Baylor University. Allison W. Pearson Jon C. Carr John C. Shaw

Transcription

1 Baylor University E T& P Toward a Theory of Familiness: A Social Capital Perspective Allison W. Pearson Jon C. Carr John C. Shaw In the search for ways in which the family firm context is unique to organizational science, the construct of familiness has been identified and defined as resources and capabilities that are unique to the family s involvement and interactions in the business. While identification and isolation of a construct unique to family firms is both groundbreaking and important for family firm research, it is also important that the development of the construct continues to be examined from complementing theoretical viewpoints. As such, we set out to review the development of the familiness construct and identify its dimensions. We also explore the nomological relationships of the construct based on a social capital theory perspective and offer a theory of familiness. Family business researchers continue to seek ways to describe how family firms are differentiated from other organizational forms. Chrisman, Chua, and Sharma (2005, p. 559) urge researchers to identify... the nature of family firms distinctions, examining if these distinctions are truly the result of the family s involvement. Researchers suggest this is the case, since... the family component shapes the business in a way that family members of executives in nonfamily firms do not and cannot (Chua, Chrisman, & Sharma, 1999, p. 22). In this search to discover how family firms uniquely differ from nonfamily firms, researchers have applied broad theoretical perspectives, such as agency theory, to better understand the family firm context. Although these approaches have increased our understanding of family business, they have yet to lead to constructs and theories that describe why certain causal relationships comprise the family aspects that exist in these firms. One notable exception is the construct known as familiness, which has emerged as a concept uniquely related to family business research. Habbershon and Williams (1999) first introduced the term familiness, describing it as... the idiosyncratic firm level bundle of resources and capabilities resulting from the systems interactions (Habbershon, Williams, & MacMillan, 2003, p. 451). Chrisman, Chua, and Litz (2003) later described the concept as... resources and capabilities related to family involvement and interactions (p. 468). Familiness is proposed as a Please send correspondence to: Allison W. Pearson, tel.: ; allison.pearson@msstate.edu, to Jon C. Carr, tel.: ; jon.carr@usm.edu, and to John C. Shaw, tel.: ; jshaw@msstate.edu 949

2 source of competitive advantage, generating firm wealth and value creation. For our purposes, distinctive familiness describes the positive influence of family involvement in the firm. Due to the broad nature of the construct, it is necessary to identify the unique family resources and capabilities that constitute familiness before substantive relationships are explored. Additionally, the familiness definition should be reviewed, identifying the relationships that relate to its application. While the familiness concept is in its infancy, construct clarity is required before future research can unfold (Chrisman, Chua, & Steier, 2005). We adopt a social capital perspective to provide definitional clarity for identifying the behavioral and social resources that constitute familiness. Relationships in the family firm result from enduring interaction and involvement of the family (Chrisman, Chua, & Steier, 2005), and we use social capital theory to explain how familiness is created. Social capital theory provides a framework to identify the unique behavioral resources and capabilities of family firms, as well as the antecedents of social capital unique to family firms. Therefore, the purpose of this article is to: (1) examine the definition and dimensions of familiness for adequate content validity; (2) identify the theoretical antecedents and outcomes of the familiness construct based upon previous theoretical perspectives (Habbershon & Williams, 1999); and (3) extend our knowledge of familiness by using social capital theory to create a theory of familiness, identifying the behavioral and social resources and capabilities unique to family firms. Examination of the Familiness Construct In addition to Habbershon and Williams (1999) conceptualization of familiness, the construct has been theoretically developed and empirically tested in a variety of work (see Table 1). Generally, familiness is used as an explanation of various relationships within family businesses, or as a means to discriminate between family and nonfamily firms. These studies point to the various ways that familiness has been conceptualized previously and the difficulty in clarifying its specific characteristics. To further examine the concept of familiness, we adopt criteria used for construct development. Criteria for Defining the Familiness Construct A construct is defined as...a broad mental configuration of a given phenomenon (Bacharach, 1989, p. 500) or as... terms which though not observational either directly or indirectly, may be applied or even defined on the basis of observables (Kaplan, 1964, p. 55). Constructs should be both sufficient and parsimonious in their representation of the domain of interest (Bacharach). If the construct is intended for scientific study, it is necessary to identify possible linkages between the construct and other related constructs, which are referred to as the nomological net (Cronbach & Meehl, 1955). The nomological net is used to draw inferences about constructs and construct validity (Schwab, 1980). The development of the nomological net represents the essence of theory building, allowing for more theoretically driven interpretation, measurement, analysis, and ultimately generalizations to a field of study. To foster theory building, we begin with an examination of the elements of the familiness construct. 950 ENTREPRENEURSHIP THEORY and PRACTICE

