Corporate Governance and Management Accounting in Family Firms: Does Generation Matter?

Abstract

This paper reports on findings from a survey of Austrian family businesses analyzing differences in
corporate governance structures, namely the top management and supervisory board, as well as
management accounting practices among generations. The results indicate that as ownership of
family firms is transferred to successive generations there is no discernible positive or negative trend
concerning the percentage of non-family managers and supervisory board members; nor is there a
discernible trend concerning the type of strategic and operational management accounting instruments
employed. In fact, it is apparent that, to a large extent, generations differ from each other significantly
and that from the first to the fifth generation and later, the development of the family firm with
respect to the percentage of non-family members serving as managers and supervisory board members
as well as the establishment of a management accounting department is approximately Ushaped.
Thus, the study demonstrates the importance of a comprehensive and profound analysis of
generation-specific characteristics.

Full text

CORPORATE GOVERNANCE AND MANAGEMENT ACCOUNTING IN FAMILY FIRMS: DOES
GENERATION MATTER?
Christine Duller, Johannes Kepler University, Linz, AUSTRIA
Birgit Feldbauer-Durstmüller, Johannes Kepler University, Linz, AUSTRIA
Christine Mitter, Salzburg University of Applied Sciences, AUSTRIA
ABSTRACT
This paper reports on findings from a survey of Austrian family businesses analyzing differences in
corporate governance structures, namely the top management and supervisory board, as well as
management accounting practices among generations. The results indicate that as ownership of
family firms is transferred to successive generations there is no discernible positive or negative trend
concerning the percentage of non-family managers and supervisory board members; nor is there a
discernible trend concerning the type of strategic and operational management accounting instru-
ments employed. In fact, it is apparent that, to a large extent, generations differ from each other signif-
icantly and that from the first to the fifth generation and later, the development of the family firm with
respect to the percentage of non-family members serving as managers and supervisory board mem-
bers as well as the establishment of a management accounting department is approximately U-
shaped. Thus, the study demonstrates the importance of a comprehensive and profound analysis of
generation-specific characteristics.
Key words: governance, supervisory board, management accounting, family firm, generational issues
1. INTRODUCTION
Family firms have been assuming an increasingly important role in the economies of countries world-
wide. Family businesses dominate the economic landscape of most nations in terms of sheer number,
gross business revenues, and jobs and are an important engine of growth, prosperity, and welfare
(Heck and Trent, 1999; Astrachan and Shanker, 2003; Sirmon et al., 2008). Due to the lack of clear
separation between family and business (Stafford et al., 1999) family firms are said to differ from non-
family firms in various ways with respect to human resources, social capital, survivability, financing
and governance structures (Morris et al., 1997; Habbershon and Williams, 1999; Sirmon and Hitt,
2003; Chrisman et al., 2006).
Nevertheless the relevance of family firms has been neglected by research (Dyer, 2003). Apart from a
few exceptions the family firm has been scarcely researched (Lansberg et al. 1988; Astrachan, 2003).
Only in 1988, with the launching of the Family Business Review, the first journal devoted to the aca-
demic study of family firms, did this topic establish itself as a field of research (Hoy, 2003; Sharma,
2004, Chrisman et al., 2006, Heck et al., 2008; Debicki et al. 2009); only then did one begin to take a
closer look at the distinguishing features and the different dynamics of family firms as well as their
influence on the organization, financing and leadership structure. Despite the growing body of litera-
ture with a theoretical or empirical focus on various management issues in family firms, there remain
various aspects of this subject which have been scarcely researched – if at all. These aspects include
the relationship between family control and corporate governance structures, controlling management
accounting in family firms, and the influence of generation on these governance mechanisms and
management accounting practices.
While experts have agreed that family firms differ from non-family companies in their corporate gov-
ernance structure (Witt, 2008), family control and how it relates to internal control or governance
mechanisms has been represented with relative paucity in the literature (Bartholomeusz and
Tanewski, 2006). The organization of a family firm’s management board and supervisory board and
the extent to which they are composed of external managers can be regarded as examples of such
governance mechanisms. The role of supervisory and advisory boards in family firms is a notable
example of subject-matter that has been – with a few exceptions aside (Klein, 2005; Blumentritt, 2006;
van den Heuvel et al., 2006) – scarcely researched (Koeberle-Schmid et al., 2009).
A vast majority of "research in family firms has been directed toward the individual or group levels with
only scant recent interest in the organizational level" (Sharma, 2004, p. 22). Thus, topics such as how

a family firm approaches standard business functions such as marketing strategies, human resource
practices and interorganizational relationships remain largely ignored and unstudied (Sharma, 2004).
This is also true of accounting; there is still a significant lack of research on current accounting prac-
tices, above all management accounting practices, that family firms use (Salvato and Moores, 2010).
While generally neglected, the only studies focusing on management accounting mainly investigate
selected areas or instruments of management accounting (e.g. Moores and Mula, 2000, who study
management control systems; Upton et al., 2001, who investigate strategic and business planning
practices of fast growing family firms, or Schachner et al., 2006, who examine the firm's performance
management system).
The majority of the studies conducted on family firms concentrate on the differences between family
and non-family firms (Sharma, 2004; Chrisman et al., 2005b; Chrisman et al., 2007). Nevertheless one
can assume that family firms are not homogeneous (Corbetta and Salvato, 2004a; Stockmans et al.,
2010), but rather they differ in various aspects such as the degree of family involvement, ownership
dispersion, management structures, and generation. While a few of these aspects have already been
researched in comparative studies of different types of family firms (consult Chrisman et al., 2007 for
an overview of such studies), the influence of the incumbent generation of managers has been scarce-
ly researched. Indeed, the transition of family firms from one generation to the next, and in particular
the transition from the founder to the subsequent generation (Astrachan, 2003), has been identified as
a salient field of research (Chrisman et al., 2003; Debicki et al., 2009). Extant literature concentrates
here on the individual characteristics of the founder/transferor and those of the successor as well as
the succession process and critical factors and contextual variables in this process (cf. Sharma, 2004
and the sources mentioned there). However, although the questions concerning the extent to which
both the governance structures and the family influence affect the management board and the super-
visory board and how this differs from generation to generation are generally regarded as relevant
questions, they have nonetheless received little attention. This is also true concerning the question of
whether the organization of the management accounting department and the management accounting
tools differ across generations (Morris et al., 1997; Bammens et al., 2008; Hack, 2009; Salvato and
Moores, 2010). Moreover it is unclear whether there exist significant differences between first-
generation family firms and subsequent generation family firms and whether these differences can be
found only between the first and second generation or whether subsequent generations also differ
among themselves.
The few existing investigations into generational issues of family firms have mainly been conceptual or
otherwise qualitative (Beckhard and Dyer, 1983; Schein, 1983), or a tangential empirical analysis
within a larger family business study (Westhead and Howorth, 2006; Kellermanns et al., 2008); they
have also been mainly limited to the USA or the UK, have been restricted to selected areas (Davis and
Harveston, 1999; Van den Berghe and Carchon, 2002; Suáre and Santana-Martín, 2004; Voordeckers
et al., 2007; Bammens et al., 2008), and have rarely focused on providing an explicit and exhaustive
differentiation among generations (Lussier and Sonfield, 2010). Having based our work on a survey of
Austrian family firms, our aim is to close this apparent research gap in order to provide a better under-
standing of generational similarities and differences as well as the influence of generational issues on
governance structures and management accounting.
The nearest approximation to our research can be found in Lussier and Sonfield's cross-cultural
comparison (2010) of first-, second-, and third-generation family businesses. However, while their
research did make a distinction between generations, it only focuses on family firms in the first, se-
cond or third generation. In this respect our study has adopted a broader scope by analyzing family
firms led by generations later than the third. In order to tackle the scarcely researched topic of the role
of supervisory boards and the role of management accounting in family firms, this study will examine
in detail whether and to what extent the incumbent generation influences the institutionalization, the
organization and the composition of supervisory boards as well as its influence on management
accounting. Here as well earlier studies are quite vague, and those with a specific focus on the gener-
ational aspect do not deal with the sophistication of financial management instruments or strategic
planning. Thus, this study makes several contributions to family firm research by investigating the
generational issue in more detail as well as placing a particular focus on management accounting.
The remainder of the paper is organized as follows. In the second part an overview is provided of the
definition of family firm as well as various theoretical perspectives of family firms. Based on these
theories, hypotheses are formulated with regard to the development of governance structures and

