Multi-family firms represent an important and complex type of family firm that is not as well understood as single-family firms. We develop a governance-based framework of the agency complexities in multi-family firms, theorizing that divergent family-centered noneconomic goals between the owning families create complex inter-family agency problems that are intensified by evolving family dynamics. We propose governance mechanisms that address these problems by limiting opportunistic behavior associated with the pursuit of noneconomic goals related to firm control, family altruism, social capital, and transgenerational succession. We then present a future research agenda that can expand our knowledge of multi-family firms.
AkerlofG. A. (1970). The market for “lemons”: Quality uncertainty and the market mechanism. Quarterly Journal of Economics, 84(3), 488–500.doi:10.2307/1879431
2.
AlchianA. A. (1965). Some economics of property rights. Il Politico, 30(4), 816–829.
3.
AlchianA. A.DemsetzH. (1972). Production, information costs, and economic organization. American Economic Review, 62(5), 777–795.
4.
AndersonR. C.ReebD. M. (2004). Board composition: Balancing family influence in S&P 500 firms. Administrative Science Quarterly, 49(2), 209–237.
5.
AndersonS. W.DekkerH. C.Van den AbbeeleA. (2017). Costly control: An examination of the trade-off between control investments and residual risk in interfirm transactions. Management Science, 63(7), 2163–2180.doi:10.1287/mnsc.2016.2435
6.
ArgoteL.GreveH. R. (2007). A behavioral theory of the firm —40 years and counting: Introduction and impact. Organization Science, 18(3), 337–349.doi:10.1287/orsc.1070.0280
7.
AriñoA.RagozzinoR.ReuerJ. J. (2008). Alliance dynamics for entrepreneurial firms. Journal of Management Studies, 45(1), 147–168.doi:10.1111/j.1467-6486.2007.00745.x
8.
AriñoA.ReuerJ. J. (2004). Designing and renegotiating strategic alliance contracts. Academy of Management Perspectives, 18(3), 37–48.doi:10.5465/ame.2004.14776166
9.
ArthursJ. D.HoskissonR. E.BusenitzL. W.JohnsonR. A. (2008). Managerial agents watching other agents: Multiple agency conflicts regarding underpricing in IPO firms. Academy of Management Journal, 51(2), 277–294.doi:10.5465/amj.2008.31767256
10.
BarnettT.KellermannsF. W. (2006). Are we family and are we treated as family? Nonfamily employees’ perceptions of justice in the family firm. Entrepreneurship Theory and Practice, 30(6), 837–854.doi:10.1111/j.1540-6520.2006.00155.x
11.
BascoR.VoordeckersW. (2015). The relationship between the board of directors and firm performance in private family firms: A test of the demographic versus behavioral approach. Journal of Management & Organization, 21(4), 411–435.doi:10.1017/jmo.2015.23
12.
BerroneP.CruzC.Gómez-MejíaL. R. (2012). Socioemotional wealth in family firms: Theoretical dimensions, assessment approaches, and agenda for future research. Family Business Review, 25(3), 258–279.
13.
BertrandM.SchoarA. (2006). The role of family in family firms. Journal of Economic Perspectives, 20(2), 73–96.doi:10.1257/jep.20.2.73
14.
Bertschi-MichelA.KammerlanderN.StrikeV. M. (2020). Unearthing and alleviating emotions in family business successions. Entrepreneurship Theory and Practice, 44(1), 81–108.doi:10.1177/1042258719834016
15.
BrighamK. H.PayneG. T. (2015). The transitional nature of the multifamily business. Entrepreneurship Theory and Practice, 39(6), 1339–1347.doi:10.1111/etap.12173
16.
Cabrera-SuárezK.De Saá-PérezP.García-AlmeidaD. (2001). The succession process from a resource-and knowledge-based view of the family firm. Family Business Review, 14(1), 37–46.doi:10.1111/j.1741-6248.2001.00037.x
17.