3 Table 1 Examples of Familiness Research Research study Theoretical viewpoint(s) Research conclusions Craig and Moores (2005) Evolutionary theory Describe familiness as a core essence of family firms and integrate the concept into a strategic balanced scorecard approach Ensley and Pearson (2005) Top management team and social capital theory Group dynamics of family firms are defined by interactions of the top management team; familiness is positively related to group dynamics Hayton (2006) RBV of the firm and systems theory Familiness as it related to successful or unsuccessful HR practices for family versus nonfamily firms Lester and Canella (2006) Social capital theory Interorganizational familiness as reflected in the broad linkages that create and support family firms Ram and Holliday (1993) Family sociology Familiness represents the social relationships of the family, reflected in the flexibility and constraints created within the workplace Tokarczyk, Hansen, Green, and Down (2007) RBV of the firm Qualitative study, which links familiness as a competitive advantage through improved market orientation RBV, resource-based view. Nature and Scope of the Familiness Construct Domain According to Habbershon et al. (2003), familiness refers to the idiosyncratic bundle of resources and capabilities possessed by family firms. While resources are defined as a set of assets and attributes that reside within the firm, capabilities are viewed as... a special type of resource specifically, an organizationally embedded, nontransferable, firmspecific resource whose purpose is to improve the productivity of other resources (Makadok, 2001, p. 389). Further, Habbershon et al. conclude that it is the systematic interaction and involvement of family, business, and individual family members that create these unique resources and capabilities. The construct domain of familiness therefore encompasses the intersection of the family and the business that is often included in models of family firms (e.g., Gersick, Davis, Hampton, & Lansberg, 1997). Additional components of the construct to review include the level of analysis, dimensionality, and temporal stability of the construct. Level of Analysis, Dimensionality, and Temporal Stability In assessing the familiness construct, the level of analysis could be the family, organization, the dominant coalition, or groups within the family firm. However, in their definition, Habbershon et al. (2003) identify the... firm-level bundle of resources and capabilities (p. 451). Thus, we will assess the construct at the firm level, as well as other levels of analysis if specified by theory. Although no specific dimensions of the familiness construct are identified in the definition, the concept likely includes multiple dimensions of resources and capabilities. Accordingly, we will attempt to identify the multiple dimensions of unique resources and capabilities of familiness. Finally, the definition of familiness does not include a temporal element. Is the construct stable over time? Does the passage of time increase or decrease familiness? Will 951