management accounting among different generations. Part three describes the sample and methodol-
ogies used. Next, the results of our empirical study are presented and discussed. The paper con-
cludes with a summary of our findings as well as a recommendation concerning additional research
that would merit further investigation.
2. THEORETICAL BACKGROUND
2.1. Definition of family firm
With respect to the delineation and definition of the term ‘family firm’, there is no general consensus in
the academic literature (Chrisman et al., 2005a; Ibrahim et al., 2008). On the one hand, one can find
more or less narrowly-defined classifications that revolve around the degree of family involvement in
the firm in terms of ownership, control, management roles, and transgenerational succession (Chua et
al., 1999; Astrachan and Shanker, 2003) or those based on the specific characteristics of family firms
(Davis and Tagiuri, 1989; Habbershon et al., 2003). A categorization widely referred to in international
empirical research and considered (tentatively) valid (Cliff and Jennigs, 2005; Holt et al., 2010) is the
F-PEC scale developed by Astrachan, Klein, and Smyrnios (2002) which consists of the three sub-
scales of power (the family’s involvement in the firm), experience (the amount of experience the family
has in the business), and culture (the extent to which the firm’s culture is a unique culture).
On the other hand, definitions based on self-perception are becoming quite common and frequently
used in empirical research. According to these definitions the classification of firms into family busi-
nesses or non-family firms depends in part, or even entirely, on the judgement of the person being
interviewed (Westhead and Cowling, 1998; Gudmundson et al., 1999; Gallo et al., 2004).
2.2. Characteristics of family firms from the point of view of various theories
Analyses of corporate governance normally adopt the principle of agency theory. In general, this
theory (Jensen and Meckling, 1976; Eisenhardt, 1989) describes strategic interactions between at
least two contract partners, the principal and the agent, in which the agent performs actions which are
delegated by the principal. Agency theory assumes that the principal’s access to information is limited,
and that the principal cannot monitor the agent’s actions completely and without cost (Jacobides and
Croson, 2001). Agency problems or agency costs arise when agents make use of their superior
knowledge in an opportunistic manner in order to maximize their own utility, which, owing to the diver-
gent interests of the principle and agent, simultaneously limits the utility of the principal. All corporate
governance instruments in essence serve the purpose of decreasing agency costs by reducing this
asymmetrical information or by harmonizing the interests of the principal and agent via an appropriate
incentive structure (Witt, 2008). As agency costs are the consequence of the separation of ownership
and control (management), it is assumed that agency costs are lower in family-owned firms, where
ownership and management often overlap to a certain degree due to the family’s more concentrated
and undiversified ownership, their long-term interest and concern for their reputation, as well as the
close dependence of the family’s well-being on the welfare of the company (Andersen et al., 2003;
Anderson and Reeb, 2003; Bartholomeusz and Tanewski, 2006; Le Breton-Miller & Miller, 2009). On
the other hand, there is indication that agency costs in family firms are actually higher due to family
conflict (between active and passive business partners, between majority owners and owners of
smaller portions of shares as well as conflicts between the various generations) and owing to the fact
that family connections result in a more difficult implementation of relational contracts (Gomez-Mejia
and Nickel-Nunez, 2001; Schulze et al., 2001; Degadt, 2003; Lubatkin et al., 2005).
In contrast to agency theory, which rests on human assumptions of self-interest and utility maximiza-
tion, stewardship theory (Davis et al., 1997) does not expect actors to be motivated by individual goals
but assumes that managers and employees behave as stewards who focus on cooperative or organi-
zational goals and their potential contribution to these goals. Hence, their motives are aligned with the
organization's targets (Corbetta and Salvato, 2004b). Indeed, it is assumed that such altruistic, coop-
erative and selfless behaviour can be found in family firms (Dyer, 2003; Schulze et al., 2003; Karra et
al., 2006; Ulaner et al., 2007; Le Breton-Miller and Miller, 2009; Vallejo, 2009). In this atmosphere of
empowerment and mutual trust, the implementation of formal corporate governance mechanisms is
considered dysfunctional as it could adversely affect relationships built on trust as well the motivation
of the stewards, who are, by and large, intrinsically motivated (Davis et al., 1997).
Yet another view of the family firm can be found in the resource-based view, which rests on the as-
sumption that the comparative advantage of a firm is dependent on its access to resources (Penrose,

1959; Wernerfeldt, 1984; Barney, 1991). In family businesses the interaction of the family as a whole,
the individual family members, as well as the firm itself give rise to a distinctive bundle of resources
which are identified as the familiness of the firm (Habbershon and Williams, 1999; Habbershon et al.,
2003). These unique characteristics may be leveraged to form competitive advantage but may also
lead to disadvantages. For instance, a company can profit from the fact that family members feel a
sense of belonging to the family as well as the firm, yet at the same time family members might hold
management positions in family firms even if they are not sufficiently qualified, leading to adverse
selection and nepotism (Sirmon and Hitt, 2003).
It is, however, neither necessary nor productive to choose a single theory among the above-
mentioned theoretical perspectives. Every theory may provide particular insight into a specific situation
or in a specific context. In this way, they each contribute to a better understanding of family firms (Lee
and O’Neill, 2003; Corbetta and Salvato, 2004a; Salvato and Moores, 2010).
2.3. Impact of generation on governance and management accounting: Hypotheses
Guided by the above-mentioned theoretical perspectives, this study aims at contributing to extant
research on generational issues of family firms by providing a deeper insight into the impact of the
incumbent generation on governance structures and management accounting. As there is a relative
paucity of research specifically stressing generational issues in family firms, some hypotheses (cf.
Lussier and Sonfield, 2010) are solely or partially based on previous findings rather than on estab-
lished theories and models. In this section, hypotheses are derived with respect to the link between
the incumbent generation and the employment of non-family executives, the implementation and
composition of the supervisory board, as well as the management practices of the family firm. Moreo-
ver, hypotheses are developed concerning the inter-generational development of these governance
mechanisms and management accounting instruments.
As mentioned, there is a lack of consensus as well as mixed empirical results on whether family
involvement in a family business reduces or increases agency costs (Karra et al., 2006). However, the
act of transferring ownership to the next generation is generally assumed to involve higher agency
costs as the number of family members who act passively and are mainly interested in their own
economic welfare increases (Lubatkin et al., 2005; Lane et al., 2006; Miller and Le-Breton-Miller,
2006); in addition, family ties weaken, leading to a lower level of personal and emotional attachment to
the firm (Salvato and Melin, 2008) as well as looser connections amongst family members and be-
tween the family and the business (Jaskiewicz and Klein, 2007; Pieper et al., 2008). Moreover, conflict
among family members rises with the number of generations involved in the firm (Witt, 2008) as does
conflict between family and non-family shareholders in subsequent generations (Villalonga and Amit,
2006). Thus, in line with agency theory, it can be assumed that family firms face increasing agency
costs as the firm is transferred to subsequent generations (Lutz et al., 2010). One argument for having
managers from the family is their high identification with the family, as they are less likely to behave in
an opportunistic manner, exhibit an extraordinary high level of commitment to daily operations and are
able to contribute to establishing competitive advantages for the family firm (Sirmon and Hitt, 2003).
As it is commonly believed that a family member’s attachment to a family firm decreases with each
successive generation, the advantages gained in having a manager from the family are reduced and
the option of taking on an external manager will, at the same time, become more attractive as owner-
ship of the firm is passed on to successive generations.
Consequently, the family business employs a higher percentage of non-family executives as the family
business moves from one generation to the next. On the one hand, due to their objectivity and exper-
tise, external managers could serve as a buffer or mediator between the various interests of individual
family members (Ward and Aronoff, 1994). Moreover, as ownership of family firms is transferred to
successive generations and family members disengage themselves from the management of the firm
and adopt the role of purely passive business owner, fewer family members will be available for the
growing number of managerial positions (Lussier and Sonfield, 2010), resulting in vacant positions in
the management board which can be occupied by external managers.
In addition, various studies have shown that subsequent generations employ “more professional”
management methods, and that this professionalization goes hand in hand with a stronger involve-
ment of non-family managers (Schein, 1983; Dyer, 1988). The preceding arguments result in the
following hypothesis:

H1: As firm ownership is passed on to successive generations, the percentage of non-family execu-
tives within the management board increases.
Generally, boards are considered to be one of the most important governance mechanisms (Zahra
and Pearce, 1989; Forbes and Milliken, 1999). Depending on the legal form of the firm, country-
specific characteristics, and firm-specific factors, there exists a plethora of terms for the board (e.g.
supervisory board, board of directors, board of governance, or advisory board) as well as various
forms of organization and composition of this board (Corbetta and Salvato, 2004a; Koeberle-Schmid
et al., 2009; Brenes et al., 2011). In the following, the term ‘supervisory board’ will be used; it is im-
portant to note, however, that one must distinguish this committee from the type of advisory board
which has neither legal standing nor a formal role.
Supervisory boards have two main functions (Hillman and Dalziel, 2003; Blumentritt, 2006; van den
Heuvel et al., 2006). On the one hand, based on agency theory, they serve as a control mechanism
that ensures corporate oversight on the behalf of shareholders and other stakeholders by fostering
management's accountability and ratifying strategies and plans so that management acts in the best
interests of the firm (Van den Berghe and Baelden, 2005). On the other hand, grounded in the stew-
ardship theory and resource-based view, board members support the firm in virtue of their capabilities,
skills, experience, reputations, and contacts, and in doing so provide the business with valuable re-
sources and advice. This is called the service or advice role of boards (Hillman et al., 2000; Corbetta
and Salvato, 2004a; Koeberle-Schmid et al., 2009).
As long as the interests of the owner are harmonized with those of the manager, there is no need for a
controlling committee such as the supervisory board (Pieper et al., 2008; Achleitner et al., 2010). Once
family members disengage themselves from the management of a firm, though, the usual agency
problems come into existence between the family members as passive business owners and the
management board. Should the suppositions put forward for Hypothesis 1 be valid, and the conflict of
interest rise with subsequent generations, and the participation of family members in the management
board decrease, then one would expect to see an increase in the importance of supervisory boards
with each successive generation in order to monitor the management of the firm in accordance with
the agency theory and in order to balance interests (Bammens et al., 2008; Witt, 2008; Achleitner et
al., 2010).
In connection with the advice role of boards, the increasing level of conflict in successive generations
could increase the necessity of a supervisory board (Bammens et al., 2008) which could serve as an
arbitrator. On the other hand, the increase in the management board’s wealth of experience and
organizational knowledge (Astrachan et al., 2002; Miller and Le-Breton-Miller, 2006) with each suc-
cessive generation could lead one to suppose the opposite effect, i.e. a lower need for advice (Bam-
mens et al., 2008). Hence, a generation's need for the advice boards can provide depends on whether
the increasing demand for arbitration and mediation (as a result of the increased level of conflict) is
offset by the decreasing need for experience and knowledge or whether it exceeds it.
Stewardship theory proposes that boards are redundant or even inefficient in family firms as govern-
ance mechanisms that work well with opportunistic managers may not prove effective and may not
motivate stewards (Lee and O'Neill, 2003; Jaskiewicz and Klein, 2007; Pieper et al., 2008). However,
as relations among family members and between family member and the firm begin to weaken, this
argument should become less valid with subsequent generations. In the same way, the increase in
professionalization which accompanies successive generations should also result in the formation of a
supervisory board (Brenes et al., 2011).
In sum, according to the above reasoning the likelihood of having a supervisory board should increase
across generations. This leads to our second hypothesis:
H2: As firm ownership is passed on to successive generations, the firm is more likely to have imple-
mented a supervisory board.
As the need for board control increases over generations, so does the likelihood of outside, non-family
board members as well. External supervisory board members are more suitable than family members
for providing oversight of the management as they are not subject to family pressure and are not as
bound by the social relationships of the family (Westhead and Howorth, 2006; Koeberle-Schmid et al.,