CarneyM. (2007). Minority family business in emerging markets: Organization forms and competitive advantage. Family Business Review, 20(4), 289–300.doi:10.1111/j.1741-6248.2007.00097.x
18.
CarpenterJ.BowlesS.GintisH.HwangS.-H. (2009). Strong reciprocity and team production: Theory and evidence. Journal of Economic Behavior and Organization, 71(2), 221–232.doi:10.1016/j.jebo.2009.03.011
19.
CarsonS. J.MadhokA.WuT. (2006). Uncertainty, opportunism, and governance: The effects of volatility and ambiguity on formal and relational contracting. Academy of Management Journal, 49(5), 1058–1077.doi:10.5465/amj.2006.22798187
20.
CassonM. (1999). The economics of the family firm. Scandinavian Economic History Review, 47(1), 10–23.doi:10.1080/03585522.1999.10419802
CheungS. N. S. (1970). The structure of a contract and the theory of a non-exclusive resource. Journal of Law and Economics, 13(1), 49–70.
23.
ChildJ.RodriguesS. B. (2003). Corporate governance and new organizational forms: Issues of double and multiple agency. Journal of Management and Governance, 7(4), 337–360.doi:10.1023/A:1026210608769
24.
ChrismanJ. J.ChuaJ. H.Le Breton-MillerI.MillerD.SteierL. P. (2018). Governance mechanisms and family firms. Entrepreneurship Theory and Practice, 42(2), 171–186.doi:10.1177/1042258717748650
25.
ChrismanJ. J.ChuaJ. H.LitzR. A. (2004). Comparing the agency costs of family and non-family firms: Conceptual issues and exploratory evidence. Entrepreneurship Theory and Practice, 28(4), 335–354.doi:10.1111/j.1540-6520.2004.00049.x
26.
ChrismanJ. J.ChuaJ. H.PearsonA. W.BarnettT. (2012). Family involvement, family influence, and family-centered non-economic goals in small firms. Entrepreneurship Theory and Practice, 36(2), 267–293.doi:10.1111/j.1540-6520.2010.00407.x
27.
ChrismanJ. J.SharmaP.SteierL. P.ChuaJ. H. (2013). The influence of family goals, governance, and resources on firm outcomes. Entrepreneurship Theory and Practice, 37(6), 1249–1261.doi:10.1111/etap.12064
28.
ChuaJ. H.ChrismanJ. J.BergielE. B. (2009). An agency theoretic analysis of the professionalized family firm. Entrepreneurship Theory and Practice, 33(2), 355–372.doi:10.1111/j.1540-6520.2009.00294.x
29.
ChuaJ. H.ChrismanJ. J.SharmaP. (1999). Defining the family business by behavior. Entrepreneurship Theory and Practice, 23(4), 19–39.doi:10.1177/104225879902300402
30.
CoaseR. H. (1960). The problem of social cost. Journal of Law and Economics, 3, 1–44.doi:10.1086/466560
31.
CruzC.NordqvistM. (2012). Entrepreneurial orientation in family firms: A generational perspective. Small Business Economics, 38(1), 33–49.doi:10.1007/s11187-010-9265-8
32.
CyertR. M.MarchJ. (1963). A behavioral theory of the firm. Prentice-Hall.
33.
DaspitJ. J.LongR. G. (2014). Mitigating moral hazard in entrepreneurial networks: Examining structural and relational social capital in East Africa. Entrepreneurship Theory and Practice, 44(1), 1343–1350.doi:10.1111/etap.12128
34.
DaspitJ. J.MadisonK.BarnettT.LongR. G. (2018). The emergence of bifurcation bias from unbalanced families: Examining HR practices in the family firm using circumplex theory. Human Resource Management Review, 28(1), 18–32.doi:10.1016/j.hrmr.2017.05.003
35.
DemsetzH. (1967). Towards a theory of property rights. American Economic Review, 57, 347–359.
36.
DreuxD. R. (1990). Financing family business: Alternatives to selling out or going public. Family Business Review, 3(3), 225–243.doi:10.1111/j.1741-6248.1990.00225.x
37.
