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Filling the institutional void: The social behavior and performance of family vs non-Family technology firms in emerging markets


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Family businesses (FBs) are said to treat their employees with unusual consideration to form a cohesive internal “community”. They are also claimed to develop deeper, more extensive “connections” or relationships with outside stakeholders. Both behaviors may increase the viability of a business intended to support an owning family and its later generations. Such social linkages, we believe, may compensate for the lack of capital, product and labor institutional infrastructures in dynamic emerging economies. This survey study of a most challenging emerging-market sector, namely Korean high-technology businesses, argues three major points. (1) Relationships of community and connection will be more common in FBs than in non-FBs. (2) These relationships will enhance performance in emerging-market high-technology sectors, which, because of their competitive, complex, and ever-changing nature, rely on significant expert knowledge and social capital within and outside the organizational community. (3) The performance of FBs will benefit more from these community and connection relationships than the performance of non-FBs, because in these personally intimate settings employees and external partners will be especially likely to return the generosity of a visibly active owning family, or to penalize its selfishness. Significant empirical support was found for most of these hypotheses. Journal of International Business Studies (2009) 40, 802–817. doi:10.1057/jibs.2009.11
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Filling the institutional void: The social behavior
and performance of family vs non-family
technology firms in emerging markets
Danny Miller
Jangwoo Lee
Sooduck Chang
Isabelle Le Breton-Miller
HEC Montreal, and University of Alberta,
Alberta, Canada;
Department of Management,
Kyungpook National University, Daegu, Korea;
Department of Business Administration,
Hannam University, Daejon, Korea
D Miller, HEC Montreal, and University of
Alberta, 4642 Melrose Avenue, Montreal
QC, Canada H4A 2S9.
Received: 10 January 2006
Revised: 19 November 2008
Accepted: 23 December 2008
Online publication date: 9 April 2009
Family businesses (FBs) are said to treat their employees with unusual
consideration to form a cohesive internal ‘‘community’’. They are also claimed
to develop deeper, more extensive ‘‘connections’’ or relationships with outside
stakeholders. Both behaviors may increase the viability of a business intended
to support an owning family and its later generations. Such social linkages,
we believe, may compensate for the lack of capital, product and labor
institutional infrastructures in dynamic emerging economies. This survey
study of a most challenging emerging-market sector, namely Korean high-
technology businesses, argues three major points. (1) Relationships of
community and connection will be more common in FBs than in non-FBs.
(2) These relationships will enhance performance in emerging-market high-
technology sectors, which, because of their competitive, complex, and ever-
changing nature, rely on significant expert knowledge and social capital within
and outside the organizational community. (3) The performance of FBs will
benefit more from these community and connection relationships than the
performance of non-FBs, because in these personally intimate settings
employees and external partners will be especially likely to return the
generosity of a visibly active owning family, or to penalize its selfishness.
Significant empirical support was found for most of these hypotheses.
Journal of International Business Studies (2009) 40, 802–817.
Keywords: family firms; human resource management (HRM); inter-organizational
relationships; institutional gaps; social capital; emerging markets
This paper first argues that family businesses (FBs) are more apt
than non-FBs to form close relationships with employees and
external stakeholders that enable them to outperform in the most
turbulent sectors of emerging markets. It suggests that such ties
may be especially useful in such economies because they fill what
Khanna and Palepu (1997) have termed an ‘‘institutional void’’ in
capital, product and labor markets. The paper then develops
hypotheses about the relative prevalence and performance impli-
cations of these relationships in family vs non-family firms, and
tests them on a sample of Korean high-technology firms. It
concludes with a discussion of results.
Family firms account for about half of the US gross national
product, employ over half of the workforce, and create more than
Journal of International Business Studies (2009) 40, 802–817
2009 Academy of International Business All rights reserved 0047-2506
85% of all new jobs (Shanker & Astrachan, 1996).
Although many are small, they make up about
one-third of Fortune 500 companies (Anderson &
Reeb, 2003). Their presence in Asia is greater still,
accounting for over 60% of the mid-cap public firms
in Hong Kong, Singapore and South Korea (LaPorta,
Lopes-de-Silanes, & Shleifer, 1999). Yet family firms
remain negatively portrayed and poorly understood
(Miller & Le Breton-Miller, 2005).
This becomes clear from an apparent contra-
diction that has begun to surface only recently.
Much of the theory on FB has emphasized its
shortcomings – succession problems, nepotism,
inadequate capital, family conflicts, and a lack of
professional management (Chandler, 1990; Gersick,
Davis, Hampton, & Lansberg, 1997; Miller,
Le Breton-Miller, Lester, & Cannella, 2007; Schulze,
Lubatkin, Dino, & Buchholtz, 2001). Recent
studies, however, have shown that some family
firms out-survive their peers, and also reap higher
returns and richer market valuations (Anderson &
Reeb, 2003; Mackie, 2001; Villalonga & Amit,
2006). Despite the vital role that family firms play
in the economy, we know little about their
distinctive resources, or the competitive advantages
that might cause their outperformance.
We believe that one reason for the confusion
surrounding FBs and their performance is that
current theories view them as being mired in the
past. They have been portrayed as being traditional,
overly humane, paternalistic in relationships with
their employees (Bertrand & Schoar, 2006; Chandler,
1990; Landes, 1949; Lazonick, 1986), and excessively
sentimental, subject to cronyism, and too cooperative
in their long-term associations with outside stake-
holders (Morck, Wolfenzon, & Yeung, 2005). Thus
most scholars have deemed such organizations as
‘businesses of yesterday’’ – too stagnant or poorly
performing, especially in dynamic environments
(Chandler, 1990; Morck et al., 2005).
On the other hand, some scholars have argued
that cohesive clan cultures in which employees are
hired for the long run, and are generously and well
treated, are central to competitive advantage in the
industries of the future (Collins, 1995; Davis &
Meyer, 1998; Koch, 2007; Miller, 2003; Miller & Le
Breton-Miller, 2005). So are ongoing, partnering
relationships with external stakeholders – suppliers,
advisors, collaborators – who provide resources
needed to enhance the effectiveness of innovative
ventures and enable the firm to focus on its core
competencies (Adler & Kwon, 2002; Bubolz, 2001;
Nahapiet & Ghoshal, 1998). It is perhaps an irony,
then, that some of these denigrated FB ‘‘ways of the
past’’ might be useful in the high-technology
industries of the future.
This may be especially true in emerging markets,
where the close social connections that some
family firms are able to build can make up for
‘institutional voids’’ – the relative lack of inter-
mediary firms, regulatory systems and contract-
enforcing mechanisms. Khanna and Palepu (1997)
have argued that these voids may hamper econom-
ic exchange in the capital, labor and product
markets of emerging economies. Moreover, Khanna
and Palepu (1999, 2000) and Khanna and Rivkin
(2000) have shown that business groups in emer-
ging economies such as South Korea and India
outperform unaffiliated companies because the
connections within such groups help to fill the
institutional void by providing superior access to
human, financial, and technological resources.
We shall argue that the close connections that
family firms may build with stakeholders inside and
outside the firm also may help fill that institutional
void. Specifically, close ties with employees and
with external parties who provide financing, pro-
fessional advice, and training may well provide
an institutional context that makes up for gaps in
the political, social and economic infrastructures
of emerging markets. This is especially true in
competitive, high-technology settings, where such
ties are needed to access scarce human and capital
resources and to buffer firms from uncertainty
(Nonaka, 1994, 1995).
Family firms in Korean high-technology indus-
tries provide ideal venues for studying the topic.
First, FBs in Korea represent over one half of the
economy (Nam, 2002). Second, like Brazil, Russia
and China, Korea enjoys one of the most dynamic
and fast-growing economies in the world, and
has become a hotbed of new company creation in
high-technology industries such as computers,
telecommunications and specialized machinery
(Lee & Chang, 1999; Lee, Lee, & Pennings, 2001).
Finally, like the above countries, Korea lacks the
institutional development of Europe and America
(Choi, 2004; Lee & Lee, 1994). Indeed, Khanna and
Palepu (1999) have argued that Korean chaebols
such as Daewoo and Samsung have formed business
groups precisely in order to overcome the institu-
tional voids in Korea’s capital, labor and product
markets. Korea thus provides a useful arena for
investigating whether strong ties within and out-
side the firm might help to fill the institutional gap
(Park, 1982).
