Stewardship-oriented Culture and Family Firm Performance: A Study on the Moderating Effects in an Emerging Economy.

AutorMucci, Daniel Magalhaes

Introduction

A lot of research on the effect of family involvement over family business (FB) performance can be found in the literature (e.g., Basco, 2013; Gonzalez-Cruz & Cruz-Ros, 2016; Wagner, Block, Miller, Schwens, & Xi, 2015). Favorable and unfavorable perspectives based on different theoretical frameworks such as agency theory, stewardship theory, faultlines, the resource-based view, and socioemotional wealth are used in the literature to discuss this relationship (e.g., Basco, Campopiano, Calabro, & Kraus, 2019; Chirico & Bau', 2014; Kim & Gao, 2013). This literature has mainly focused on the comparison between family and nonfamily firm performance (Rutherford, Kuratko, & Holt, 2008) and, more recently, some studies have focused exclusively on FBs, addressing FB heterogeneity (Nordqvist, Sharma, & Chirico, 2014) based on different levels of family involvement (Basco, 2013; Basco et al., 2019; Gonzalez-Cruz & Cruz-Ros, 2016).

Despite the existence of a whole stream of literature on FB performance, the empirical evidence is still inconclusive (Garcia-Castro & Aguilera, 2014; Gonzalez-Cruz & Cruz-Ros, 2016). There are some attempts in recent studies to provide a more compelling direction regarding the antecedents of FB performance in multiple contexts (Wagner et al., 2015). Most studies in the literature have looked at ability variables (such as family involvement in management and ownership) and there have been few attempts to investigate these elements together with family essence (such as orientation or cultural aspects), which might simultaneously capture FB particularities and their effects on performance (Basco, 2013; Basco & Voordeckers, 2015; De Massis, Kotlar, Chua, & Chrisman, 2014). According to Basco (2013), the essence approach follows the behavioral perspective (Chrisman, Chua, & Sharma, 2005) and the resource-based view (Habbershon & Williams, 1999) and intends to depict what happens inside the firm while the ability captures the potential family influence in the FB. In fact, researchers have proposed that the association between family involvement in management (FIM) and FB performance might be moderated by family-longevity goals (Kim & Gao, 2013), identity (Calabro, Campopiano, & Basco, 2017), and listed versus unlisted status (Minichilli, Corbetta, & MacMillan, 2010; O'Boyle, Pollack, & Rutherford, 2012). Other studies have looked at mediators, such as a long-term orientation among management (Hoffmann, Wulf, & Stubner, 2016) and objective achievement perceptions (Basco et al., 2019). Drawing attention to the importance of considering both ability and family essence variables, Wagner, Block, Miller, Schwens and Xi (2015) suggest that individualistic versus collectivist settings might help to explain the conflicting evidence from prior literature regarding FB performance. Hence, we address this gap in the literature regarding the circumstances that might enhance or damage the FIM-performance relationship, particularly concerning cultural aspects encompassed by the stewardship-oriented culture (e.g., Zahra, Hayton, Neubaum, Dibrell, & Craig, 2008). Stewardship-oriented culture has been defined as "a collective, supportive, and caring environment" (Zahra et al., 2008, p. 1043) which relates to a collectivist setting (Wagner et al., 2015) and to a long-term orientation (Kim & Gao, 2013). Prior literature indicates that a stewardship-oriented culture (Zahra et al., 2008) can be seen as a component of the level of familiness in a FB since it is expected to enhance the bright side of the presence of family members in the top management team (Kim & Gao, 2013; Miller & Le Breton-Miller, 2006).

Considering that a stewardship-oriented culture might assist a FB in enhancing the bright side of family influence (e.g., Habbershon & Williams, 1999) and suppressing particular family agency problems resulting from the dark side of family influence on the business (e.g., Lubatkin, Schulze, Ling, & Dino, 2005), we propose the following research question: Does a stewardship-oriented culture favorably moderate the association between the level of family involvement in management and the family firm's financial performance? We discuss the association between family involvement in management and FB financial performance and investigate whether a stewardship-oriented culture plays a moderating role in this relationship. We focus on family involvement in management, particularly the Top Management Team (TMT), since these top executives have a relevant influence on the firm's performance. The Chief Executive Officer (CEO) might also play a role due to his/her strategic leadership in the top team (D'Allura, 2019). In terms of the essence of FBs, we focus on the stewardship-oriented culture, which might moderate the FIM-performance relationship.