DuplatV.KlijnE.ReuerJ.DekkerH. (2020). Renegotiation of joint venture contracts: The influence of boards of directors and prior ties as alternative governance mechanisms. Long Range Planning, 53(2), 101856–19.doi:10.1016/j.lrp.2018.10.006
38.
DuranP.OrtizM. (2020). When more is better: Multifamily firms and firm performance. Entrepreneurship Theory and Practice, 44(4), 761–783.doi:10.1177/1042258719851206
39.
EisenhardtK. M. (1989). Agency theory: An assessment and review. Academy of Management Review, 14(1), 57–74.doi:10.5465/amr.1989.4279003
40.
FamaE. F. (1980). Agency problems and the theory of the firm. Journal of Political Economy, 88(2), 288–307.
41.
FamaE. F.JensenM. C. (1983a). Separation of ownership and control. Journal of Law and Economics, 26(2), 301–325.doi:10.1086/467037
42.
FamaE. F.JensenM. C. (1983b). Agency problems and residual claims. Journal of Law and Economics, 26(2), 327–349.doi:10.1086/467038
43.
Family Owned Business Institute. (2014). Family owned business survey. Seidman College of Business at Grand Valley State University and Haworth College of Business at Western Michigan University.
44.
FossN. J.WeberL. (2016). Moving opportunism to the back seat: Bounded rationality, costly conflict, and hierarchical forms. Academy of Management Review, 41(1), 61–79.doi:10.5465/amr.2014.0105
45.
GedajlovicE.CarneyM. (2010). Markets, hierarchies, and families: Toward a transaction cost theory of the family firm. Entrepreneurship Theory and Practice, 34(6), 1145–1172.doi:10.1111/j.1540-6520.2010.00418.x
46.
GersickK. E.DavisJ. A.HamptonM. M.LansbergI. (1997). Generation to generation. Harvard Business School Press.
47.
Gómez-MejíaL. R.HaynesK. T.Núñez-NickelM.JacobsonK. J. L.Moyano-FuentesJ. (2007). Socioemotional wealth and business risks in family-controlled firms: Evidence from Spanish olive oil mills. Administrative Science Quarterly, 52(1), 106–137.doi:10.2189/asqu.52.1.106
48.
GordonE. A.HenryE.PaliaD. (2004). Related party transactions and corporate governance. Advances in Financial Economics: Corporate Governance, 9(1), 1–27.
49.
GreenwoodR.EmpsonL. (2003). The professional partnership: Relic or exemplary form of governance?Organization Studies, 24(6), 909–933.doi:10.1177/0170840603024006005
50.
HanischD. N.RauS. B. (2014). Application of metric conjoint analysis in family business research. Journal of Family Business Strategy, 5(1), 72–84.doi:10.1016/j.jfbs.2014.01.003
51.
HartO.MooreJ. (1990). Property rights and the nature of the firm. Journal of Political Economy, 98(6), 1119–1158.doi:10.1086/261729
52.
HaynesG. W.WalkerR.RoweB. R.HongG.-S. (1999). The intermingling of business and family finances in family-owned businesses. Family Business Review, 12(3), 225–239.doi:10.1111/j.1741-6248.1999.00225.x
53.
HoffmannC.JaskiewiczP.WulfT.CombsJ. G. (2019). The effect of transgenerational control intention on family-firm performance: It depends who pursues it. Entrepreneurship Theory and Practice, 43(3), 629–646.doi:10.1177/1042258717730025
54.
HoltD. T.MadisonK.KellermannsF. W. (2017). Variance in family members’ assessments: The importance of dispersion modeling in family firm research. Family Business Review, 30(1), 61–83.
55.
Internal Revenue Service. (2016). Statistics of Income Bulletin. Internal Revenue Service.
56.
JamesH. S. (1999). Owner as manager, extended horizons and the family firm. International Journal of the Economics of Business, 6(1), 41–55.doi:10.1080/13571519984304
57.