Family and non-family technology firm behavior Danny Miller et al
Journal of International Business Studies
This paper will argue that the aspects of FBs that
are said to limit them to stable contexts – namely
close relationships with employees and external
stakeholders – are the very same characteristics that
allow them to perform well in the most turbulent
sectors of emerging markets. It draws hypotheses
about the nature and performance implications of
these relationships within family vs non-family
Korean high-technology businesses.
When firms are run by proprietors from the same
family who view their businesses as vehicles for
the security, reputation, and intergenerational
benefits of their kin, then the connections between
these owners and their organizations are apt to
be unusually close (Arregle, Hitt, Sirmon, & Very,
2007; Miller, Le Breton-Miller, & Scholnick, 2008;
Zahra, Hayton, & Salvato, 2004). There is among
such leaders an acute awareness that a great deal is
at stake in how their organizations perform over
the long haul: family fortune, family stature in
society, the future careers of the children, and even
the potential for the family to carry on a cherished
tradition or exalted mission (Miller & Le Breton-
Miller, 2005). Thus the relationship with the
business, and often its employees and stakeholders,
can be more lasting, generous and encompassing
(Arregle et al., 2007). By contrast, owners of non-
FBs are said to be more motivated by economic
rationales (Jacobs, 1991; Ward, 2004). They are
driven by financial performance in the short to
medium term, and are less concerned with very
long-term, and often quite personal, partnerships
(James, 1999). These putative differences may
have significant implications for how FB vs non-
FB owners act towards their employees and outside
stakeholders, and how those partners in turn will
benefit the business.
Some writers, for example, have suggested that FB
owners build a corporate ‘‘community’’ to help
their firms fulfill their mission and to increase
company longevity (Guzzo & Abbott, 1990; Miller
& Le Breton-Miller, 2005). Community elements
include loyalty to and caring for workers beyond
immediate legal or bureaucratic requirements, and
providing secure, satisfying jobs. Such elements
may create close associations with employees that
overcome talent scarcities in the tight labor markets
of emerging economies (Khanna & Palepu, 1997).
FBs are also said to manifest an apparent desire to
create ‘‘connections’’: enduring relationships that
build social capital with a wide variety of external
stakeholders who supply the company with
resources (Arregle et al., 2007; Bubolz, 2001; Miller
& Le Breton-Miller, 2005). These parties may
include critical suppliers of knowledge, social, and
financial capital who can strengthen the business,
afford it stability, and stretch its capabilities (Adler
& Kwon, 2002; Hagel & Singer, 1999; Nahapiet &
Ghoshal, 1998). Again, such relationships – alliances
and joint ventures as opposed to ‘‘one shot’
transactions – may help to compensate for the
institutional voids in capital, product, knowledge
and supply markets (Khanna & Palepu, 1997, 1999).
The social capital of trust and loyalty engendered
by these stable relationships can reduce the risks
associated with a venture. Moreover, family owners
and managers may have an advantage in forming
and benefiting from such relationships, as they
have the incentive and power to make and honor
their commitments (Bubolz, 2001; Miller & Le
Breton-Miller, 2005; Saxton, 1997)
Unfortunately, the prevalence of these commu-
nity and connection ties in family vs non-family
firms, and their performance implications for
high-technology firms in emerging markets, have
neither been argued nor researched. The following
sections of the paper do that.
Relative Prevalence of Community in FBs
The literature on organizational commitment to
employees (OCE) has identified a construct that
very much mirrors Miller & Le Breton-Miller’s
(2005) concept of community. The OCE construct
is based on Eisenberger, Huntington, Hutchison,
and Sowa’s (1986) notion of perceived organiza-
tional support, as refined and operationalized by
Lee and Miller (1999) and Miller and Lee (2001). In
essence, it is the degree to which an organization
‘goes the extra mile’’ to treat its employees well.
This involves generous compensation, employee
security, profit sharing, and even concern for
personal satisfaction and growth on the job. Some
scholars have suggested that OCE can evoke
employees’ loyalty and motivate them to work
smarter and harder (Eisenberger et al., 1990; Lee &
Miller, 1999; Miller & Lee, 2001; Moorman, Blakely,
& Niehoff, 1998; O’Reilly & Chatman, 1986).
Unfortunately, OCE has not been well studied
outside developed economies, or in today’s most
competitive environments. Yet these community
Family and non-family technology firm behavior Danny Miller et al
Journal of International Business Studies
approaches may be quite common among busi-
nesses operating in emerging markets to overcome
scarcities and imperfections in the labor market
(Khanna & Palepu, 2000, 2006; Nam, 2002). They
may also be popular with high-technology firms
that compete on the basis of knowledge, and must
therefore attract and keep top talent (Nonaka, 1994).
As noted, whereas non-family companies tend to
have an impersonal or ‘‘professional’’ orientation,
and a financially driven set of motives, FBs
frequently act as long-term stewards of the busi-
ness, its aims and its people – across the generations
(Gersick et al., 1997; Ward, 2004). Within FBs, it is
not only an owners’ fortune and reputation at
stake, but also that of their children and other family
members currently or prospectively involved in the
business. Here the business is not simply seen as a
way of making money but as an extension of the
family and its reputation in the community, as well
as a means for supporting the children or other
family members and their career aspirations (Miller
et al., 2008). Thus there is often an unusually deep
commitment to the business and its employees,
and family owners are willing to invest generously
in their staff (Allouche & Amann, 1997; Reid &
Harris, 2002). It is the employees, after all, who
must keep the business spry and creative and
secure the health of the company. They therefore
should be treated well by FB owners who have the
greatest incentive to commit to and invest in them
– that is, exhibit a high level of OCE (Guzzo &
Abbott, 1990).
There is a growing body of qualitative evidence to
support the strong emphasis that many American
FBs place on OCE to enhance the internal commu-
nity. Gersick et al. (1997) mention altruism and
trust as primary factors in FBs. Dyer (1986) sug-
gested that such ‘‘paternalism’’ often encompasses
non-family employees, promoting a sense of stabi-
lity and commitment to the firm. Allouche and
Amann (1997) and Miller and Le Breton-Miller
(2005) argued that family firms would have excep-
tionally generous compensation packages; they also
were said to train copiously and avoid layoffs.
Beehr, Drexler, and Faulkner (1997), Donckels
and Fro
¨hlich (1991), and Guzzo and Abbott
(1990) have echoed many of these arguments. Thus
we hypothesize that:
Hypothesis 1: Community, as measured by orga-
nizational commitment to employees (OCE), will
be greater among family than among non-family
technology firms in emerging-market economies.
Not all agree with this hypothesis. Some authors
have argued that FBs are especially given to
stinginess because of poor access to capital, nepo-
tism, family conflict, and sentimentality, and that
they discriminate against non-family managers
(see the reviews of this literature by Chandler,
1990; Morck et al., 2005; Schulze et al., 2001;
Singell, 1997). Although such conditions may well
prevail among some FBs, they have been argued
to be far rarer among those operating in more
competitive, rapidly changing environments, such
as those of our study (Carney, 2005).
Effects of Community (OCE) on Performance
In high-technology environments, where employee
initiative and creativity are especially important
to competitive vitality, OCE may be especially
important to performance. Here, consideration of
employees can help to attract and keep the best
people (Eisenberger et al., 1990; Lee & Lee, 1994). It
takes talented staff to invent and commercialize
better products and important innovations, and to
leverage these across new market opportunities
(Galbraith, 2000). In addition, the low levels of
turnover associated with a positive corporate
climate help to preserve team knowledge and tacit
knowledge within the firm, and keep it away from
competitors – again enhancing innovative endea-
vors and the collaboration that high-technology
ventures require (Barney & Hansen, 1994; Nonaka,
1995). This logic has been largely ignored and
implicitly disputed in many firms that have
engaged in widespread downsizing and in restruc-
turing that penalizes the workforce (Miller & Le
Breton-Miller, 2005).