4 familiness increase or decrease with succession to future generations? Hence, the chronological nature of familiness will be considered in the evaluation of the construct. Underlying Theoretical Perspective The resource-based view (RBV) of the firm (Barney, 1991; Makadok, 2001) is the original theoretical basis for the familiness construct. A broad overview of the RBV suggests that unique bundles of resources and capabilities serve as a source of competitive advantage for the firm (Habbershon & Williams, 1999). To establish the inseparability and synergy created by the unique resources and capabilities of family firms, Habbershon et al. (2003) ground the familiness construct in systems theory. While these theoretical perspectives are useful in identifying the role of familiness in creating competitive advantage for the firm, they fail to illuminate the specific components of the construct. Instead, Habbershon and Williams combined the descriptive attributes of family firms often suggested in the literature but not always scientifically linked to predict enhanced organizational performance. Chrisman, Chua, and Steier (2005, p. 238) later noted that... we do not yet fully understand sources or types of familiness. In sum, vaguely specified relationships between familiness and other factors suggest that its nomological net requires further development. Nomological Net of the Familiness Construct Providing only a basic outline of the nomological relationships of familiness to other contructs, Habbershon and Williams (1999) use RBV to explain how familiness leads to a competitive advantage, and, subsequently, to enhanced organizational performance or wealth creation. Chrisman et al. (2003) suggest that the degree of familiness within the family firm will also lead to noneconomic performance outcomes, such as the preservation of family ties or transgenerational value creation. Lansberg (1999) notes that the vision of the family firm often includes a social mission in addition to profit-seeking goals. This extension of the familiness organizational performance relationship is an important distinction. According to these researchers, the performance dimension of wealth does not distinguish family firms from nonfamily firms. However, it may be through the process of value creation that this distinction becomes evident (Chrisman et al., 2003). Chua et al. (1999) argued that value creation is an important and unique outcome for family: The family business is a business governed and/or managed with the intention to shape and pursue the vision of the business held by a dominant coalition controlled by members of the same family or a small number of families in a manner that is potentially sustainable across generations of the family or families (p. 25). In other words, the family firm pursues both economic and noneconomic outcomes to sustain the business across future generations. While we have clarified the performance outcomes associated with familiness, the specific resources and capabilities that constitute the construct still remain unspecified. Figure 1 illustrates the general RBV model of familiness, including the black box of familiness resources and capabilities. According to Habbershon and Williams (1999),... if we believe that family managers are a competitive advantage to family firms, then we must determine (1) what type of resource they are, and (2) under what conditions they add value (p. 10). The authors give several examples of how family firms possess unique resources, such as: (1) family history is imperfectly imitable; (2) informal decision making in the family is socially 952 ENTREPRENEURSHIP THEORY and PRACTICE

5 Figure 1 Resource-Based View Model of Familiness Black Box of Familiness Family Firm Resources Family Firm Capabilities Competitive Advantage Performance Wealth Creation Value Creation complex; and (3) families operate from embedded routines that create causal ambiguity. However, these possible resources are only examples of what might be construed as familiness. They further note,... the strategically relevant behavioral and social phenomena inside a firm must be designated as resources, capabilities, and competencies so that competitive consequences can be understood in the light of the strategic and competitive context within which the firm operates (p. 13). To identify the behavioral and social resources included in familiness and to expand the nomological net, additional theoretical insights are necessary. In summary, we reviewed the definitions of familiness to explore the domain of the construct, as well as levels of analysis issues, dimensionality, and stability. We also evaluated the key theoretical perspective that underlies the familiness construct. This examination has revealed opportunities to further elaborate the construct of familiness consistent with guidelines for sound theory development (Bacharach, 1989). Table 2 summarizes the construct development opportunities for familiness, indicating those areas which have received theoretical consideration, as well as areas requiring further work before theory development can occur. Several conclusions can be drawn from Table 2. First, the development of the familiness construct from an RBV viewpoint presents difficulties with regard to the identification of the specific characteristics and measurement associated with it. This is not unique to familiness, as other critiques of RBV have highlighted the inability to parameterize aspects of a firm (see Priem & Butler, 2001). The RBV is also criticized for a general lack of specificity (Hoopes, Madsen, & Walker, 2003), an overly broad definition of resources that has led to fragmented research (Armstrong & Shimizu, 2007), and a lack of clarity regarding the basic premises of the theory (Hoopes et al.). Such criticisms lead Priem and Butler to conclude that considerable conceptual work remains before the RBV can meet the requirements of theoretical structure (p. 34). However, a key purpose of this research is to develop a theoretical extension of familiness, using existing theoretical and empirical research to parameterize this construct within an RBV framework. Finally, this review highlights how existing conceptualizations of familiness provide clues to possible theoretical extensions that may serve to extend this line of inquiry. To overcome the limitations posed by RBV as the theoretical basis of familiness and to provide an extension to the conceptualization of the construct, it is necessary to identify additional theory to guide the exploration of certain unresolved issues, such as the identification of the unique resources that are dimensions of the familiness construct, specifically those related to behavioral and social aspects of family firms. Additionally, the construct s nomological net requires further clarification. In this vein, Habbershon and Williams (1999) conclude that... it is the conditions and antecedents of distinctive familiness that researchers ultimately need to identify (p. 13). We adopt social capital 953