JaskiewiczP.CombsJ. G.ShanineK. K.KacmarK. M. (2017). Introducing the family: A review of family science with implications for management research. Academy of Management Annals, 11(1), 309–341.doi:10.5465/annals.2014.0053
58.
JenningsJ. E.DempseyD.JamesA. E. (2018). Bifurcated HR practices in family firms: Insights from the normative-adaptive approach to stepfamilies. Human Resource Management Review, 28(1), 68–82.doi:10.1016/j.hrmr.2017.05.007
59.
JensenM. C.MecklingW. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305–360.doi:10.1016/0304-405X(76)90026-X
60.
JiangY.PengM. W. (2011). Are family ownership and control in large firms good, bad, or irrelevant?Asia Pacific Journal of Management, 28(1), 15–39.doi:10.1007/s10490-010-9228-2
61.
JohnsonS.La PortaR.Lopez-de-SilanesF.ShleiferA. (2000). Tunneling. American Economic Review, 90(2), 22–27.doi:10.1257/aer.90.2.22
62.
KarraN.TraceyP.PhillipsN. (2006). Altruism and agency in the family firm: Exploring the role of family, kinship, and ethnicity. Entrepreneurship Theory and Practice, 30(6), 861–877.doi:10.1111/j.1540-6520.2006.00157.x
63.
KhayesiJ. N. O.GeorgeG.AntonakisJ. (2014). Kinship in entrepreneur networks: Performance effects of resource assembly in Africa. Entrepreneurship Theory and Practice, 27(1), 1323–1342.doi:10.1111/etap.12127
64.
KleinB.CrawfordR. G.AlchianA. A. (1978). Vertical integration, appropriable rents, and the competitive contracting process. Journal of Law and Economics, 21(2), 297–326.doi:10.1086/466922
65.
KudlatsJ.McDowellW. C.MahtoR. (2019). Unrelated but together: Trust and intergroup relations in multi-family businesses. Journal of Business Research, 101(3), 750–756.doi:10.1016/j.jbusres.2018.12.073
66.
La PortaR.Lopez-de-SilanesF.ShleiferA.VishnyR. (1999). Corporate governance around the world. Journal of Finance, 54(2), 471–517.
67.
LauD. C.MurnighanJ. K. (1998). Demographic diversity and faultlines: The compositional dynamics of organizational groups. Academy of Management Review, 23(2), 325–340.doi:10.5465/amr.1998.533229
68.
LesterR. H.CannellaA. A. (2006). Interorganizational familiness: How family firms use interlocking directorates to build community-level social capital. Entrepreneurship Theory and Practice, 30(6), 755–775.doi:10.1111/j.1540-6520.2006.00149.x
69.
LiZ. (2014). Mutual monitoring and corporate governance. Journal of Banking and Finance, 45, 255–269.
70.
LimE. N. K.LubatkinM. H.WisemanR. M. (2010). A family firm variant of the behavioral agency theory. Strategic Entrepreneurship Journal, 4(3), 197–211.
71.
LimS. -Y. (2018) Three essays on family firms [Doctoral thesis]. Singapore: Nanyang Technological University.
72.
LubatkinM. H.SchulzeW. S.LingY.DinoR. N. (2005). The effects of parental altruism on the governance of family-managed firms. Journal of Organizational Behavior, 26(3), 313–330.doi:10.1002/job.307
73.
MadisonK.DaspitJ. J.TurnerK.KellermannsF. W. (2018). Family firm human resource practices: Investigating the effects of professionalization and bifurcation bias on performance. Journal of Business Research, 84(1), 327–336.doi:10.1016/j.jbusres.2017.06.021
74.
MerrillT. W. (1998). Property and the right to exclude. Nebraska Law Review, 77, 730–755.
75.
MillerD.Le Breton-MillerI. (2005). Managing for the long run: Lessons in competitive advantage from great family businesses. Harvard Business School Press.
76.