First, this study contributes to prior literature by addressing the claim that familiness cannot be solely captured by the level of family involvement in the business (Irava & Moores, 2010; Pearson, Carr, & Shaw, 2008). This topic is relevant since the prevalent reasoning of most studies is that the level of family involvement in the group of top executives reflects the level of familiness of the FB (Minichilli et al., 2010). Hence, this study addresses the need to investigate ability and family essence variables simultaneously to explain the association between FIM and FB performance (Basco, 2013; Basco & Voordeckers, 2015). We focus on the presence of a stewardship-oriented culture in the FB, bringing more evidence to the family business literature on existing possible moderators on the relationship between FIM and FB performance. Prior literature has focused on family goals, family identity, firm listing status as possible moderators (e.g., Calabro et al., 2017; Kim & Gao, 2013). Stewardship theory can shed additional light on the understanding of how family involvement in management is related to FB performance, particularly focusing on the agency-suppressing and stewardship-enhancing roles of a stewardship-oriented culture, as a moderator variable. The focus on stewardship as a cultural dimension might provide additional evidence to prior literature that has used mainly a behavioral agency lens (e.g., Basco, 2013; Basco et al., 2019). Our study also considers two different aspects of family involvement in the management of a FB, namely whether a family CEO is present and the ratio of family managers present in the family firm's Top Management Team (TMT). Most of the prior literature on family firm performance has focused exclusively on the ratio of family involvement in the board or management, but not on family CEOs, especially when considering moderating effects on this relationship (e.g., Kim & Gao, 2013).

In addition, despite an extensive screening of multiple databases to identify papers that have discussed the antecedents of FB performance, there is little evidence regarding Brazilian FBs (Beuren, Politelo, & Martins, 2016; Brandt, Kroenke, & Pletsch, 2018; Wagner et al., 2015). For instance, Brazilian FBs have a higher sense of tradition and heritage than Anglo-Saxon FBs (Frezatti, Bido, Mucci, & Beck, 2017; Gupta & Levenburg, 2010) and face particular governance challenges that might affect their performance (Instituto Brasileiro de Governanca Corporativa [IBGC], 2019). Hofstede (2001) indicates that Brazilian culture presents a higher level of power distance, collectivism, and risk avoidance than developed economies such as those in the US and Germany, which might have implications for the role that family and nonfamily managers play in influencing FB performance. Prior studies developed in Brazil have focused on the ownership-performance relationship by comparing FBs to nonfamily businesses (NFBs) (Beuren et al., 2016; Peixoto & Buccini, 2013), while there is little evidence on FIM. Finally, in the international literature, most studies concentrate on small and medium enterprises (SMEs) or on publicly listed firms (e.g., Basco, 2013) from the US and Europe, while there is little attention paid to how FIM affects performance, especially in private FBs, such as those featured in this study. Medium and large private FBs might encompass a higher level of tradition, age, and involvement of different generations of the family in the firm, which might result in different interpretations of the findings of prior studies.

This paper is organized into five sections, including this introduction. In second section, we present the literature and the conceptual model and research hypotheses. In third section, we show the methodology, and in fourth section, we explore the results of the Structural Equation Modeling analysis. Finally, we present the discussions and conclusions and highlight the limitations of this study.

Literature Review and Hypotheses

There is a vast stream of research that has investigated the effects of family involvement in management on FB performance (Rutherford et al., 2008; Wagner et al., 2015). Basically, there are two opposing views on the family's influence on firm performance, depending on whether family involvement is considered an advantage (the bright side of family influence) or a disadvantage (the dark side of family influence) to the firm (Chirico & Bau', 2014; Miller & Le Breton-Miller, 2006; Rutherford et al., 2008). The literature has mainly focused on comparing FBs and NFBs. More recently, there has been emerging literature focusing on the heterogeneity among FBs (e.g., Basco, 2013; Basco et al., 2019; Kim & Gao, 2013) with respect to family involvement (for instance, in ownership, management, and generations) (Chrisman et al., 2012) and family essence characteristics and behaviors (e.g., long-term orientation and stewardship).

The overall model discussed later in this section includes three hypotheses regarding the direct effects, which are grounded in the prior literature concerning the consequences of family...

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