2009). Stewardship theory generally proposes that fewer non-family members should be present on a
supervisory board as there is less of a need for monitoring management due to the aligned goals;
hence the control role of the supervisory board is less necessary (Jaskiewicz and Klein, 2007). How-
ever, with decreasing goal alignment across generations, the percentage of outsiders might increase.
Once again, resource-based theory offers conflicting arguments concerning the need for non-family
supervisory board members. On the one hand, since outside members commonly adopt the role of
arbitrator and mediator in family businesses and are associated with objective and independent sup-
port (Westhead and Howorth, 2006; Brenes et al., 2011), the higher level of conflict associated with
subsequent generations will increase the need for outside arbitration and objectivity, which will result
in a higher number of non-family board members with each successive generation. On the other hand,
due to the accumulation of knowledge and experience gained as the firm passes through generations,
there might be less demand for outside know-how. Based upon this discussion, the following is ex-
pected:
H3: As firm ownership is passed on to successive generations, the percentage of non-family members
on the supervisory board increases.
As family firms pass through successive generations of family management and ownership, their
management culture and leadership style alter. While a paternalistic leadership style and an informal
and subjective management culture are dominant among first generation businesses, it is replaced by
a more formal, objective and professional management and leadership style (Schein, 1983; Dyer,
1988; McConaughy and Phillips, 1999). This "professionalization" should accelerated as the percent-
age of external managers increases with each further generation (Dyer, 1989).
The delegation of the management activities to non-family executives leads to a high degree of formal-
ization (Salvato and Melin, 2008), as "professional managers are required to justify their actions to
shareholders and consequently initiate numerous formal procedures and tools to keep a close eye on
events" (Cromie et al., 1995, p. 12). Since non-family CEOs are not protected by family ties, they are
held more accountable for performance and are more prone to be disciplined for evidence of high
business risk (Gomez-Mejia and Nickel-Nunez, 2001). This too can contribute to an increased level of
formalization, as external managers try to protect themselves through these formal structures. The
establishment of a distinct organizational unit responsible for management accounting and the imple-
mentation of formal management accounting instruments are approaches to establish formalized
management control systems.
Moreover, the disclosure of information is a crucial prerequisite for monitoring. As the demand for
monitoring increases with subsequent generations due to the above-mentioned reasons, the estab-
lishment of a distinct organizational unit responsible for management accounting, whose task is,
among other things, to provide the management with information, will become more likely. In light of
these arguments a fourth hypothesis can be postulated:
H4: As firm ownership is passed on to successive generations, family firms are more likely to have
established a separate organizational unit responsible for management accounting.
The increase in the degree of professionalization with each successive generation can also result in
an increase in the usage of formalized management accounting instruments. Indeed, empirical studies
have shown that professionalization involves the use of more sophisticated financial management
tools (Filbeck and Lee, 2000; Lussier and Sonfield, 2010). In addition, by using management account-
ing instruments, external managers serve as the driving force of professionalization.
It is argued that in later generations family members are more innovative and the driving force behind
entrepreneurial activities (Salvato, 2004; Kellermanns et al., 2008) as they must adapt to changes in
their environment by rejuvenating and reinventing themselves over time if they are to sustain the same
level of growth and financial prosperity as the previous generation (Salvato and Melin, 2008). There-
fore, subsequent generations might be more likely to use innovative or strategic management ac-
counting instruments as well as various detailed plans. Grounded on these assumptions, the following
hypotheses can be postulated:

H5: As firm ownership is passed on to successive generations, family firms rely on strategic manage-
ment accounting instruments to a greater extent.
H6: Concerning business planning (operational planning), as firm ownership is passed on to succes-
sive generations, family firms rely on detailed plans and operational budgets to a greater extent.
3. RESEARCH DESIGN
3.1. Sample
In order to prove these hypotheses a study was carried out within the framework of a much bigger
research project in which the chief executive officers of all 5,406 Austrian enterprises with at least 50
employees were contacted in July and August 2009. The survey instrument employed was a standard-
ized online questionnaire, which had already undergone a pretest. The data of 479 medium-sized and
large firms were included in our study, representing a response rate of 8.9 %. To control for a non-
response bias, the representativeness was tested by comparing the first third of the data set with the
last third with respect to size and classification (family or non-family firms). As no differences were
detected, the representativeness of the study was confirmed. Of the participating firms slightly less
than two thirds (62.8 %) had between 50-249 employees, and a little over one third (37.2 %) had at
least 250 employees.
As mentioned, there is no clear-cut definition of the term ‘family firm’. Thus, the operationalization of
the concept is not a simple task. As the decision of which definition of family firm should be adopted
will crucially affect the results of the empirical study (Villalonga and Amit, 2006; Rutherford et al.,
2008), this study has taken two approaches to defining the term. From the point of view of self-
perception we have classified a firm as a family firm when the respondent provided an answer to the
question ‘Which generation currently leads your firm?’; as it can be assumed that only firms that
regard themselves as family firms would classify themselves in such a way. A second approach to
delineating the concept can be found in the dimension of power which, according to the F-PEC scale,
focuses on the fact that the family will exert substantial influence on the firm; this method of distin-
guishing a family firm from a non-family firm (SFI – substantial family influence) was used in order to
enable a comparison between our results and the results of other empirical studies based on the F-
PEC definition of ‘family firm’. SFI measures the strength of family influence, construed as the family’s
share of equity in the firm as well its influence through governance boards and management. Moreo-
ver, some shares must be held by the family in order for the firm to be considered a family business.
It is important to note that a significantly larger number of companies classify themselves as family
firms (n = 304 or 63.5 %) than the number arrived at by the SFI method (n = 199 or 46.1 % of the 432
firms for which this analysis was possible). As explained above, the SFI method represents a more
restrictive and three-dimensional method of classification, due to this it is apparent that some compa-
nies have been excluded from the study sample which would have otherwise classified themselves as
family firms.
3.2. Methodology
In addition to descriptive statistics we have also employed classical statistical testing for our data
analysis. To test our hypotheses we applied either the chi-squared test or Fisher’s exact test at a
significance level of α = 0.05. The usual as well as special assumptions (for the chi-squared test
expected cell count is 5 or more in at least 80 % of cells and the minimum expected count is 1 or
more) were always fulfilled. To compare the mean number of instruments in different groups, first a
Kolmogorov-Smirnov test was applied to ensure normal distribution.
As all tests for normal distribution were significant (and therefore normal distribution was not con-
firmed), differences in the mean were analysed with a Mann-Whitney U test (two means), a Kruskal-
Wallis test (more than two means), or a Jonckheere-Terpstra test (testing an increasing trend), again
at a significance level of α = 0.05 (Duller, 2008).
4. RESULTS AND IMPLICATIONS
4.1. Non-family executives
If the self-perception of the firms on which the study was conducted is used as the main criterion in
delineating the concept of ‘family firm’, then, depending on the generation, one obtains the results