As noted, we expect that devotion to employees
will be rewarded by a reciprocal dedication, and the
resulting emotional attachment and level of moti-
vation may serve well a high-technology business
(O’Reilly & Chatman, 1986; Orpen, 1995). Indeed,
a dedicated and motivated workforce may act as a
valuable, scarce, inimitable resource that can help
firms execute a strong innovation strategy (Barney
& Hansen, 1994; Lee & Miller, 1999). It may
also enhance initiative and collaboration among
decision-makers – qualities vital to successful
innovation (Miller & Lee, 2001).
Although Lee and Miller (1999) found only
modest main effects of OCE on performance, they
did not concentrate on high-technology businesses,
in which innovation, knowledge creation, and the
preservation of organizational knowledge capital
are so critical. It is in those contexts that we would
Family and non-family technology firm behavior Danny Miller et al
Journal of International Business Studies
anticipate OCE to contribute to performance.
Indeed, the employee initiative engendered by
OCE is expected to be especially rewarding in
uncertain high-technology settings that demand
flat organization structures, participative manage-
ment styles that put a premium on employee
initiative, and fast, collaborative decision-making
systems to support the necessary innovation
(Cooper, Willard, & Woo, 1986; Duchesneau &
Gartner, 1990; Miller & Lee, 2001).
The emerging-market context, too, may amplify
the OCE advantage. According to Khanna and
Palepu (1997, 1999, 2006), the institutional void
in the labor market that characterizes emerging
economies makes critical enduring relationships
with talented employees. As the presence of
intermediary organizations and contract-enforcing
mechanisms is lacking, obtaining a motivated,
trustworthy and stable workforce is a challenge.
Thus, for example, Korean businesses blend
Confucian ethics and paternalism to create a
climate of commitment to employees, and to
receive dedication from them in return (Lee &
Lee, 1994; Shin, 1993). Here, an organization’s
commitment to its employees, along with the sense
of dedication and community it brings, is believed
to be at the very heart of organizational success
(Lee & Miller, 1999). Thus OCE in the form of a
‘paternalistic culture’’ may be an especially impor-
tant source of competitive advantage.
Hypothesis 2: Community as measured by OCE
will contribute positively to performance in
technology firms in emerging-market economies.
Although other studies have examined and
partially supported this hypothesis, they have
focused neither on high-technology environments
nor on emerging markets, in which OCE may be
of special significance because of the importance of
employee initiative, creativity and commitment in
the innovative process. Nor have these studies
devoted attention to smaller FBs, in which a close,
personal connection between employees and own-
ers may engender the trust and reciprocal generos-
ity that make OCE especially effective.
Family Advantage in Community (OCE)
Although OCE might benefit all kinds of high-
technology organizations (Lee & Miller, 1999;
Miller & Lee, 2001), it may be especially effective
within an FB involving multiple relatives. This is
because of the personal relationships that so often
develop between family owner-managers and their
employees (Ward, 2004). Thus generosity and loyalty
are credited to family members, not to an impersonal
corporate entity, and so evoke reciprocity. In owner-
managed FBs, OCE generosity has a clear and
human source. As a result, a more personal and
intimate relationship may be formed between the
benevolent family and the grateful workers.
Employees can see at first hand the sacrifices the
family makes. They are face to face with multiple
family members, get to understand their values and
characters, and, when there is true consideration,
begin to feel a sense of loyalty. Family managers
also have the power to grant special benefits on a
one-off basis: they may, for example, ignore bureau-
cracy and short-term financial concerns and extend
generosity to exceptional employees or under
exceptional circumstances. Such acts of ‘‘outside
the box’’ kindness may generate unusual devotion.
Habbershon and Williams (1999) have argued
that it is exactly such human and social resources
that are keys to competitive advantage and perfor-
mance in family firms, as these are so very difficult
to emulate in more economically focused or
impersonal corporations.
It is important to acknowledge that there is a
negative side to paternalism in FBs. Issues of
favoritism, nepotism, discrimination against
non-family managers, and disregard for merit
are among these shortcomings (for reviews of these
well-known criticisms see Miller, Steier, & Le
Breton-Miller, 2003; Morck et al., 2005; Schulze
et al., 2001; Singell, 1997). Given such weaknesses,
when OCE is poor, FBs may pay dearly – again
making OCE a more critical variable to family than
to non-FBs.
Hypothesis 3: Community (OCE) will have a
stronger impact on performance in family than
in non-family technology firms in emerging
Prevalence of Connection in FBs
Two archetypal modes in which a firm may interact
with external stakeholders are transactions and
relationships (Arregle et al., 2007; Saxton, 1997;
Sirmon & Hitt, 2003; Williamson, 1999). In the
former, exchange takes place based on competitive
bidding in a market context. The unit of analysis is
the transaction, and the incentive is largely eco-
nomic. Relationships, on the other hand, involve
Family and non-family technology firm behavior Danny Miller et al
Journal of International Business Studies
ongoing, social capital-building associations – ties
based on economic factors and non-economic
factors alike. They represent closer, more stable,
and encompassing ties.
Arregle et al. (2007) and Miller and Le Breton-Miller
(2005) argued that FBs were especially apt to form
such relationship connections with outside stake-
holders. Owing to their emphasis on the
long-term viability of their enterprise, again because
of concern that the business supports the futures
of other family members, FB owners may be more
apt than others to form alliances with external
parties who might supply valuable knowledge,
information and capital (Miller & Le Breton-Miller,
2005). The stable nature of external relationships of
FBs also enables these firms to generate social
capital (Nam, 2002). Such alliances help a firm to
survive during the tough times that often beset
uncertain, high-technology environments (Saxton,
1997). They also aid in overcoming the institu-
tional gaps so common in emerging markets
(Khanna & Palepu, 1997, 1999). Moreover, FBs
are more apt to invest deeply in these alliances as
they can help assure the future of the business
for the next generation (Habbershon & Williams,
1999; Sirmon & Hitt, 2003).
If family owners have a greater incentive to work
with outside partners, they also have an unusual
ability to do so. The personal status of family
owner-executives makes many of them ideal rela-
tionship partners to outsiders. Partners, quite
rightly, tend to see family owner-managers as stable
and powerful representatives of their organizations,
with the clout to make commitments, and the
staying power and incentive to honor them. Family
executives tend to be there for decades, have the
best long-term interests of their companies and
families at heart, and so behave accordingly in
relationships with outside parties. These qualities
make relationships easier for FBs to form and
preserve (Adler & Kwon, 2002; Bubolz, 2001; Miller
& Le Breton-Miller, 2005; Sirmon & Hitt, 2003).
Thus it can be argued that:
Hypothesis 4: Connections with outside partners
will be more extensive among family than
among non-family technology firms in emerging
We should note that FBs are not expected to form
the types of alliances that would threaten their
control of the business (Gomez-Mejia, Haynes,
˜ez-Nickel, Jacobson, & Moyano-Fuentes, 2007).
They are most apt to favor connections that provide
valuable resources and develop capabilities. Relation-
ships that would involve giving up financial
control or compromise family values would be
resisted (Miller & Le Breton-Miller, 2005).
Performance Effects of Connection
Given the uncertainty of high-technology environ-
ments, enduring relationships with other institu-
tions and professionals can usefully increase
organizational knowledge and reduce financial
risk (Adler & Kwon, 2002). Pfeffer and Salancik
(1978) and their followers have argued that firms
depend for their viability on external resources,
and that they need to form relationships with
external stakeholders to ensure access to informa-
tion, talent, capital, and clients. In the context
of high-technology businesses, the most important
resources tend to be access to knowledge capital,
technology, and patents – much of which can be
accessed via robust relationships with external
parties (Grant, 1996; Lee et al., 2001; Nahapiet &
Ghoshal, 1998; Nonaka, 1994).
Khanna and Palepu (1997, 2000) have argued that
in emerging markets where there is an institutional
void, business groups characterized by solid, long-
term commitments outperform standalone firms.
They suggest that this is because the ties between
firms within business groups reduce transactions
costs and provide reliable access to capital, human,
reputational and technological resources that are
hard to come by in such economies (Khanna &
Palepu, 1997; Khanna & Rivkin, 2000). These ties
are to be found not only within business groups
but also in connections with suppliers, partners and
others who provide managerial and technological
support (Miller & Le Breton-Miller, 2005).
For uncertain emerging markets it might also be
argued that the more extensive the geographic
range of such ties, the more salutary they will be.