MinichilliA.CorbettaG.MacMillanI. C. (2010). Top management teams in family-controlled companies: ‘Familiness’, ‘faultlines’, and their impact on financial performance. Journal of Management Studies, 47(2), 205–222.doi:10.1111/j.1467-6486.2009.00888.x
77.
MukherjeeT.SwamiV.WangW. (2019). Governance structure and performance of private family firms. Journal of Economics and Finance, 43(4), 713–734.doi:10.1007/s12197-018-9466-6
78.
PagliarussiM. S.RapozoF. O. (2011). Agency relationships in a Brazilian multifamily firm. Family Business Review, 24(2), 170–183.doi:10.1177/0894486511409573
79.
PatelP. C.CooperD. (2014). Structural power equality between family and non-family TMT members and the performance of family firms. Academy of Management Journal, 57(6), 1624–1649.doi:10.5465/amj.2012.0681
80.
PieperT. M.SmithA. D.KudlatsJ.AstrachanJ. H. (2015). The persistence of multifamily firms: Founder imprinting, simple rules, and monitoring processes. Entrepreneurship Theory and Practice, 39(6), 1313–1337.doi:10.1111/etap.12179
RogersonW. P. (1992). Contractual solutions to the hold-up problem. Review of Economic Studies, 59(4), 777–793.doi:10.2307/2297997
83.
RossS. A. (1973). The economic theory of agency: The principal’s problem. The American Economic Review, 63(2), 134–139.
84.
SchulzeW.ZellwegerT. M. (2020). Property rights, owner-management, and value creation. Academy of Management Review.doi:10.5465/amr.2018.0377
85.
SchulzeW. S.LubatkinM. H.DinoR. N.BuchholtzA. K. (2001). Agency relationships in family firms: Theory and evidence. Organization Science, 12(2), 99–116.doi:10.1287/orsc.12.2.99.10114
86.
SharmaP.ChuaJ. H.ChrismanJ. J. (2000). Perceptions about the extent of succession planning in Canadian family firms. Canadian Journal of Administrative Sciences, 17(3), 233–244.doi:10.1111/j.1936-4490.2000.tb00223.x
87.
SharmaP.SalvatoC.ReayT. (2014). Temporal dimensions of family enterprise research. Family Business Review, 27(1), 10–19.doi:10.1177/0894486513516058
88.
SirmonD. G.HittM. A. (2003). Managing resources: Linking unique resources, management, and wealth creation in family firms. Entrepreneurship Theory and Practice, 27(4), 339–358.doi:10.1111/1540-8520.t01-1-00013
89.
SoleimanofS.RutherfordM. W.WebbJ. W. (2018). The intersection of family firms and institutional contexts: A review and agenda for future research. Family Business Review, 31(1), 32–53.doi:10.1177/0894486517736446
90.
SonfieldM. C.LussierR. N. (2004). First-, second-, and third-generation family firms: A comparison. Family Business Review, 17(3), 189–201.doi:10.1111/j.1741-6248.2004.00013.x
91.
StanleyL.KellermannsF. W.ZellwegerT. M. (2017). Latent profile analysis: Understanding family firm profiles. Family Business Review, 30(1), 84–102.
92.
StewartA.HittM. A. (2012). Why can’t a family business be more like a nonfamily business? Modes of professionalization in family firms. Family Business Review, 25(1), 58–86.
93.
VerbekeA.KanoL. (2012). The transaction cost economics theory of the family firm: Family-based human asset specificity and the bifurcation bias. Entrepreneurship Theory and Practice, 36(6), 1183–1205.doi:10.1111/j.1540-6520.2012.00545.x
WelbourneT. M.BalkinD. B.Gómez-MejíaL. R. (1995). Gainsharing and mutual monitoring: A combined agency-organizational justice interpretation. Academy of Management Journal, 38(3), 881–899.
96.
ZellwegerT.KammerlanderN. (2015). Family, wealth, and governance: An agency account. Entrepreneurship Theory and Practice, 39(6), 1281–1303.doi:10.1111/etap.12182