presented in Table 1 concerning the percentage of non-family managers in the management board.
We will first present the results of the statistical evaluation based on the self-perception classification
of family firm and then we will go on to explain the results of an operationalization using SFI.
In general the development of the percentage of non-family executives is U-shaped. While the per-
centage of non-family executives in the first generation constitutes 68.1 % of the management board,
it decreases in subsequent generations (2
nd
, 3
rd
, or 4
th
generation), which apparently conflicts with our
first hypothesis (H1). Even though the percentage of external managers fluctuates over the second,
third, and fourth generation, revealing a zigzag development, the intersecting confidence intervals
indicate that the groups are not without overlap. Starting with the fifth generation the percentage of
non-family managers once again increases markedly and even exceeds the level of the founding
generation. A Kruskal-Wallis test is significant at the 1 % level (p = 0.000), indicating significant differ-
ences between the generations. However, when testing for an increasing trend, the Jonckheere-
Terpstra test revealed no significance (p = 0.804). As such, an increase in the percentage of non-
family managers over successive generations has not been proven.
TABLE 1: PERCENTAGE OF NON-FAMILY EXECUTIVES ACCORDING TO GENERATION
Generation n Mean 95 %-confidence interval (mean)
Lower Bound Upper Bound
1
st
(founder) 85 68.1 % 58.6 % 77.6 %
2
nd
94 50.5 % 31.9 % 49.1 %
3
rd
53 51.4 % 39.6 % 63.2 %
4
th
18 30.3 % 15.4 % 45.1 %
5
th
and subsequent 44 80.1 % 69.1 % 91.1 %
Total 294 55.7 % 50.7 % 60.8 %
Using the SFI for family firm operationalization we arrived at the following results: The percentage of
non-family executives in the first generation was 32.6 %, in the second generation 23.4 %, in the third
generation 34.5 %, in the fourth generation 30.3 % and in the fifth and subsequent generations
46.7 %. According to the Kruskal-Wallis test there were no significant differences among the genera-
tions (p = 0.248) in this subgroup. The Jonckheere-Terpstra test was also not significant (p = 0.156).
Therefore, H1 is only partially supported. Our results indicate that there is a correlation between the
percentage of non-executive managers and the incumbent generation. However, it turned out differ-
ently than expected. The surprisingly high percentage of external managers in the management board
of first generation firms can be explained by the resource-based view. Apparently the founder does not
have the capacity to take on all the management tasks necessary and thus must rely on the support of
external managers. This argumentation is also backed by the findings of Villalonga and Amit (2006).
While they found evidence for valuable skills the founders bring to their firms, they could not detect
differences in the added value when the founders acted as chairman or CEO. They consider founders
as inspiring leaders, great visionaries, or exceptionally talented scientists who "may not – indeed,
need not – be good managers" (Villalonga and Amit, 2006, p. 404). Following this line of reasoning the
founder has a high demand for external management know-how. This demand can be met by hiring
non-family executives.
As the subsequent generations (2
nd
, 3
rd
, or 4
th
generation) take over the business, the family might
have already become larger. Thus, on the one hand, in line with stewardship theory, the family's
cohesiveness grows and more family members are able and willing to become executives. On the
other hand, as proposed, there might be a lower level of conflict in these generations, which results in
a lower or complete lack of demand for the arbitrator-role of non-family executives. As a result of the
increased knowledge base of the firm and its family affiliates, there is less need for non-family execu-
tives' experience. Consequently, the two conflicting implications of the resource-based view neither
negate each other nor do they result in a predominant need for remediation. On the contrary, the
evidence suggests that the rise in organizational knowledge is a crucial reason for the lack of increase
in the percentage of external managers. Obviously, with the 5
th
generation (later than in comparable
studies) this cohesiveness starts to fall apart and family members may withdraw themselves from

management because of a higher level of conflict (as suggested by theory and other empirical sur-
veys), leading to a higher percentage of external executives than in the founding generation.
4.2. Supervisory board and its percentage of non-family members
Table 2 presents the percentage of firms within each generation that has a supervisory board, using
the classification of family firms based on self-perception. While the first generation has implemented
a supervisory board in 18.4 % of the cases, the percentage increases to 50 % by the fifth generation.
Here again the percentages concerning the existence of a supervisory board vary between the second
(27.8 %), third (17.0 %) and fourth generation (15.8 %), which once again indicates a zigzag develop-
ment. However, the intersecting confidence intervals again demonstrate that the groups of the second,
third, and fourth generation are not without overlap. Starting with the fifth generation the percentage of
supervisory boards’ increases markedly and again clearly exceeds the level of the founding genera-
tion. A Kruskal-Wallis test is significant at the 1 % level (p = 0.000) indicating significant differences
between the generations. Since the Jonckheere-Terpstra test was also significant at the 5 % level (p =
0.009), indicating an increasing trend as generation increases, H2 is supported.
TABLE 2: SUPERVISORY BOARD AMONG GENERATIONS
Generation n Mean 95 %-confidence interval (mean)
Lower Bound Upper Bound
1
st
(founder) 87 18.4 % 10.1 % 26.7 %
2
nd
97 27.8 % 18.8 % 36.9 %
3
rd
53 17.0 % 6.5 % 27.4 %
4
th
19 15.8 % -2.3 % 33.9 %
5
th
and subsequent 48 50.0 % 35.3 % 64.7 %
Total 304 26.0 % 21.0 % 30.9 %
When using the SFI for family firm operationalization, a supervisory board was present in 5.1 % of all
cases in the first generation, in 22.9 % of the cases in the second generation, in 12.8 % of the cases in
the third generation, in 16.7 % of the cases in the fourth generation, and in 29.4 % of the cases in the
fifth and subsequent generations. Neither the Kruskal-Wallis test (p = 0.095) nor the Jonckheere-
Terpstra test was significant (p = 0.149). However, if only the differences between the founding gener-
ation and all subsequent generations are analyzed, significant differences can be seen in the percent-
age of firms that have implemented a supervisory board (5.1 % in the founding generation versus
20.1 % in subsequent generations; the chi-squared test is significant at the level of 5 % (p = 0.017))
and in the Kruskal-Wallis test (p = 0.037). The Jonkheere-Terpstra test (p = 0.027) also reveals a
significant increasing trend. In light of this, the lack of significance found in an analysis conducted
across generations could be explained by the more restrictive classification inherent in the SFI meth-
od, which results in a very small number of companies represented in the various generation groups,
especially in the fourth, fifth, and all subsequent groups. Analyzing a sample of Spanish family firms,
Suáre and Santana-Martín (2004) only differentiated between first, second and subsequent (third and
subsequent) generations. In this way, they found evidence that with each successive generation, the
probability that the firm has implemented a supervisory board increases.
As previously mentioned, much of the literature on the transition of family firms has focused on the
transition from the first to the second generation, as this succession process is apparently managed
with extreme difficulty (Lussier and Sonfield, 2010). The results of our study could be seen as provid-
ing support for this line of reasoning as there is a significant increase in the prevalence of a superviso-
ry board from the first to the second generation. Obviously, the advice provided by a supervisory
board during and after this transition phase is extremely welcomed in the second generation but less
necessary as the business moves into its third and fourth generation. However, starting in the fifth and
subsequent generations a higher divergence of goals and incentives among family members (as
argued by agency theory) as well as the weakening of family ties (as supposed by stewardship theory)
might lead to an increased likelihood of the implementation of a supervisory board.
Table 3 presents the results concerning the percentage of non-family members in the supervisory
board, using the classification based on self-perception. Once again, the Kruskal-Wallis test revealed

significant differences among the generations (p = 0.006). When founding generations had a supervi-
sory board, it was completely made up of non-family executives. Thus, with subsequent generations,
the percentage of non-family members fell to 82.0 % in the second, to 77.0 % in the third, and 61.1 %
in the fourth generation, rising again to 92.4 % in the fifth and subsequent generations. The percent-
ages show a marked divergence due to the low numbers allocated to the cells in the third and fourth
generation. As indicated by the percentages among the generations and supported by the Jonkheere-
Terpstra test, the percentage of non-family members in the supervisory board does not increase as
the firm is passed on to successive generations. Therefore, hypothesis 3 is rejected.
TABLE 3: PERCENTAGE OF NON-FAMILY MEMBERS ON THE SUPERVISORY BOARD
Generation n Mean 95%-confidence interval (mean)
Lower Bound Upper Bound
1
st
(founder) 16 100.0 % 100.0 % 100.0 %
2
nd
26 82.0 % 70.8 % 93.2 %
3
rd
9 77.0 % 57.9 % 96.1 %
4
th
3 61.1 % -72.0 % 194.2 %
5
th
and subsequent 24 92.4 % 85.6 % 99.2 %
Total 78 87.5 % 82.2 % 92.2 %
Similar but slightly different results were found when using the SFI operationalization. The average
percentage of non-family members serving on supervisory boards amounted to 100 % in the first
generation, 72.1 % in the second, 58.6 % in the third, and 76.7 % in the fifth and all subsequent gen-
erations. With the exception of those of the first generation, the confidence intervals are not without
overlap. Neither the Kruskal-Wallis test (p = 0.268) nor the Jonckheere-Terpstra test was significant
(p = 0.253).
Our results for hypothesis 3 indicate a U-shaped or convex relationship between generational succes-
sion and the percentage of non-family members serving on the supervisory board and thus confirm the
results of Bammens et al.’s (2008) study of a Flemish family firm sample (however, they only differen-
tiate between first, second, and ‘third and subsequent’ generations). As they found evidence that the
likelihood of having a non-family board member is fully dependent on the need for board advice, one
can assume that, as the greatest amount of organizational knowledge is built up in the first generation
(Astrachan et al., 2002), second and subsequent generations benefit from this increased knowledge
pool and do not need as much complementary outside knowledge as the founding generation did.
However, from the fifth generation onwards an increased demand for outside arbitration offered by
non-family board members arises, which results in a more pronounced need for non-family members
on the supervisory board. It is interesting to note that Bammens et al. (2008) expected to see this
increased demand for outside arbitration already at the beginning of the third generation. Though the
more fine-grained breaking down of family firms following the second generation indicates a U-shaped
development, it also reveals that only in later generations does the higher need for support in media-
tion become relevant. Another explanation, in line with the illustration provided by Voordeckers et al.
(2007), might be that, while an increased knowledge base leads to less demand for advice during the
second, third and fourth generation, it increases the awareness of the value (apart from mediation)
non-family board members bring to the firm among later generations. Moreover, in later generations
the increasing professionalization should lead to a higher percentage of external managers serving on
the supervisory board.
Our results might also be explained by a family's desire to retain its familial character. Consequently,
non-family members are only employed when few family members are available, as it is in the found-
ing generation as well as in later generations (starting with the fifth generation in our sample) when
family members withdraw from the business due to a weakening of family ties and personal attach-
ment.
4.3. Management accounting unit
With respect to the institutionalization of a separate organizational unit for management accounting we
derived the results shown in table 4 from the family firms that regarded themselves as family busi-