Just as business groups provide support through
business diversification (Khanna & Palepu, 1997,
1999), regional, national and especially interna-
tional connections with business partners, clients
and suppliers may counter the risks inherent in the
reliance on very local political and economic
conditions. Indeed, the more geographically far-
reaching these connections, the greater the ability
to reduce local risk.
The most relevant relationships with outsiders
for high-technology companies may include
joint research ventures with universities, other
companies, and research organizations, as well as
Family and non-family technology firm behavior Danny Miller et al
Journal of International Business Studies
associations with technological and management
consultants, government agencies, legal experts,
and technical experts (Lee et al., 2001). Joint
research ventures spread risk, provide complemen-
tary knowledge, and facilitate technology transfer,
which is an important source of innovation in
Korea. Ties with individual experts provide firms
with highly specialized knowledge that they can
use to bolster their innovation projects or commer-
cialization efforts. Links with governments and
legal experts can help in funding and developing
market connections (Lee et al., 2001; Lee & Chang,
1999). Thus:
Hypothesis 5: Relationships and connections
with outside partners and stakeholders will con-
tribute positively to performance in technology
firms in emerging-market economies.
Family Advantage in Connection
Just as relationships between employees and own-
ers may evoke reciprocal commitment, so may
ongoing relationships with outside stakeholders
and partners generate social capital (Adler & Kwon,
2002; Nahapiet & Ghoshal, 1998). Family owners
are usually there for the long run, with family
executive tenures often exceeding 20 years –
compared with the four to five years one finds
within other enterprises (Miller & Le Breton-Miller,
2005). This stability elevates family executives’
accountability to partners, as they are apt to be
present to answer for any problems that arise.
Thus family executives have an incentive to
behave reliably and honorably to stakeholders.
An added inducement to such behavior is that
family reputations and fortunes are at stake. Finally,
family owners have the power to fulfill the
commitments they undertake – they usually cannot
be derailed by a high-pressure, short-sighted board.
All of these things make FBs desirable partners
and therefore more likely to evoke cooperation
and reciprocal generosity from their relationships
with outsiders. It is hardly surprising, then, that
studies have argued that FBs have a real advantage
in creating social capital – which serves as a solid
basis for all kinds of alliances with outsiders
(Arregle et al., 2007; Bubolz, 2001; Nahapiet &
Ghoshal, 1998; Sirmon & Hitt, 2003).
Given the stability of family ownership and
management, family executives can hope to har-
vest the fruits of relationships for years to come.
The concept of social capital is central here, as
ongoing, long-term relationships engender trust
and goodwill, and reduce transaction costs (Adler &
Kwon, 2002; Bubolz, 2001; Nahapiet & Ghoshal,
1998). Often, families can even pass on relation-
ships across the generations: this happened in firms
such as J.P. Morgan and Bechtel, where in the inner
sanctums of exclusive business associations and
elite social clubs family scions were introduced by
an older generation to the wealthy and powerful
(Miller & Le Breton-Miller, 2005). That way, the
trust and credibility of one generation could be
passed on to the next (Gomez-Mejia, Nun
& Gutierrez, 2001). This social capital and its
potentially long-term payoff period are other
reasons why FBs may benefit especially from
relationships with alliance partners.
By contrast, in firms led by those with briefer
tenures, there may be pressures for short-term
performance that might induce opportunism – a
favoring of bargain transactions over relationships.
Managers of non-FBs sometimes have less incentive
to protect reputation or make relationships pay off
for the very long run. So they may not evoke as
much trust and business from their partners. Non-
family managers also may not have enough power
to make the exceptional commitments, often
reciprocated, that render relationships especially
Hypothesis 6: Relationships and connections
with outside stakeholders and partners will have
a more positive impact on the performance of
family than on non-family technology firms in
emerging markets.
Table 1 summarizes our hypotheses and their
As noted, and consistent with Khanna and Palepu
(1997, 1999), we chose South Korea as our repre-
sentative emerging market. We selected as target
firms all 271 independent companies on the Daegu
High Tech Venture Guide List of 2003 (these were
situated in the two high-tech zones in Daegu city).
We have already discussed the relevance of Korean
high-technology firms to the purpose of this study,
and the two zones in Daegu city represent high
concentrations of such companies to which the
researchers had significant access. We approached
the CEOs or highest-ranking officers of these firms,
Family and non-family technology firm behavior Danny Miller et al
Journal of International Business Studies
and 170 companies agreed to participate in the
study (a response rate of 62.7%).
The top managers who agreed to participate were
interviewed by telephone after they had examined
our pre-mailed questionnaires. We and our trained
research assistants helped the executives complete
the survey, and explained any items that the
executives wished to have clarified (e.g., the mean-
ing and scope of technology transfer). We assured
everyone that their responses would be kept
completely confidential. Our final sample consisted
of 52 computer and related firms (30.6%), 40
communications equipment makers (23.5%), 36
machine manufacturers (21.2%), and 42 electronic
components producers (24.7%) (Appendix A
describes the sample). In order to guard against
common method variance we obtained, for 35
randomly chosen firms, two independent responses
from the top-most executives. This enabled us to
assess inter-rater reliabilities, which we report
Most of our variables were measured using the
previously validated scales of others. Following La
Porta et al. (1999) and Miller and Le Breton-Miller
(2005), family firms were defined as those in which
owner-managers report that their family owns
more shares than any other block holder, and in
which strategic decision-making is directly influ-
enced by multiple members of the same family.
OCE was assessed using the scales of Lee and
Miller (1999) and Miller and Lee (2001). These
consisted of four anchored five-point Likert scale
items gauging how much the organization is
committed to employee well-being, ample and fair
pay, satisfaction at work, and sharing profits
(Appendix B presents all measurement items). The
Cronbach alpha for our OCE measure in this study
was 0.81. The inter-rater reliability, as assessed
across our 35 pairs of executives (the top and
next-to-top executives from 35 randomly chosen
companies), was 0.78.
Connection was assessed by taking the mean
values of two components: managerial (i.e., finan-
cial and politico-legal) and technology-related
relationships. These were considered to be the
types of association most relevant to our firms.
High-technology companies require financial,
legal, technological, and knowledge resources to
fund, license and undertake product and process
innovation – a core capability and primary source
of competitive advantage (Lee, 1998; Lee et al.,
2001). The managerial connection component
was assessed using five five-point Likert scales
assessing the degree (from very rarely to very
frequently) to which the organization pursued
ongoing relationships with
(1) government agencies,
(2) venture capitalists,
(3) banks and insurance companies,
Table 1 Summary of hypotheses and rationales
Community (OCE) Connection
Family vs non-family prevalence Hypothesis 1: Higher in FBs: Family long-run
perspective motivates investment in human
capital (Guzzo & Abbott, 1990; Reid &
Harris, 2002)
Hypothesis 4: Higher in FBs: Family concern
for later generations motivates relationship
formation (Saxton, 1997; Sirmon & Hitt,
Effect on performance in
emerging-market companies
Hypothesis 2: Positive: Community attracts
good people, motivates initiative and
collaboration; loyalty retains knowledge
capital (Lee & Miller, 1999); fills institutional
void (Khanna & Palepu, 1997, 1999)
Hypothesis 5: Positive: Connection provides
access to capital, knowledge, technology
and information needed for successful
innovation (Adler & Kwon, 2002; Nahapiet
& Ghoshal, 1998); fills institutional void
(Khanna & Palepu, 1997, 1999)
Family vs non-family
relationship effects on
Hypothesis 3: Higher in FBs: Family
managers form more personal relationships
with employees; so they get more credit and
more reciprocity from their beneficence
(Habbershon & Williams, 1999; Miller & Lee,
Hypothesis 6: Higher in FBs: Family stability,
power, stake engender more loyal partners,
more trusting relationships with outsiders,
more time to reap benefits (Bubolz, 2001;
Miller & Le Breton-Miller, 2005)
Family and non-family technology firm behavior Danny Miller et al
Journal of International Business Studies
(4) lawyers, and
(5) financial experts and consultants.
The technological connection variable was
assessed using three five-point Likert scales gauging
the degree (from very rarely to very frequently) to
which the firm pursued long-term relationships
with universities or research institutes to conduct
(1) joint research and development efforts,
(2) projects involving significant technological
transfer, and
(3) education and training efforts.
