are likely to diminish
the capacity of the family to exert control over the
business (Gómez-Mejía et al., 2007). On the other hand,
the long-term orientation and specific resources of family
firms compared to those of their non-family counterparts
have been suggested to positively affect firm growth
(e.g., Baù et al., 2019; Sirmon & Hitt, 2003).
Given these contrasting arguments, the effect of
family involvement on business growth remains unclear
(Basco, 2013; Calabrò et al., 2017; Gibb Dyer, 2006;
OBoyle et al., 2012). However, it is known that the
composition of the top management team (TMT) and
the characteristics of its decision makers play a decisive
role in the strategy and goal definition of family
businesses (Geyer, 2016; Hambrick & Mason, 1984).
Yet, our knowledge regarding the impact of generational
involvement, that is, the joint involvement of multiple
generations in the TMT (Sciascia et al., 2013), on family
firm growth is minimal. This lack of knowledge is not a
trivial issue since generational involvement is among the
most distinctive ways through which family dynamics
influence company goals, decisions and related
outcomes (e.g., De Massis et al., 2015; Sciascia et al.,
2013; Upton et al., 2001).
Correspondence: Daniel Pittino,Jönköping International Business School,
Italy.E-mail: daniel.pittino@ju.se
European Management Review, Vol. 17, 785801, (2020)
DOI: 10.1111/emre.12366
© 2019 European Academy of Management
Therefore, building upon the upper echelons
perspective (Finkelstein et al., 2009; Hambrick & Mason,
1984), according to which the composition of a firms
TMT affects the teams strategic decision-making and
subsequent organizational outcomes (Carpenter et al.,
2004), we examine theeffect of generational involvement
in management on various measures of business growth
and consider different levels of family participation.
Specifically, we argue that generational involvement and
the participation of family actors in ownership and
management foster cognitive diversity at the TMT level,
which may ultimately positively or negatively impact
family business growth. Cognitive diversity, i.e.,
differences in knowledge, skills, preferences, and
perspectives, among TMT members (Mello & Rentsch,
2015; Miller et al., 1998) in manageme nt is key to
explaining firmoutcomes given such diversity shedslight
on the underlyingreasons behind decision makingchoices
and outcomes, and demographic variables (e.g., age,
tenure, education, and gender) have often been used as
mere proxies by upper echelon theorists (Glick et al.,
1993; Hambrick & Mason,1984). The variables we focus
on and the related cognitive diversity arguments have
important implications for a TMT group functioning such
as cooperation, conflict and group performance (Barsade
et al., 2000).
Our study, which is based on a longitudinal sample of
Belgian private family firms resulting in 1,350 year-
observationsduring the 20092013 period,makes several
important contributions. First, our theory primarily allows
us to contributeto the literature related to the determinants
of family businessgrowth, which, to date, has paid limited
attention to the combined effect of different family
involvement factors (e.g., Casillas et al., 2010). In fact,
most studies examining the effects of family involvement
on firm growth address the dimensions of involvement
separately and evaluate their additive impact while
overlooking their joint effects. Understanding the
combined effect of various dimensions of family
involvement is key because this information could
provide scholars and practitioners a more realistic picture
of the heterogeneous patterns existing among familyfirms
(e.g., Chrisman et al., 2016), which emerge mainly from
configurations of multiple family attributes (e.g., Klein
et al., 2005; Nordqvist et al., 2014).
Second, we shed further light on the upper echelons
perspective applied to family firms (e.g., Binacci et al.,
2016; Ling & Kellermanns, 2010; Sciascia et al., 2013)
with an additional emphasis on the role of non-family
actors (e.g., Tabor et al., 2018) by assessing the effects
of upper echelon diversity not only within groups but also
across groups, that is, by considering the joint effect of
diversity at the TMT and ownership group levels. Third,
we advance the upper echelons literature on a broader
level by adding to the ongoing debate concerning the
relationship between TMT diversity and firm outcomes
(e.g., Carpenter, 2002; Hambrick et al., 2015; Roberson
et al., 2017). While the demographic diversity of the
TMT is an important factor to consider, upper echelons
theory has beencriticized for its unifocalattention towards
demographic variables that are mere indications of the
deep-level composition of TMTs, such as the team
membersattitudes, personality, and cognitive
characteristics (e.g., Kauer et al., 2007; Oppong, 2014;
Priem et al., 1999). Our studyaddresses the pressing need
to unravel deeper-level factors affecting firm outcomes,
such as generational and family involvement in
management and ownership.
Literature and hypotheses
Business growthis considered a key factor forthe creation
of wealth and employment (e.g., Davidsson & Wiklund,
2006). As highlighted by several review efforts (e.g.,
Davidsson et al., 2010; G ilbert et al., 2006; Shepherd &
Wiklund, 2009), research investigating this topic has
produced a very large amount of empirical work and
numerous theoretical modeling attempts. However, the
conceptual understanding of the concept is still partial,
and empirical evidence is sometimes conflicting
(Davidsson & Wiklund, 2010; Shepherd & Wiklund,
2009). In fact,business growth is a complex phenomenon
to define and measure (Achtenhagen et al., 2010). In the
seminal work The Theory of the Growth of the Firm,
Edith Penrose (1959) observes that The term growth
() sometimes denotes merely increase in amount; for
example, when one speaks of growthin output, export,
and sales. At othertimes, however, it is used in its primary
meaning, implying an increase in size or improvement in
quality as a result of a process of development, akin to
natural biological processes in whichan interacting series
of internal changesleads to increases in size accompanied
by changes in the characteristics of the growing object
(Penrose, 1959, p.1).
Therefore, business growth needs to be analyzed as a
multifaceted phenomenon, but there is consensus among
scholars and practitioners that business growth represents
an essential performance measureof a successful business
(Achtenhagen et al., 2010) and is mainly reflected in
growth in assets, size growth and revenue growth (e.g.,
Shepherd & Wiklund, 2009). Among other factors,
growth is dependent on a firms strategy (e.g., Baum
et al., 2001; Davidsson & Wiklund, 2013; Geyer, 2016)
as it can be interpreted as a strategic goal set at the top
management level (Greve, 2008). This situation is
especially valid in the context of family firms (Baù
et al., 2019), which rely heavily on internal financing
and, therefore, need to carefully plan business growth
goals and processes as these activitiesinvolve investments
786 D. Pitt ino et a l.
© 2019 European Academy of Management

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