nesses. While we found significant differences between the generations using the Kruskal-Wallis test
(p = 0.003), we were not able to confirm a rising trend with the Jonkheere-Terpstra test (p = 0.739).
TABLE 4: MANAGEMENT ACCOUNTING UNIT AMONG GENERATIONS
Generation n Mean 95 %-confidence interval (mean)
Lower Bound Upper Bound
1
st
(founder) 86 51.2 % 40.4 % 61.9 %
2
nd
97 53.6 % 43.5 % 63.7 %
3
rd
51 33.3 % 19.9 % 46.7 %
4
th
18 22.2 % 1.0 % 43.5 %
5
th
and subsequent 48 64.6 % 50.6 % 78.6 %
Total 300 49.3 % 43.6 % 55.0 %
Similar results were found when using the SFI operationalization. The percentage of firms with an
distinct and separate organizational unit responsible for management accounting amounts to 38.5 %
in the first generation, 48.6 % in the second generation, 26.3 % in the third generation, 22.3 % in the
fourth generation, and 58.8 % in the fifth and all subsequent generations. While the Kruskal-Wallis test
revealed significant differences among the generations (p = 0.041), we were unable to confirm a rising
trend with the Jonkheere-Terpstra test (p = 0.559).
Therefore, H4 is only partially supported. Once again, our results reveal a U-shape curve with some
zigzag development during the phases of the second, third, and fourth generation. The increased
implementation of a separate organizational unit for management accounting goes hand in hand with
a higher percentage of non-family executives and a higher percentage of external board members.
Therefore, both of these factors might act as drivers for the institutionalization of a separate manage-
ment accounting unit.
The high degree of institutionalization of a management accounting unit in the founding generation,
which stands in direct contrast with our hypothesis, might be explained by the fact that external pro-
viders of capital such as banks, business angels or venture capital funds require the founders to
professionalize their business operations (Pérez de Lema and Duréndez, 2007). In the case of man-
agement accounting this means drawing up appropriate plans and implementing management ac-
counting systems (see Davila and Foster, 2007 for the case of venture capitalists) in order to deal with
the high level of information asymmetry that characterizes entrepreneurial finance situations. As the
firm develops, this asymmetry of information becomes less pronounced, thereby leading to a lower
importance of management accounting activities, activities which may be unpopular to begin with. As
agency costs are expected to increase again in later generations because of a higher potential of
conflict among family members and between the family and other shareholders, the higher percentage
of companies in the hands of later generations that have implemented a separate management ac-
counting unit confirms our assumptions that this unit is necessary in order to provide the information
required for efficient control.
4.4. Management accounting tools
To evaluate H5 we asked the survey participants to indicate which of the following strategic manage-
ment accounting instruments are used in their firm: performance measurement system, sensitivity
analysis, SWOT analysis, competitor analysis, benchmarking, industry structure analysis, ABC analy-
sis, cost-benefit analysis, product life cycle analysis, portfolio analysis, target costing, scenario plan-
ning technique, real options model, experience curve analysis, value chain analysis, shareholder value
analysis, capital budgeting techniques, gap analysis, PIMS, and balanced scorecard. In the next step,
we checked if there were significant differences among the generations in the adoption of these in-
struments in general (analyzing the number of instruments used) and in the implementation of every
particular instrument. As the number of instruments used did not exhibit a normal distribution we
applied the Kruskal-Wallis test, which did not reveal significant differences among the generations, nor
did we find an increased trend in the number of strategic management accounting instruments used
by applying the Jonckheere-Terpstra test. These results were valid independent of the method of
operationalization of family business. In order to detect differences in the particular instruments em-

ployed we distinguished between founding and subsequent generations (thereby preventing the
number of cases in the particular subgroups from being too small and not allowing proper evaluation)
and analyzed whether the implementation rate differed. Significant differences were only found for the
instruments shown in table 5.
TABLE 5: USE OF SELECTED STRATEGIC MANAGEMENT ACCOUNTING INSTRUMENTS
Strategic management
accounting instrument
family businesses based
on self-perception family businesses based on SFI
rate of implementation p-
value
(Fisher’s
test)
rate of implementation p-
value
(Fisher’s
test)
founder
generation
subsequent
generation
founder
generation
subsequent
generation
cost-benefit analysis 14.5 % 5.9 % 0.018 8.3 % 3.5 % 0.207
experience curve analysis 21.7 % 11.2 % 0.019 22.2 % 10.6 % 0.064
shareholder value analysis
10.8 % 4.4 % 0.042 5.6 % 2.1 % 0.269
balanced scorecard 34.9 % 19.5 % 0.005 25.0 % 20.6 % 0.355
Contrary to our hypothesis and previous studies, with respect to the significant differences found
between the founding generation and all subsequent generations, family businesses of the first gener-
ation made significantly more use of strategic management accounting tools. Thus, H5 is refuted. The
supposed higher degree of innovation in later generations was not evident with respect to the strategic
management accounting instruments. On the contrary, the founders seemed significantly more open
to the use of strategic management accounting instruments. A possible explanation for the decrease
found in subsequent generations could be the fact that the expected professionalization accompanies
a more critical attitude towards management accounting instruments from the point of view of
cost/benefit and, as a result, firms do away with instruments which do not fulfill this criterion in favor of
standard instruments. Just such a streamlining of management accounting instruments is currently
noticeable in many industries and can be seen, for instance, in the current discussion regarding a
more efficient form of budgeting.
In order to evaluate H6, concerning whether there is an increasing trend among generations to adopt
detailed plans and operational budgets, we followed the same procedure as described above for
strategic management accounting instruments. First, we asked the survey participants to indicate
which of the following plans they use: sales/marketing plan, product portfolio plan, procure-
ment/purchasing plan, profit and loss forecast and fiscal plan, calculative profit and loss forecast,
budgeted balance sheet, liquidity plan, production plan, inventory plan, personnel plan, R&D plan, and
miscellaneous plans. Second, we investigated if there were significant differences among the genera-
tions in the use of these plans, As the number of instruments used did not exhibit normal distribution,
we applied the Kruskal-Wallis test, which did not reveal significant differences among the generations,
nor did we found an increased trend by applying the Jonckheere-Terpstra test, independent of which
operationalization of a family business was used. In order to detect differences in the particular in-
struments implemented, we grouped the family firms into two categories, founder and subsequent
generations and analyzed whether the implementation rate differed. Significant differences were only
found for the budgeted balance sheet as well as the production plan among family firms based on self-
perception (see table 6).
Once again, with the exception of the production plan, the product portfolio plan and the R&D plan,
operational plans are relied upon more among founding generation firms. While this stands in contrast
to our proposed hypothesis, Jorissen et al. (2001) using a sample of Belgian wholesale companies,
found that the first-generation is more aware of the usefulness of planning than later generations. In
Austria, the significantly higher use of the budgeted balance sheet among founders might be ex-
plained by the fact that this instrument is encouraged within the process of forming a company and the
process of applying for a business loan.
Only for the production plan did we find a significantly higher adoption rate among subsequent genera-
tions (for the sub-sample based on the self-perception definition of family firm), thereby confirming our
hypothesis that professionalization is accompanied by a higher degree of formalization. While not
significant, R&D plans are used to a higher extent among subsequent generations as well. This might
be in line with the presumed higher innovativeness among later generation family members and their
necessity to continuously adapt to changes in order to stay competitive.