The Cronbach alphas for these two component
variables were 0.75 and 0.87, respectively, and 0.82
for the eight-item composite connection variable.
Inter-rater reliabilities were 0.78 and 0.77 respec-
tively, and 0.84 for the eight-item composite
connection variable.
A second aspect of connection, its geographic
range, was assessed using three scales that gauged
the geographic scope of the connections – ranging
from local, to subregional, to regional, to national,
to international. The Cronbach alpha for the
dimension was 0.70, and the inter-rater reliability
was 0.76.
Performance was measured using the measures of
Gupta and Govindarajan (1984). Because our
sample includes companies in different industries,
and whose goals and performance criteria differ, we
were required to use a relative, multidimensional
and subjective assessment of performance rather
than a narrow financial indicator. Also, over 50% of
the sample refused to provide financial data, as they
were private companies. Six performance factors
were rated by the top executives of each firm along
five-point scales. Respondents were asked how well
the firm had achieved its objectives concerning
profitability, growth, efficiency, customer service,
turnover, and employee morale. The Cronbach
alpha for the performance measure was 0.84, and
inter-rater reliability was 0.87, suggesting excellent
correspondence among independent raters. The
limitations of the performance measure are that it
only partly and imprecisely reflects financial per-
formance, and is influenced by the priorities of
individual companies.
A firm was classified as an FB only if a family was
the largest shareholder in the company and actively
influenced decision-making. To test Hypotheses 1
and 4, Tables 2 to 4 present means comparison
tests, correlation analyses, and multiple regression
analyses, respectively, that compare community
(OCE) and connection in family vs non-family
firms. Table 4 performs this comparison controlling
for firm age, size and industry (Jorissen, Leveren,
Martens, & Reheul, 2005). To test Hypotheses 2 and
5 concerning the impact of community and con-
nection on performance, we conducted the correla-
tion and hierarchical regression analyses of Tables 3
and 5, respectively. Again, all regressions control for
the size and age of the firms, and also
for industry, in the latter case by using dummy
variables. The follow-up analyses of Table 6
were run to assess the generality of Hypotheses 2
and 5 across industries with differing levels
of uncertainty. Finally, Hypotheses 3 and 6 on the
differential impact of community and connection
on performance in family vs non-FBs were tested
by the interaction terms of Table 5. These
terms were a product of a family dummy
variable and either community (OCE) or connec-
tion. The significance of the interaction terms
Table 2 Descriptive statistics: non-family vs family firms
Variable Total sample (N¼170) Non-family firms (N¼99) Family firms (N¼71) t-value
Mean Std dev. Mean Std dev. Mean Std dev.
Size 28.34 44.56 23.49 30.46 32.06 53.81 1.19
Age 7.43 6.76 6.35 3.93 9.11 9.30 2.34**
Uncertainty (dummy) 0.79 0.41 0.83 0.38 0.73 0.45 1.47
Community (OCE) 3.68 0.63 3.70 0.69 3.65 0.60 0.48
Connections 2.79 0.68 2.70 0.73 2.79 0.60 1.98**
Geographic reach of connections 2.22 1.07 2.03 1.05 2.45 1.08 2.56**
Performance 3.74 0.70 3.72 0.56 3.76 0.87 0.31
**po0.05 (two-tailed test).
Family and non-family technology firm behavior Danny Miller et al
Journal of International Business Studies
was established according to the incremental
variance they explained over that of the main
effects and control variables.
Hypotheses 1 and 4: Community and Connection
in Family vs Non-family Firms
The mean comparisons of Table 1 show that
community (OCE) does not differ significantly
between family and non-family firms, but connec-
tions are stronger in family than in non-FBs. To
determine whether these findings were influenced
by differences between family and non-FBs in
age, size and industry (Jorissen et al., 2005), we
performed the multiple regression analyses of
Table 4, incorporating these potential differences
as control variables while regressing community
and connections on a family firm dummy variable
(1¼family, 0¼non-family). The results confirm
those of Table 1. Thus Hypothesis 1 is not supported,
whereas Hypothesis 4 is well supported. Although
our high-tech FBs are more apt to form connections
Table 3 Pearson correlations and Cronbach alphas
Variables 1 2 3 4 5 6 a
1. Size (log employees) NA
2. Age 0.52*** NA
3. Community (OCE) 0.07 0.10 0.81
4. Connections 0.00 0.07 0.17** 0.82
5. Geographic reach 0.25*** 0.16** 0.10 0.14* 0.70
6. Performance 0.06 0.01 0.37*** 0.20** 0.21*** 0.84
7. Family (dummy) 0.10 0.20*** 0.04 0.15** 0.16** 0.03 NA
*po0.10; **po0.05; ***po0.01 (two-tailed test); N¼170.
Table 4 Regression of community and connection on family
dummy and controls
Dependent variable Community Connection Geographic reach
Size (log employees) 0.045 0.143 0.210**
Age 0.127 0.188* 0.020
Computers 0.086 0.014 0.085
Telecommunication 0.069 0.059 0.004
Machinery 0.047 0.116 0.031
Family (dummy) 0.048 0.229*** 0.134*
N170 170 170
Adj. R
0.001 0.048 0.047
F1.029 2.357** 2.327**
*po0.10; **po0.05; ***po0.01 (two-tailed test).
Table 5 Regression of performance on community and
Dependent variable Performance
Size (log employees) 0.147** 0.031 0.063
Age 0.041 0.066 0.120
Computers 0.125* 0.176* 0.188*
Telecommunication 0.069 0.089 0.120
Machinery 0.055 0.008 0.019
Family (dummy) 0.065 0.042 0.004
Community (OCE) 0.655***
Connections 0.243***
Geographic reach of
Family Community
Family Connections 0.143*
Family Geographic
N170 170 170
Adj. R
0.466 0.047 0.046
F18.86*** 2.00** 1.97**
*po0.10; **po0.05; ***po0.01 (two-tailed test).
Table 6 Regression of performance on community and
connection: effects of industry uncertainty
Dependent Variable Performance
Size (log employees) 0.160** 0.065 0.058
Age 0.027 0.046 0.085
Uncertainty (dummy) 0.018 0.080 0.074
Family (dummy) 0.072 0.029 0.003
Community (OCE) 0.694***
Connections 0.221***
Geographic reach of
Ind. uncertainty
Community (OCE)
Ind. uncertainty
Ind. uncertainty
Geographic reach
N170 170 170
Adj. R
0.451 0.020 0.023
F23.444*** 1.549 1.616
*po0.10; **po0.05; ***po0.01 (two-tailed test).
Family and non-family technology firm behavior Danny Miller et al
Journal of International Business Studies
with outside stakeholders than non-family compa-
nies, they are not apt to try to build an internal
community by treating their employees better than
their non-family counterparts – perhaps because
those high-technology counterparts are also highly
solicitous of their staff.
Hypotheses 2 and 5: The Impact of Community
and Connection on Performance
The correlation matrix of Table 3 shows that
community and connections both had positive
correlations with performance, lending support to
Hypotheses 2 and 5, respectively. More impor-
tantly, these relationships are confirmed by the
multiple regression analyses of Table 5. Among
our high-technology companies, community and
connection each contribute to performance,
broadly defined. The geographic breadth of the
connections has the same effect. This finding is
consistent with arguments that, in emerging-market
high-technology industries, connections and rela-
tionships help access the resources needed for
innovation and good performance (Lee, 1998; Lee
& Chang, 1999; Lee et al., 2001).
In order to establish the robustness of these
relationships across different levels of industry uncer-
tainty we defined a new dummy variable. The
variable took on a value of 1 for the most uncertain
industries of computers and telecommunications,
and a value of 0 for the least uncertain industry of
machinery. This split was based on Lee’s (1998)
analysis of uncertainty among emerging-market
high-technology firms. Firm performance was
regressed against interaction terms that were the
product of the uncertainty dummy and community,
connection, and the geographic scope of connections,
respectively. As shown in Table 6, these interaction
results were not related to performance, nor was the
uncertainty dummy variable. Thus support for
Hypotheses 2 and 5 does not vary materially among
the industries of our sample. We hesitate, however, to
generalize this result to stable industries, as all of our
firms were in the high-technology sector, and all
faced a considerable degree of uncertainty.
