Phases of Family Business Research

Pieper and Klein (2007), in their review of family business research, categorise the literature in three phases. Although in their analysis they acknowledge that the early phase of research included some subsystems, it assumed that family business was a closed system with two distinct systems (family and business) interacting. This led to research and practice focusing on the development of how-to guides for family business operations and succession planning. One example of this approach is the work by Barnes and Hershen (1989). They focused on the transition between the founder and successor of the business and characterised the interaction as a power dynamic within the family and the business. In their analysis, the founder (or old man) must decide to relinquish power so that when he reaches his inevitable death, the family’s business will continue. The founder’s unwillingness or inability to give up control of the family firm is a recurring theme in studies of this era (Dyer 1986; Sharma et al. 2001; Ward 1987). It is interesting that this earlier research

acknowledged both the role of the business and family, but saw the two as separate and intersecting, rather than seeing the family business as a unique form. This approach of focusing on the individual components of the family business may have led to viewing the role of the family dynamic in the business as static and external, rather than as an integral part of what we view today as the family business. Pieper and Klein’s (2007) analysis came to the conclusion that it ignored the potential interaction between the family business and the environment.

In later research, according to Pieper and Klein (2007), classification took a process view that examined family business from a more systems, process perspective, but that generally still saw the process of the family as having an impact or causal role in the operation of the firm. This process view influenced Lansberg’s (1988) work on succession planning in the family firm where he begins with reference to a

sociologist and discusses succession by integrating business and family dynamics by suggesting that the challenges in succession planning may be the result of the founder’s ambivalent feelings that are as much a part of the family dynamic as the business dynamic. This is interesting, as Lansberg’s earlier work focused not on process, but on the family and business being separate but overlapping social institutions. The process view is a foundation in Barnes and Hershen’s (1989) work on transferring power from the founder to successor in the family firm. Whiteside and Whiteside and Brown (1991) describe the family firm as a new system generated from the interaction of the family and the firm. While this suggests a systems approach, it is seen by Pieper and Klein (2007) as having the same limitation as the closed system approach, as it focuses exclusively on the dynamic between the family and the business, and largely ignores the interaction between this system (family-business) and the external environment. Peiper and Klein’s (2007)

observation is important as it points to the weakness in the approach of seeing family business as the interaction between the family and the business. Using this as a framework leads to examining the two entities (family and business) and their interaction and ignores that the intersection of the two actually creates a new type of entity that has its own internal and external dynamics. While the interaction between the family and business still has importance in understanding family business

dynamics, it runs the risk of ignoring that this new entity –the family business- has its own interactions with the outside environment and its process are not simply the product of the separate family and business units.

Interest in the systems approach grew, but it is important to re-emphasize that this framework did not always see the family firm as a system, but took the view that the study of family firms is the study of two parallel entities – families and firms – intersecting (Hollander & Elman 1988). Churchill and Hatten (1987) proposed a

model that reflects this Venn diagram approach, and that sees the owner-managed business as the intersection of the business and the family, and the family business as the intersection of the owner-manager, the family, and the business. This view sees the study of family firms as the study of the interaction of the task-oriented business and the emotively driven family.

The view of the family firm as the intersection of two systems remained prevalent through much of the 1990s. Tagiuri and Davis (1996) use this framework in their examination of the differences of family and non-family firms. Their approach makes a significant contribution, as it is one of the earliest research reports that begins to consider the family firm as unique, not just a subset of the family and the firm. The seven bivalent attributes that that they identify as the unique features of family firms can be either advantages or disadvantages in the firm’s efforts for success. Harris, Maritnez, and Ward (1994), in their examination of strategy differences between family and non-family firms, also use a paradigm that sees family firms as two interlocking systems, and suggest that this is a widely accepted approach. Taguiri and Davis’ (1996) framework was cited by Gersick (1997) when he built on their three-circle model and introduced developmental stages in family business.

Stafford, Duncan, Dane and Winter (1999) argue convincingly for a model that views the family firm as a unique system, not simply the Venn diagram where family business is the intersecting area of two independent systems. Their criticism that past paradigms do not adequately integrate the family in past models points to the

limitations of the research to this point. They propose a single model of family business sustainability. This single system views business outcomes as a function of the characteristics of both family and business. This may have been one of the first models to incorporate the family dynamic as a key part of the ongoing family business dynamic, not simply its origin. In their model the family is a key player throughout all phases in contributing to family business sustainability. From a family business systems perspective, family achievements, business achievements, and the transactions between the family and the business distinguish a family business from a non-family business. It is worthwhile noting that Stafford, Duncan, Dane and

Winter’s (1999) work began to move beyond the family firm as an isolated set of interactions between the family and the business to include the family business’ interaction with the external environment.

The lack of agreement on one approach to research on the family firm is illustrated by the different approaches seen in the three-circle model, as the intersection of the family, the business, and the owners (Chua, Chrisman & Steier 2003; Churchill & Hatten 1987; Harris, Martinez & Ward 1994; Lee 2006), and in the two-circle model as the intersection of the family and the business (Beckhard & Dyer 1983; Davis 1983; Davis & Stern 1988; Stafford et al. 1999).

More recent research, over the past 10 to 15 years, that sees family business through an open systems lens, has resulted in both complex and specific models of the family firm. According to Pieper and Klein’s (2007) analysis, this research phase has developed into two streams – family influence models and sustainable family business models – both of which include the intersection of the family and the firm, but go further in addressing the interaction between these two (and their interactions) with the external environment. By removing conceptual barriers that limit the

discussion to the family and business as separate, distinct, yet intersecting entities, their approach provided a framework that generated more promising investigations.