TABLE 6: IMPLEMENTATION OF OPERATIONAL PLANS
Type of plan
family businesses based
on self-perception family businesses based on SFI
rate of implementation p-
value
(Fisher’s
test)
rate of implementation p-
value
(Fisher’s
test)
founder
generation
subsequent
generation
founder
generation
subsequent
generation
sales/marketing plan 88.3 % 85.2 % 0.324 87.5 % 84.4 % 0.453
product portfolio plan 26.0 % 32.1 % 0.198 28.1 % 31.9 % 0.428
procurement/
purchasing plan 49.4 % 40.8 % 0.126 50.0 % 40.0 % 0.202
profit and loss forecast /
fiscal plan 64.9 % 57.1 % 0.148 59.4 % 54.1 % 0.367
calculative profit and
loss forecast 40.3 % 39.3 % 0.494 34.4 % 36.3 % 0.505
budgeted balance sheet 64.9 % 49.5 % 0.015 53.1 % 43.0 % 0.200
liquidity plan 80.5 % 73.0 % 0.125 78.1 % 70.4 % 0.259
production plan 28.6 % 41.3 % 0.033 34.4 % 41.5 % 0.298
inventory plan 36.4 % 32.1 % 0.299 71.1 % 67.2 % 0.071
personnel plan 71.4 % 61.2 % 0.074 62.5 % 57.0 % 0.360
R&D plan 19.5 % 22.4 % 0.359 15.6 % 20.7 % 0.352
5. CONCLUSION
The purpose of this study was to shed light on the impact of a firm's incumbent generation on its
governance mechanisms, the institutionalization of a separate organizational unit for management
accounting, and the management accounting practices employed. Concerning governance mecha-
nisms, we found that with each successive generation the likelihood that the company has implement-
ed a supervisory board increases. Unfortunately, we were unable to identify a clear trend with respect
to the percentage of non-family managers and members of the supervisory board. It would appear that
the percentages of non-family executives and non-family board members takes the general form of a
U-shaped curve, albeit with clear peaks and valleys between the second, third, and fourth generation.
This U-shaped trend might be explained in the following way: in the first generation the founder does
not have access to sufficient resources and is thus obliged to resort to external managers and external
members on the supervisory board to a greater extent – assuming a supervisory board has been
implemented. In subsequent generations (second, third, and fourth generations) the firm places great-
er importance on the qualities of a family firm and, due to altruistic motives, attempts to fill the appro-
priate positions with family members. It is only in later generations that external managers and mem-
bers of the supervisory board come into play again, which can stem from the dwindling interest of
family members in the firm as well as a weakening attachment to it. Alternatively, it could be a result of
a higher potential for conflict and the attendant necessity for stronger control and mediation from
outside.
With respect to the institutionalization of a separate organizational unit responsible for management
accounting, a similar – though not always clearly discernible – U-shaped development was identified,
indicating that founding generations might be more aware of the usefulness and importance of man-
agement accounting than those immediately following them. It is only in the fifth and subsequent
generations that we find a clearly higher number of independent organizational units devoted to man-
agement accounting. The affinity the founding generation exhibits for management accounting instru-
ments is reflected, upon further analysis, in the strategic instruments they employ as well as the op-
erational plans they use. Although the results vary and are barely significant, the founding generation
is more likely to employ some strategic instruments and operational plans. Only one operational plan,
namely the production plan, was represented significantly more often in subsequent generations.
Our study contributes to the literature by analyzing the generational impact on governance and man-
agement accounting using a broader generational scale. In contrast to most other studies, which only
differentiate between three categories, namely ‘first’, ‘second’, and ‘third and subsequent generations’,
we also analysed the third and fourth generation separately, revealing different and sometimes con-
flicting findings to the results of those other studies. Secondly, our study provided further insights into
the widely neglected research area of management accounting in family firms. Thirdly, while most of

the research on generational issues has been limited to the USA and the UK, our survey used an
Austrian data test and therefore contributes to the growing body of European analyses (e.g. Suáre and
Santana-Martín, 2004; Voordeckers et al., 2007; Bammens et al., 2008) that focus on governance
aspects in civil-law countries. Finally, we analyzed the generational influences on governance and
management accounting from various theoretical angles. As our results could not be explained by one
single theory, our survey confirms the importance of broadening theoretical frameworks in family
business research.
Our study has some limitations that should be acknowledged and addressed in future research. First
of all, we examined generational differences by asking the participating companies by which genera-
tion their firm is led. As we discovered major differences among generations, it would be necessary to
use a more fine-grained scale in the classification of generations, which would make it possible to
control for hybrid forms (multi-generational firms with members from more than one generation).
Moreover, generations, as well as family members within a particular generation, might differ in their
personal characteristics, attitudes, goals, and values. Therefore, future research should analyze these
differences in more detail, either through qualitative studies, or by incorporating direct measurements
of these attributes in quantitative research. Thirdly, we did not link our results to performance
measures. Future research should address this shortcoming in order to answer the question of wheth-
er there are different optimal governance structures and management accounting practices among
generations that can contribute to a company's success. Lastly, as suggested by Hoy (2003), the
survey should be expanded into a cross-cultural study in order to further investigate institutional and
legal differences and their consequences on governance structures and management accounting.
Doing so would result in a larger sample, which would be make it possible to control for effects of size,
something we were unable to do due to the relatively small numbers in some generation clusters that
prevented a thorough evaluation.
REFERENCES
Achleitner, Ann-Kristin, Bock, Carolin, Braun, Reiner, Schraml, Stephanie and Welter, Juliane, “Goal
Structures in Family Firms: Empirical Evidence on the Relationship between Firm and Family
Goals“, CEFS Working Paper Series, Number 5, Pages 1-28, 2010.
Anderson, Ronald C., Mansi, Sattar A. and Reeb, David M., “Founding family ownership and the
agency cost of debt”, Journal of Financial Economics, Volume 68, Number 2, Pages 263-285,
2003.
Anderson, Ronald C. and Reeb, David M., “Founding family ownership and firm performance: Evi-
dence from the S&P 5000”, Journal of Finance, Volume 58, Number 3, Pages 1301-1328, 2003.
Astrachan, Joseph H., “Commentary on the special issue: the emergence of a field”, Journal of Busi-
ness Venturing, Volume 18, Number 3, Pages 567-572, 2003.
Astrachan, Jospeh H., Klein, Sabine B. and Smyrnios, Kosmas X., “The F-PEC Scale of family influ-
ence: A proposal for solving the family business definition problem.”, Family Business Review, Vol-
ume 15, Number 1, Pages 45-58, 2002.
Astrachan, Joseph H. and Shanker, Melissa C., “Family Businesses’ Contribution to the U.S. Econo-
my: A Closer Look”, Family Business Review, Volume 16, Number 3, Pages 211-219, 2003.
Bammens, Yannick, Voordeckers, Wim and Van Gils, Anita, “Board of directors in family firms: a
generational perspective”, Small Business Economics, Volume 31, Number 2, Pages 163-180,
2008.
Barney, Jay, “Firm Resources and Sustained Competitive Advantage”, Journal of Management, Vol-
ume 17, Pages 99-120, 1991.
Bartholomeusz, Simon and Tanewski, George A., “The Relationship between Family Firms and Cor-
porate Governance”, Journal of Small Business Management, Volume 44, Number 2, Pages 245-
267, 2006.
Beckhard, Richard and Dyer, Gibb W., “Managing Continuity in the Family-Owned Business”, Ameri-
can Management Association, Volume 60, Number 1, Pages 5-12, 1983.
Blumentritt, Timothy, “The Relationship Between Boards and Planning in Family Businesses”, Family
Business Review, Volume 19, Number 1, Pages 65-72, 2006.
Brenes, Esteban R., Madrigal, Kryssia and Requena, Bernardo, “Corporate Governance and Family
Business Performance”, Journal of Business Research, Volume 64, Number 3, Pages 280-285,
2011.
Chrisman, James J., Chua, Jess H., Kellermanns, Franz W. and Chang, Erick P.C., “Are family man-
agers agents or stewards? An exploratory study in privately held family firms”, Journal of Business
Research, Volume 60, Number 10, Pages 1030-1038, 2007.