Hypotheses 3 and 6: The Impact of Community
and Connection on Performance in Family vs
The regression analyses of Table 5 predict perfor-
mance. They confirm significant interactions between
the dummy variable for family firm status and
community, connections, and the geographic reach
of those connections, respectively. The interaction
analyses assess whether FBs were better able to
benefit from higher levels of community or con-
nection than non-FBs. The results show strong
support for the community–family interaction, but
more modest support for the two connection–
family interactions. Moreover, the Fvalues for the
changes in R
derived from adding the interaction
terms to the full models are 7.068, 3.338, and 2.934.
These coefficients are significant at beyond the
0.01, 0.10, and 0.10 levels, respectively, under a
two-tailed test. The results clearly support Hypoth-
esis 3, and provide tentative support for Hypothesis
6. It thus appears that community, connection, and
geographically extended connections are more
useful in family than in non-FBs.
The results lend significant support to most of our
hypotheses. Investment in community and con-
nection are indeed germane to success in our
emerging-market high-technology environments,
and both characteristics appear to be more helpful
to family than to non-FBs. Connections are also
more common in family than in non-FBs. The one
major surprise was that OCE was not more
common in FBs than elsewhere, and that may be
one major reason why performance does not vary
significantly between family and non-family enter-
prises. Perhaps in high-technology environments,
talented employees are so clearly a critical resource
that all firms try to treat them well – family and
non-family alike. Another reason why FBs in our
sample did not outperform may be because of the
unique disadvantages that beset some FBs – family
conflicts, nepotism, and tradition may all be
especially damaging in competitive and turbulent
settings. These disadvantages may offset any
advantage from community or connection. Finally,
our non-FBs are also high-technology companies:
thus they are dynamic entities that are able to avoid
the bureaucratic snares of more staid non-FBs.
This research has a number of implications. First,
it suggests that OCE – a human dimension
appears to be important to the performance of
both family and non-family firms in a high-tech
industry. Specifically, organizations that attempt to
form tighter emotional bonds with their employees
by being more solicitous of their well-being may
be rewarded for doing so in a fast-changing
industry – but most especially if they are family
firms. The resulting motivation, dedication, and
cooperation among employees may represent a
Family and non-family technology firm behavior Danny Miller et al
Journal of International Business Studies
valuable competitive resource for high-technology
family firms. The formation of connections with
external providers of expertise, and social and
financial capital, also appears to be an important
source of advantage, and one more often used in
FBs. Moreover, consistent with the arguments of
Khanna and Palepu (1997, 1999, 2006), the forma-
tion of community and connection ties may help
to overcome the institutional void in emerging-
market economies.
Limitations of the Research and Future Directions
It is important to note some of the limitations of
this research. First, the findings may apply mostly
to smaller companies in uncertain, high-technology
environments. We cannot say whether our results
would hold in more stable settings, or in very large
companies. Also, whereas these Korean findings
may have application to other emerging economies
that are institutionally challenged, it remains to be
discovered whether they are as relevant to the
developed world. We hope that this study will
motivate scholars to do more research on family
enterprise. Future research might examine in more
detail how family firms differ from non-family
firms in other aspects of behavior, strategy and
performance. It might be useful also to replicate
this research in other countries and industries to
establish its generality and limitations.
It is perhaps paradoxical that the very aspects of
FBs that have caused them to be subject to criticism
in the management and governance literature are
the same characteristics that allow these and other
businesses to perform well in dynamic, high-
technology environments of an emerging market.
The approach for which FBs have been criticized –
affective, collective, community relationships with
their employees, and intensive, ongoing connec-
tions with outside stakeholders – appears to con-
tribute not to failure but to success. Moreover, this
advantage occurs not in staid, placid environments
but in the most turbulent and competitive ones.
These relational, as opposed to transactional,
orientations contribute to performance in FBs,
and also in non-family companies, albeit less
powerfully. It may well be that the close ties formed
by family firms give them an edge in surmounting
the institutional void so characteristic of emerging
markets (Khanna & Palepu, 1997, 1999). Emerging-
market executives and government policymakers
might do well to take note of the importance of FBs
in high-technology settings, and pay attention to
the levers that can be used to make these businesses
more competitive.
The authors are indebted to Professors Lorraine Eden,
Shaker Zahra, Kenneth C. Craddock, the Social
Sciences and Humanities Research Council of Canada,
and two anonymous reviewers for their most helpful
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See Table A1.
See Table B1.
Table A1 Characteristics of responding firms
Item Category Total Non-family firms Family firms
Number % Number % Number %
Age of firm 1–2 years 13 7.7 9 5.3 4 2.4
3–4 years 71 42.0 41 24.3 30 17.8
5–6 years 46 27.2 29 17.2 17 10.1
7 years and more 39 23.1 20 11.8 19 11.2
Number of employees Fewer than 11 78 47.0 45 27.1 33 19.9
11–20 34 20.5 20 12.0 14 8.4
21–40 25 15.1 18 10.8 7 4.2
41 or more 29 17.5 15 9.0 14 8.4
Industry Computers 52 30.6 33 19.4 19 11.2
Telecommunications 40 23.5 25 14.7 15 8.8
Machinery 36 21.2 17 10.0 19 11.2
Electronics 42 24.7 24 14.1 18 10.6
Nvalid 170 100.0 99 58.2 71 41.8
Table B1 Scale items in questionnaire
Community (OCE)
Rate the extent to which you agree with the following:
Do not agree Strongly agree
The organization really cares deeply about its employees’ well-being
3.56 (0.72)
The firm is profoundly concerned about paying everyone what they deserve
3.87 (0.68)
The firm cares deeply about employees’ overall satisfaction at work
3.53 (0.77)
If the firm earned more profit, it would share gains by increasing salaries
3.79 (0.69)
Family and non-family technology firm behavior Danny Miller et al
Journal of International Business Studies
Managerial connection
Rate how regularly your firm interacts with the following entities to build strong managerial relationships:
Very rarely Very frequently
Government agencies
2.69 (1.04)
Financial experts and consultants
2.67 (0.93)
2.08 (0.94)
Venture capitalists
2.04 (0.89)
Bankers and insurers
2.54 (0.94)
Technological connection
Rate the regularity with which you cooperate with universities and research institutes in the following ongoing relationships:
Very rarely Very frequently
Joint research and development efforts
2.99 (1.34)
Technical and technology transfer and information exchange
3.06 (1.22)
Education and training
2.79 (1.13)
Geographic reach: From local to regional to national to international
Please check the location of your most important connections
Business partners
2.36 (1.44)
(1) Within the existing high-tech zone and Daegu City
(2) Kyungpook Province
(3) Yongnam Province and Seoul area
(4) Other national area
(5) Foreign area
2.31 (1.43)
(1) Within the existing high-tech zone and Daegu City
(2) Kyungpook Province
(3) Yongnam Province and Seoul area
(4) Other national area
(5) Foreign area
1.98 (1.41)
(1) Within the existing high-tech zone and Daegu City
(2) Kyungpook Province
(3) Yongnam Province and Seoul area
(4) Other national area
(5) Foreign area
Table B1 Continued
Family and non-family technology firm behavior Danny Miller et al
Journal of International Business Studies
Danny Miller (PhD, McGill University) is Research
Professor at HEC Montreal and Chair in Strategy
and Family Enterprise at the University of Alberta.
His research interests include strategy formation,
capability creation, and organization design within
family and non-family enterprises. He was born in
and resides in Canada.
Jangwoo Lee (PhD, Korea Advanced Institute of
Science and Technology) is a Professor and Director
of the Research Institute of Creative and Cultural
Industries at Kyungpook National University. His
research focuses on technological entrepreneur-
ship, family enterprises, and strategic management.
Dr Lee was born in and resides in Korea. antonio@
Sooduck Chang (PhD, Kyungpook National
University) is an Assistant Professor of Business
Administration at Hannam University in Korea.
Current research interests are in strategic manage-
ment, entrepreneurship, organization theory and
the performance of technology ventures. Dr Chang
was born in and resides in Korea.
Isabelle Le Breton-Miller (PhD, Imperial College) is
an Associate Professor of management at HEC
Montreal and a Senior Research Fellow at the
University of Alberta. Her current research interests
center on the governance, strategies, succession
challenges, human resources practices, organiza-
tion and performance of large and small family
businesses. She was born in and resides in Canada.