Chrisman, James J., Chua, Jess H. and Sharma, Pramodita, “Current trends and future directions in
family business management studies: Toward a theory of the family firm”, Cole Whiteman Paper
Series, http://www.usasbe.org/knowledge/whitepapers/chrisman2003.pdf, 2003.
Chrisman, James J., Chua, Jess H., and Sharma, Pramodita, “Trends and Directions in the Develop-
ment of a Strategic Management Theory of the Family Firm”, Entrepreneurship Theory & Practice,
Volume 29, Number 5, Pages 555-576, 2005a.
Chrisman, James J., Chua, Jess H. and Steier, Lloyd, “Sources and Consequences of Distinctive
Familiness: An Introduction”, Entrepreneurship Theory & Practice, Volume 29, Number 3, Pages
237-247, 2005b.
Chrisman, James J., Steier, Lloyd P. and Chua, Jess H., “Personalism, Particularism, and the Com-
petitive Behaviors and Advantages of Family Firms: An Introduction”, Entrepreneurship Theory &
Practice, Volume 30, Number 6, Pages 719-729, 2006.
Chua, Jess H., Chrisman, James J., Sharma, Pramodita, “Defining the Family Business by Behavior”,
Entrepreneurship Theory & Practice, Volume 23, Number 4, Pages 19-39, 1999.
Cliff, Jennifer, E. and Jennings, Devereaux P., “Commentary on the Multidimensional Degree of
Family Influence Construct and the F-PEC Measurement Instrument”, Entrepreneurship Theory &
Practice, Volume 29, Number 3, Pages 341-347, 2005.
Corbetta, Guido and Salvato, Carlo A., “The Board of Directors in Family Fiirms: One Size Fits All?”,
Family Business Review, Volume 17, Number 2, Pages 119-134, 2004a.
Corbetta, Guido and Salvato, Carlo, ”Self-Serving or Self-Actualizing? Models of Man and Agency
Costs in Different Types of Family Firms”, Entrepreneurship Theory & Practice, Volume 28, Num-
ber 4, Pages 355-362, 2004b.
Cromie, Stanley, Stephenson, Ben and Monteith, David. “The Management of Family Firms: An Em-
pirical Investigation”, International Small Business Journal, Volume 13, Number 4, Pages 11-34,
1995.
Davis, Peter S. and Harveston, Paula D., “In the Founder’s Shadow: Conflict in Family Firms”, Family
Business Review, Volume 12, Number 4, Pages 311-323, 1999.
Davis, James H., Schoorman, David F. and Donaldson, Lex, “Toward a Stewardship Theory of Man-
agement”, Academy of Management Review, Volume 22, Number 1, Pages 20-47, 1997.
Davis, John and Tagiuri, Renato, “The Influence of Life Stage on Father-Son Work Relationships in
Family Companies”, Family Business Review, Volume 11, Number 1, Pages 47-74, 1989.
Debicki, Bart J., Matherne, Curtis F., Kellermanns, Franz W. and Chrisman, James J., “Family Busi-
ness Research in the New Millennium: An Overview of the Who, the Where, the What and the
Why”, Family Business Review, Volume 22, Number 2, Pages 151-166, 2009.
Degadt, Jan, “Business Family and Family Business: Complementary and Conflicting Values”, Journal
of Enterprising Culture, Volume 11, Number 4, Pages 379-397, 2003.
Davila, Antonio and Foster, George, “Management Control Systems in Early-Stage Startup Compa-
nies”, The Accounting Review, Volume 82, Number 4, Pages 907-937, 2007.
Duller, Christine, “Einführung in die nichtparametrische Statistik mit SAS und R”, Physica, Heidelberg,
2008.
Dyer, Gibb W. Jr., “The Family: The Missing Variable in Organizational Research”, Entrepreneurship
Theory & Practice, Volume 27, Number 4, Pages 401-416, 2003.
Dyer, Gibb W. Jr., “Integrating professional management into a family owned business”, Family Busi-
ness Review, Volume 2, Number 3, Pages 221–235, 1989.
Dyer, Gibb W. Jr., “Culture and Continuity in Family Firms”, Family Business Review, Volume 1,
Number 1, Pages 37–50, 1988.
Eisenhardt, Kathleen M., “Agency Theory: An Assessment and Review”, Academy of Management
Review, Volume 14, Number 1, Pages 57-74, 1989.
Filbeck, Greg and Lee, Sharon, “Financial Management Techniques in Family Businesses”, Family
Business Review, Volume 13, Number 3, Pages 201-216, 2000.
Forbes, Daniel P. and Milliken, Frances J., “Cognition and Corporate Governance: Understanding
Boards of Directors as Strategic Decision-Making Groups”, Academy of Management Review, Vol-
ume 24, Number 3, Pages 489-505, 1999.
Gallo, Miguel Á., Tàpies, Josep, and Cappuyns, Kristin, “Comparison of Family and Nonfamily Busi-
ness: Financial Logic and Personal Preferences”, Family Business Review, Volume 17, Number 4,
Pages 303-318, 2004.
Gomez-Mejia, Luis R. and Nickel-Nunez, Manuel, “The Role of Family Ties in Agency Contracts”,
Academy of Management Journal, Volume 44, Number 1, Pages 81-95, 2001.

Gudmundson, Donald, Hartman, Alan E. and Tower, Burk C., “Strategic Orientation: Differences
between Family and Nonfamily Firms”, Family Business Review, Volume 12, Number 1, Pages 27-
39, 1999.
Habbershon, Timothy G., Williams, Mary and MacMillan, Ian C., “A unified systems perspective of
family firm performance”, Journal of Business Venturing, Volume 18, Number 4, Pages 451-465,
2003.
Habbershon, Timothy G. and Williams, Mary L., “A Resource-Based Framework for Assessing the
Strategic Advantages of Family Firms”, Family Business Review, Volume 12, Number 1, Pages 1-
26, 1999.
Hack, Andreas, "Sind Familienunternehmen anders? Eine kritische Bestandsaufnahme des aktuellen
Forschungsstands", Zeitschrift für Betriebswirtschaft, Volume 79, Special Issue 2, Pages 1-29,
2009.
Heck, Romana K.Z., Hoy, Frank, Poutziouris, Panikkos Z. and Steier, Lloyd P., “Emerging Paths of
Family Entrepreneurship Research”, Journal of Small Business Management, Volume 46, Number
3, Pages 317-330, 2008.
Heck, Romana K. Z. and Trent, Elizabeth S., “The Prevalence of Family Business from a Household
Sample”, Family Business Review, Volume 12, Number 3, Pages 209-219, 1999.
Hillman, Amy J. and Dalziel, Thomas, ”Boards of Directors and Firm Performance: Integrating Agency
and Resource Dependence Perspectives”, Academy of Management Review, Volume 28, Number
3, Pages 383-396, 2003.
Hillman, Amy J., Cannella, Albert A. and Paetzold, Ramona L., ”The Resource Dependence Role of
Corporate Directors: Strategic Adaption of Board Composition in Response to Environmental
Change”, Journal of Management Studies, Volume 37, Number 2, Pages 235-255, 2000.
Holt, Daniel T., Rutherford, Matthew, W. and Kuratko, Donald F., ”Advancing the Field of Family
Business Research: Further Testing the Measurement Properties of the F-PEC”, Family Business
Review, Volume 23, Number 1, Pages 76-88, 2010.
Hoy, Frank, “Legitimizing Family Business Scholarship in Organizational Research and Education”,
Entrepreneurship Theory & Practice Journal, Volume 27, Number 4, Pages 417-422, 2003.
Ibrahim, Nabil A., Angelidis, John P. and Parsa, Faramarz, “Strategic Management of Family Busi-
nesses: Current Findings and Directions for Future Research”, International Journal of Manage-
ment, Volume 25, Number 1, Pages 95-110, 2008.
Jacobides, Michael G. and Croson, David C., ”Information Policy and Shaping the Value of Agency
Relationships”, Academy of Management Review, Volume 36, Number 2, Pages 202-223, 2001.
Jaskiewicz, Peter and Klein, Sabine B., “The impact of goal alignment on board composition and
board size in family businesses”, Journal of Business Research, Volume 60, Number 10, Pages
1080-1089, 2007.
Jensen, Michael C. and Meckling, William H., „Theory of the Firm: Managerial Behavior, Agency Costs
and Ownership Structure”, Journal of Financial Economics, Volume 3, Number 4, Pages 305-360,
1976.
Jorissen, Ann, Laveren, Eddy, Martens, Rudy and Reheul, Anne-Mie, Planning and control practices
in family firms versus non-family firms: empirical evidence from SME’s in the wholesale sector,
Working Paper, 2001; http://www.tew.ua.ac.be/download.php?fi_fid=75.
Karra, Neri, Tracey, Paul and Phillips, Nelson, “Altruism and Agency in the Family Firm: Exploring the
Role of Family, Kinship and Ethnicity”, Entrepreneurship Theory & Practice, Volume 30, Number 6,
Pages 861-877, 2006.
Kellermanns, Franz W., Eddleston, Kimberly A., Barnett, Tim and Pearson, Allison, “An Exploratory
Study of Family Member Characteristics and Involvement: Effects on Entrepreneurial Behavior in
the Family Firm”, Family Business Review, Volume 21, Number 1, Pages 1-14, 2008.
Klein, Sabine B., “Beiräte in Familienunternehmen – Zwischen Beratung und Kontrolle”, Zeitschrift für
KMU and Entrepreneurship, Volume 53, Number 3, Pages 185-207, 2005.
Klein, Sabine B., Astrachan, Joseph H., and Smyrnios, Kosmas X., „The F-PEC Scale of Family
Influence: A Proposal for Solving the Family Business Definition Problem“, Family Business Re-
view, Volume 15, Number 1, Pages 45-58, 2002.
Koeberle-Schmid, Alexander, Brockhoff, Klaus and Witt, Peter, “Performanceimplikationen von Auf-
sichtsgremien in deutschen Familienunternehmen“, Zeitschrift für Betriebswirtschaft, Volume 79,
Special Issue 2, Pages 83-111, 2009.
Lane, Suzanne, Astrachan, Joseph, Keyt, Andrew and McMillan, Kristi, “Guidelines for Family Busi-
ness Boards of Directors”, Family Business Review, Volume 19, Number 2, Pages 147-167, 2006.
Lansberg, Ivan, Perrow, Edith L. and Rogolsky, Sharon, “Family Business as an Emerging Field”,
Family Business Review, Volume 1, Number 1, Pages 1-8, 1988.

Le Breton-Miller, Isabelle and Miller, Danny, “Agency vs. Stewardship in Public Family Firms. A Social
Embeddedness Reconciliation”, Entrepreneurship Theory & Practice, Volume 33, Number 6, Pages
1069-1091, 2009.
Lee, Peggy M. and O’Neill, Hugh M., “Ownership Structures and R&D Investments of U.S. and Japa-
nese Firms: Agency and Stewardship Perspectives”, Academy of Management Journal, Volume
46, Number 2, Pages 212-225, 2003.
Lubatkin, Michael H., Schulze, William S., Ling, Yan and Dino, Richard N., „The effects of parental
altruism on the governance of family-managed firms“, Journal of Organizational Behavior, Volume
26, Number 3, Pages 313-330, 2005.
Lutz, Eva, Schraml, Stephanie and Achleitner, Ann-Kristin, “Loss of Control vs. Risk Reduction –
Decision Factors for Hiring Non-Family CFOs in Family Firms“, Working Paper Series Center for
Entrepreneurial and Financial Studies, Volume 4, Pages 1-30, 2010.
Lussier, Robert N. and Sonfield, Matthew C., “A six-country study of first-, second-, and third-
generation family businesses”, International Journal of Entrepreneurial Behaviour & Research, Vol-
ume 16, Number 5, Pages 414-436, 2010.
McConaughy, Daniel L. and Phillips, G. Michael, “Founders versus Descendants: The Profitability,
Efficiency, Growth Characteristics and Financing in Large, Public, Founding-Family-Controlled
Firms”, Family Business Review, Volume 12, Number 2, Pages 123-131, 1999.
Miller, Danny and Le Breton-Miller, Isabelle, “Family Governance and Firm Performance: Agency,
Stewardship, and Capabilities”, Family Business Review, Volume 19, Number 1, Pages 73-87,
2006.
Moores, Ken and Mula, Joseph, “The Salience of Market, Bureaucratic, and Clan Controls in the
Management of Family Firm Transitions: Some Tentative Australian Evidence”, Family Business
Review, Volume 13, Number 2, Pages 91-106, 2000.
Morris, Michael H., Williams, Roy O., Allen, Jeffrey A. and Avila, Ramon A., “Correlates of Success in
Family Business Transitions”, Journal of Business Venturing, Volume 12, Number 5, Pages 385-
401, 1997.
Penrose, Edith T., “The theory of the growth of the firm”, 1959.
Pérez de Lema, D. G. and Duréndez, A., “Managerial behaviour of small and medium-sized family
businesses: an empirical study”, International Journal of Entrepreneurial Behaviour & Research,
Volume 13, Number 3, Pages 151-172, 2007.
Pieper, Torsten M., Klein, Sabine B. and Jaskiewicz, Peter, “The Impact of Goal Alignment on Board
Existence and Top Management Team Composition: Evidence from Family-Influenced Business-
es“, Journal of Small Business Management, Volume 46, Number 3, Pages 372-394, 2008.
Rutherford, Matthew W., Kuratko, Donald F. and Holt, Daniel T., “The family business theory jungle:
Competing theories on “familiness” and performance”, Entrepreneurship Theory & Practice, Vol-
ume 32, Pages 1089-1109, 2008.
Salvato, Carlo, “Predictors of Entrepreneurship in Family Firms”, The Journal of Private Equity, Vol-
ume 7, Number 3, Pages 68-76, 2004.
Salvato, Carlo and Melin, Leif, “Creating Value Across Generations in Family-Controlled Businesses:
The Role of Family Social Capital”, Family Business Review, Volume 21, Number 3, Pages 259-
275, 2008.
Salvato, Carlo and Moores, Ken, “Research on Accounting in Family Firms: Past Accomplishments
and Future Challenges”, Family Business Review, Volume 23, Number 3, Pages 193-215, 2010.
Schachner, Markus, Speckbacher, Gerhard and Wentges, Paul, “Steuerung mittelständischer Unter-
nehmen: Größeneffekte und Einfluss der Eigentums- und Führungsstruktur“, Zeitschrift für Be-
triebswirtschaft, Volume 76, Number 6, Pages 589-614, 2006.
Schein, Edgar H., “The Role of the Founder in Creating Organizational Culture”, American Manage-
ment Association, Volume 60, Number 1, Pages 13-28, 1983.
Schulze, William S., Lubatkin, Michael H., Dino, Richard N. and Buchholtz, Ann K., „Agency Relation-
ship in Family Firms: Theory and Evidence“, Organization Science, Volume 12, Number 2, Pages
99-116, 2001.
Schulze, William S., Lubatkin, Michael H. and Dino, Richard N. “Toward a theory of agency and altru-
ism in family firms”, Journal of Business Venturing, Volume 18, Number 4, Pages 473-490, 2003.
Sharma, Pramodita, “An Overview of the Field of Family Business Studies: Current Status and Direc-
tions for the Future”, Family Business Review, Volume 17, Number 1, Pages 1-36, 2004.
Sirmon, David G., Arregle, Jean-Luc, Hitt, Michael A. and Webb, Justin W., “The Role of Family Influ-
ence in Firms’ Strategic Responses to Threat of Imitation”, Entrepreneurship Theory & Practice,
Volume 32, Issue 6, Pages 979-998, 2008.

Sirmon, David G. and Hitt, Michael A., “Managing Resources: Linking Unique Resources, Manage-
ment, and Wealth Creation in Family Firms”, Entrepreneurship Theory & Practice Journal, Volume
27, Number 4, Pages 339-358, 2003.
Stafford, Kathryn, Duncan, Karen A., Dane, Sharon and Winter Mary, “A Research Model of Sustaina-
ble Family Business”, Family Business Review, Volume 12, Number 3, Pages 197-208, 1999.
Stockmans, Annelies, Lybaert, Nadine and Voordeckers, Wim, “Socioemotional Wealth and Earnings
Management in Private Family Firms”, Family Business Review, Volume 23, Number 3, Pages
280-294, 2010.
Suáre, K.C. and Santana-Martín, D.J., “Governance in Spanish family business”, International Journal
of Entrepreneurial Behaviour & Research, Volume 10, Number 1/2, Pages 141-163, 2004.
Ulaner, Lorraine, Floren, Roberto H. and Geerlings, Jurgen R., “Owner commitment and relational
governance on the privately-held form: An empirical study”, Small Business Economics, Volume
29, Number 3, 275-293, 2007.
Upton, Nancy, Teal, Elisabeth J. and Felan, Joe T., “Strategic and Business Planning Practices of
Fast Growth Family Firms”, Journal of Small Business Management, Volume 39, Number 1, Pages
60-72, 2001.
Vallejo, Manuel C., “The Effect of Commitment of Non-Family Employees of Family Firms from the
Perspective of Stewardship Theory”, Journal of Business Ethics, Volume 87, Number 3, Pages
379-390, 2009.
Van den Berghe, L.A.A. and Baelden, Tom, “The Monitoring Role of the Board: one approach does
not fit all”, Corporate Governance, Volume 13, Number 5, Pages 680-690, 2005.
Van den Berghe, L.A.A. and Carchon, Steven, “Corporate Governance Practices in Flemish Family
Businesses”, Corporate Governance: An International Review, Volume 10, Number 3, Pages 225-
245, 2002.
van den Heuvel, Jeroen, Van Gils, Anita and Voordeckers, Wim, “Board Roles in Small and Medium-
Sized Family Businesses: performance and importance”, Corporate Governance: An International
Review, Volume 14, Number 5, Pages 467-485, 2006.
Villalonga, Belen and Amit, Raphael, “How do family ownership, control and management affect firm
value?”, Journal of Financial Economics, Volume 80, Number 2, Pages 385-417, 2006.
Voordeckers, Wim, Van Gils, Anita and van den Heuvel, Jeroen, “Board Composition in Small and
Medium-Sized Family Firms”, Journal of Small Business Management, Volume 45, Number 1,
Pages 137-156, 2007.
Ward, John L. and Aronoff, Craig E. “Managing family-business conflict”, Nation's Business, Volume
82, Number 11, Pages 54-55, 1994.
Wernerfelt, Birger, “A resource based view of the firm”, Strategic Management Journal, Volume 5,
Number 2, Pages 171-180, 1984.
Westhead, Paul and Howorth, Carole, “Ownership and Management Issues Associated With Family
Firm Performance and Company Objectives”, Family Business Review, Volume 19, Number 4,
Pages 301-316, 2006.
Westhead, Paul and Cowling, Marc, “Family Firm Research: The Need for a Methodological Rethink”,
Entrepreneurship Theory & Practice, Volume 23, Number 1, Pages 31-56, 1998.
Witt, Peter, “Corporate Governance in Familienunternehmen”, Zeitschrift für Betriebswirtschaft, Volu-
me 78, Special Issue 2, Pages 1-19, 2008.
Zahra, Shaker A. and Pearce, John A., “Boards of Directors and Corporate Financial Performance: A
Review and Integrative Model”, Journal of Management, Volume 15, Number 2, Pages 291-334,
1989.
AUTHOR PROFILES
Dr. Christine Duller earned her Ph.D. at the Johannes Kepler University (JKU) of Linz, Austria, in
1999. Currently she is Assistant Professor of Applied Statistics at the JKU Linz.
Dr. Birgit Feldbauer-Durstmüller earned her Ph.D. at the Johannes Kepler University (JKU) of Linz,
Austria, in 1991. Currently she holds the Chair of Controlling & Consulting at the JKU Linz.
Dr. Christine Mitter earned her Ph.D. at the Johannes Kepler University of Linz, Austria in 2006.
Currently, she is Professor of Management Accounting and Finance in the business program at the
University of Applied Sciences in Salzburg, Austria.