Accepted by Lorraine Eden, Editor-in-Chief, 23 December 2008. This paper has been with the authors for three revisions.
How well has the firm achieved the following objectives vis-a
`-vis its principal competitors over the last 3 years?
Very poorly Very well
Profitability achievement
3.50 (0.84)
Growth in business and orders
3.92 (0.78)
Improvement in consumer loyalty
4.08 (0.72)
Improvement in internal efficiency
3.77 (0.72)
Employee turnover
3.68 (0.89)
Employees’ morale
3.62 (0.75)
Family firm
We classified the subjects as a family firm, when they answered ‘‘yes’’ for both items (1 and 2).
1. The family owns more shares than any other blockholder: Yes ( ) No ( )
2. Strategic decision-making is significantly influenced by family members: Yes ( ) No ( )
Numbers are item means and standard deviations, respectively.
Table B1 Continued
Family and non-family technology firm behavior Danny Miller et al
Journal of International Business Studies
... Further, in contrast to employees' affective organizational commitment, the construct OCE is scarcely studied in management accounting. We use this construct which measures employees' perception of the extent to which a firm genuinely cares about its employees' well-being, pays employees what they deserve, pays attention to their job satisfaction, and shares its profit with them (Bammens, Notelaers, & Gils, 2015;Miller et al., 2009). ...
... In SMEs, Gomez-Mejia, Haynes, and Nunez-Nickel (2007) argue that owners are likely to view their business as a vehicle for extending the family's reputation, ensuring employment security, providing intergenerational benefits, and preserving the socio-emotional wealth that is important to their survival. Moreover, Miller et al. (2009) andBammens et al. (2015) have shown that in SMEs, the connections between the owners and their employees are very close, more lasting, generous, and encompassing. Thus, owner-managers have an advantage in forming connections with employees and promoting human resource practices that benefit from such connections, and they also have the power to make and honor their commitments to workers (Miller et al., 2009;Miller & Le Breton-Miller, 2005). ...
... Moreover, Miller et al. (2009) andBammens et al. (2015) have shown that in SMEs, the connections between the owners and their employees are very close, more lasting, generous, and encompassing. Thus, owner-managers have an advantage in forming connections with employees and promoting human resource practices that benefit from such connections, and they also have the power to make and honor their commitments to workers (Miller et al., 2009;Miller & Le Breton-Miller, 2005). Economically, Verbeke and Greidanus (2009) have suggested that OCE may be a key variable that helps to overcome individual bounded rationality in relationships to build a trustworthy workplace climate that helps to minimize transaction costs. ...
... In particular, Lerner (2009) find that the ability of a firm to appropriate the value created through R&D activities is not exclusively related to the presence of strong formal institutions; more in general Khanna and Palepu (1997) have previously pointed out that informal institutions can fill the institutional void in environments characterized by weak formal institutions. 1 This can occur when informal institutions compensate the problems connected to the presence of inefficient capital, product and labor markets (Miller et al. 2013;Duran et al. 2019). By considering firms located in former USRR members or Soviet Satellite states (belonging to the Warsaw Pact), where most resources were in hands of governments and the institutional landscape is still characterized by a high level of uncertainty, we consider family and political connections as informal institutions, or more in general, as informal networks, which can encourage firms to invest in R&D activities. 2 The predictions of the literature that examined how family or political connections can affect the choice of a firm to invest in R&D are not homogenous. ...
... On the one hand, when family goals are centered on the desire to maintain control, the aversion of a firm to make R&D investments prevails (Gómez-Mejía et al. 2007, 2010. On the other hand, other mechanisms can operate, in the presence of the so-called "organizational identification" or when the family interests are concentrated on increasing the value of the firm, stimulating the propensity to invest in internal R&D as well as the propensity to outsource the R&D activity (Bammens 2016;Miller et al. 2013;Brinkerink and Bammens 2018). ...
... This may occur for example because assuring excellence throughout the product development process means a firm can be generally known as a provider of high-quality and stateof-the-art products among their customers. Moreover, in organizations with strong shared values organizational members can feel motivated to search novel ideas and be actively involved in innovation activities (Bammens 2016;Miller et al. 2013). With other arguments, agency theorists predict that management by a controlling shareholder (the family) should often correlate with greater firm value when the owners' interests are well aligned. ...
Full-text available
Although R&D activities can be effective means for firms to develop their innovation capacity, the current understanding of which informal institutions affect firms’ propensity to invest in R&D remains limited, especially in emerging and less-developed countries. Using a large sample of transition countries, this work investigates whether family ownership and political connections influence the firm’s propensity to invest in R&D, as well as in a specific type of open innovation (OI) strategy (i.e. performing simultaneously internal and external R&D activities). According to our evidence, both informal institutions seem encouraging firms to invest in R&D. Moreover, family and political connections appear increasing the engagement in the aforementioned OI strategy. Finally, the two kinds of networks seem to substitute each other in boosting the probability of investing in internal and external R&D activities.
... This suggests that businesses without knowledge and skills of personal financial management may find it difficult to access finance from external sources such as financial institutions. Firm capabilities also enable businesses to appreciate the available financial products and know where to source for help as well as taking effective measures to enhance their financial position (Miller, Lee, Chang, and Le Breton-Miller, 2009). Wachira and Kihiu (2012) discovered thatcompany capabilities such as financial knowledge enablesentrepreneurs to resolve challenges associated with accessingfinance. ...
Full-text available
The study aims to examine the effect of organizational dynamic capabilities on competitive advantage. The survey research design method that was used for this study was the cross-sectional survey research design method. The stratified random sampling technique was adopted for the study. A sample size of 234 respondents was randomly selected from the total population of 600. A structured questionnaire was used to obtain relevant data from the respondents. To establish the reliability of the instrument, a test-retest method was employed. Descriptive statistics, correlation, and multiple regression analysis were used as analytical techniques. Findings showed that intellectual capital, access to finance, and opportunity exploitation have a significant positive relationship with a competitive advantage. The study concluded that organizational dynamic capabilities have a significant positive effect on competitive advantage in the small and medium enterprises in Onitsha, Anambra State. The study recommended that financial institutions and the government should support SMEs in accessing finance to enhance their performance.
... A number of scholars argued that family firms gradually become more risk-averse and less innovative than non-family firms (Allio, 2004;Jones et al., 2008;Zellweger and Sieger, 2012;Duran et al., 2015). On the contrary, some other researchers argued that entrepreneurship can come to fruition in these firms (Aldrich and Cliff, 2003;Miller et al., 2009;Lumpkin et al., 2010;Le Bretton-Miller and miller, 2018). Opposing perspectives may have resulted from the fact that family firms are heterogeneous. ...
Purpose-This paper aims to shed light on the relationship between long-term orientation (LTO) and the dimensions of entrepreneurial orientation (EO) in family firms while adopting a stewardship perspective. Design/methodology/approach-A survey of the top managers of family firms in Iran's science and technology parks was conducted, and partial least squares structural equation modeling (PLS-SEM) was used to analyze the collected data. Findings-The research results showed that LTO has a positive effect on innovativeness and proactiveness and a negative effect on riskiness. Therefore, family firms' LTO pays off by enhancing their EO. Practical implications-In today's competitive world, EO is gradually becoming an inevitable necessity in many industries. Executives who want their firms to have a high level of performance should pay special attention to entrepreneurial behaviors. The present research informs the family firms' managers and practitioners to be long-term oriented to embrace more innovativeness and proactiveness, and less riskiness. Originality/value-So far, the relationship between the LTO and entrepreneurial characteristics of family firms has remained ambiguous; this research is one of the first studies investigating this relationship.
... At the same time, these voids create incentives for institutional entrepreneurship, i.e., persons proactively engaging in institution building. Institutional voids create opportunities for entrepreneurs that require and allow for creativity, experimentation, and bricolage in shaping their businesses (e.g., Ge et al., 2019;Mair and Martí, 2009;Miller et al., 2009;Puffer et al., 2010). Analyzing the persistence of entrepreneurship in this particular type of context could contribute to clarifying the role of certain institutional framework conditions in the self-perpetuation process of entrepreneurship over time. ...
We review and discuss research on the development of regional entrepreneurship over time. A particular focus is on the long-term persistence of regional levels of entrepreneurship, its explanation, and its meaning for economic development. What is the state of empirical research in this field, and what can explain the empirical findings? How are long-term trends of entrepreneurial activity linked to regional performance in terms of employment, gross domestic product (GDP), and innovative activity? Based on our assessments we derive conclusions for theory, policy implications, and avenues for further research.
This study documents a significant and positive impact of country‐level environmental, social and governance (ESG) improvement on economic growth using an international sample of 109 countries through improving energy efficiency, promoting human‐capital accumulation and attracting foreign investments. The economic benefits of country‐level ESG improvement are robust after alleviating possible endogeneity concerns. Further analysis shows that the positive influence of country ESG performance on economic growth is most pronounced in high‐income countries and for high‐greenhouse gas emitters but weaker in countries whose national income relies on natural resources. Our findings provide policy implications for promoting sustainable economic growth.
We analyze the effect of structural and demographic board diversity on family firms' corporate social performance (CSP), taking into account certain institutional and business environment aspects. The sample consists of French, German, Italian, Spanish and Portuguese nonfinancial listed firms over the period 2014–2021. We compare family and nonfamily firms before focusing on family businesses. Findings show that CSP benefits from having female directors in family firms whilst independent directors increase CSP in nonfamily businesses. Family directors exert a negative effect on CSP in family firms. The enforcement of law makes the positive influence of board independence significant for family firms and of nondual CEOs for nonfamily companies. Within family firms, the negative effect of family directors is strengthened by the enforcement of law but lowered by the efficiency of the judicial system. Hostile business environment always lowers CSP and reduces female directors' positive influence for family firms.
Family firms purportedly use different socioemotional wealth (SEW) reference points in choosing strategies, yet empirical research continues to use family involvement as a proxy for SEW. This study uses a configurational approach to examine how the multidimensionality of SEW may be used to explain the firm’s chosen strategy. We use psychometric measures of the various SEW dimensions proposed by Berrone et al. to explain the formalization of corporate social responsibility (CSR) strategy as an example. We identify various SEW configurations to understand why family firms exhibit a preference for more formal or informal CSR strategies.
Full-text available
Family businesses move the Spanish economy and are the main job generators in the country, adapting to changes where it is necessary and useful to incorporate Information and Communication Technologies (ICTs) for good business and commercial management. Taking this into consideration, this research aims to carry out a protocol to subsequently develop a systematic literature review on these topics: family businesses and ICTs. This protocol introduces some reflections about the issues of family businesses and ICTs, which gives threads to understand their importance. Likewise, the objective is to give answer to a group of research questions that will be answered along the literature review process. A methodology section is also included. It clearly shows which inclusion and exclusion criteria have been used in the search strategy under the Scopus and Web of Science databases, making visible the total number of scientific articles until reaching a filtered sample of 106 final articles for later review. Finally, a code´s tree is elaborated based on the research questions and a working plan. It ends by including a list of bibliographical references of all the work prior to the development of the protocol.
This paper aims to examine the role of social networking relationships in growing an informal sector digital microenterprise and the mediating effect of individual entrepreneurial orientation (IEO). Using data from 248 digital microenterprises in the informal sector of Senegal, this study utilizes multiple regression and Hayes process macro Model 4 to show that social networking relationships are positively associated with online informal microbusiness’ growth and IEO. It further reveals that IEO is related to digital microenterprise growth and partially mediates its link with social networking relationships. This study contributes to the social capital literature by showing that social relationships with external entities can provide resources to buffer against infrastructure and resource deficits and other growth challenges found in developing countries. It also extends the literature on IEO by facilitating a deeper understanding of individual entrepreneurial behaviors that can help transform resources from social networking relationships into growth in an informal digital environment.
Full-text available
A global firm's success is conditioned by its ability to manage the system of corporate intangible assets (corporate culture, corporate identity and information system), and product intangible assets (product design, brand equity and pre/after-sales services). Corporate imitation and innovation processes have come to represent a primary condition to stand up to global competition on the markets, which takes the shape of identifying by the design management products with 'new' features to propose to customers that change in time and space. For global corporations, achieving a differential advantage in terms of product design therefore means designing an offer based on the best interpretation of specific distinctive characteristics, and to this end, information must be collected in continuum from the market, about customers and competitors. A global firm's success is conditioned by its ability to manage the system of corporate intangible assets (corporate culture, corporate identity and information system), and product intangible assets (product design, brand equity and pre/after-sales services). Corporate imitation and innovation processes have come to represent a primary condition to stand up to global competition on the markets, which takes the shape of identifying by the design management products with 'new' features to propose to customers that change in time and space. For global corporations, achieving a differential advantage in terms of product design therefore means designing an offer based on the best interpretation of specific distinctive characteristics, and to this end, information must be collected in continuum from the market, about customers and competitors.
Full-text available
Our purpose was to test an explanation of how procedural justice may influence organizational citizenship behavior (OCB). The model tested suggests that procedural justice affects OCB by influencing perceived organizational support, which in turn prompts employees to reciprocate with organizational citizenship behaviors. Results suggest that procedural justice is an antecedent to perceived organizational support, which in turn fully mediates its relationship to three of four OCB dimensions.
Scholars of the theory of the firm have begun to emphasize the sources and conditions of what has been described as “the organizational advantage,” rather than focus on the causes and consequences of market failure. Typically, researchers see such organizational advantage as accruing from the particular capabilities organizations have for creating and sharing knowledge. In this article we seek to contribute to this body of work by developing the following arguments: (1) social capital facilitates the creation of new intellectual capital; (2) organizations, as institutional settings, are conducive to the development of high levels of social capital; and (3) it is because of their more dense social capital that firms, within certain limits, have an advantage over markets in creating and sharing intellectual capital. We present a model that incorporates this overall argument in the form of a series of hypothesized relationships between different dimensions of social capital and the main mechanisms and processes necessary for the creation of intellectual capital.
Financial experts in the West suggest that diversified business groups-or affiliated companies under one parent-in emerging markets should break up. Dismantling these mammoth conglomerates could reduce the debt and inefficiencies that some of them incur; that logic is based on the success that companies in advanced economies had when they unbundled their assets in the 1980s. But the authors argue that breaking up business groups such as the Korean chaebol and India's Tata Group is premature. Emerging economies lack a soft infrastructure-the banks, business schools, corporate governance processes, and so on, that are the foundation of economic growth. And building such an infrastructure takes time. Many business groups in emerging markets make up for the absence or weakness of market intermediaries by filling in themselves. For instance, they're venture capitalists when they use funds from one business group affiliate to fund a new one. They're labor market substitutes when business-group headquarters creates management training programs based on the knowledge and experience of managers across several business affiliates. Instead of breaking up the conglomerates now, governments should start the long-term development of market institutions for finance, labor, and goods and services. In the meantime, business groups should strive to improve the way they substitute for those market institutions. The authors suggest several Western business tools and models that business groups can use to boost their role as market intermediaries and to prepare for the eventual development of those institutions.
Emerging markets like India have poorly functioning institutions, leading to severe agency and information problems. Business groups in these markets have the potential both to offer benefits to member firms, and to destroy value. We analyze the performance of affiliates of diversified Indian business groups relative to unaffiliated firms. We find that accounting and stock market measures of firm performance initially decline with group diversification and subsequently increase once group diversification exceeds a certain level. Unlike U.S. conglomerates' lines of business, and similar to the affiliates of U.S. LBO associations, affiliates of the most diversified business groups outperform unaffiliated firms.
Business strategy is a complex subject and is usefully examined from several perspectives. This paper applies the lenses of governance and competence to the study of strategy. Both the governance and the competence perspectives have had the benefit of distinguished antecedents. They have also had to deal with tautological reputations. I begin with the governance perspective, with emphasis on the six key moves through which it has been operationalized. I then examine the competence perspective in these same six respects. Governance challenges the competence perspective to apply itself more assiduously to operationalization, including the need to choose and give definition to one or more units of analysis (of which the 'routine' is a promising candidate). The research challenges posed by competence to which governance can and should respond include dynamic transaction costs, learning, and the need to push beyond generic governance to address strategy issues faced by particular firms (with their distinctive strengths and disabilities). A lively research future for these two perspectives, individually and in combination, is projected.