6 Table 2 Evaluation of the Familiness Construct Criteria for construct definition Familiness construct: what we know Familiness construct: what we do not know 1. Nature and scope of the construct domain Defined as the idiosyncratic firm level bundle of resources and capabilities resulting from the systems interactions (Habbershon et al., 2003, p. 451). Initially defined as the bundle of resources that are distinctive to a firm as a result of family involvement (Habbershon & Williams, 1999, p. 1). What are the specific resources and capabilities? unique; embedded; and nontransferrable. What are the specific behavioral and social resources? 2. Level of analysis Specified as firm level Are there additional levels of analysis that should be considered? 3. Dimensionality Habbershon and Williams (1999, p. 13) suggest that resources will reflect dimensions related to strategically relevant behavioral and social phenomena. What are the behavioral and social aspects of family firms that create familiness resources and capabilities? 4. Stability Family history is noted as an example of a resource, suggesting that the temporal nature of family development may be essential to the development of familiness. 5. Theoretical perspective RBV upon which the construct is based 6. Nomological net The RBV suggests that family firm resources lead to competitive advantage and subsequently to firm performance, both wealth and value creation. What theory can capture the family history aspect and guide the temporal aspects of familiness? What theory in addition to RBV may elaborate on the specific, unique resources that family firms generate? What theory can guide identification of antecedents and additional outcomes of familiness? RBV, resource-based view. theory to identify the specific behavior and social resources of the family firm, as well as the antecedents and outcomes of familiness. Toward a Theory of Familiness Social Capital Theory Social capital is a broad theory, described by some as an umbrella concept (Hirsch & Levin, 1999). According to Adler and Kwon (2002), the social capital of a collectivity is in its internal structure in the linkages among individuals or groups with the collectivity and, specifically, in those features that give the collectivity cohesiveness and thereby facilitate the pursuit of collective goals (p. 21). In general, social capital is defined as... the sum of the actual and potential resources embedded within, available through, and derived from the network of relationships possessed by an individual or social unit (Nahapiet & Ghoshal, 1998, p. 243). Using an organizational perspective, Leana and Van Buren (1999) contend that social capital reflects the character of social relationships within the organization, realized through members levels of collective goal orientation and shared trust (p. 540). Stemming from the theory s collective and shared character, social capital likely has a strong influence on the flow of information and collective action of groups. Social 954 ENTREPRENEURSHIP THEORY and PRACTICE

7 capital is by definition socially complex, related to norms, values, cooperation, vision, purpose, and trust that exist in the family firm. Considered a deeply embedded resource, social capital in the family firm is tacit in nature and extremely difficult for competitors to imitate (Dess & Shaw, 2001). Specifically, family history serves as a unique historical condition that influences familiness, making family firms social capital imperfectly imitable. As such, social capital theory is particularly relevant to the study of familiness and can provide a useful framework for examining its effects on the antecedents of familiness, as well as the specific behavioral and social resources that comprise the construct. Social capital theory has been applied in numerous disciplines to examine a variety of collective social relationships, including families (Burt, 1997; Coleman, 1990), work teams (e.g., Leana & Van Buren, 1999; Oh, Labianca, & Chung, 2006), and business entities (e.g., Leana & Van Buren; Oh et al.). In the following paragraphs, we provide a brief description of social capital theory, and then use the theory to construct a model that complements the RBV perspective of familiness. To integrate social capital theory with the familiness construct, we synthesize several theoretical and empirical works presented in the literature. For example, Nahapiet and Ghoshal (1998) perceive social capital as an antecedent to intellectual capital and competitive advantage. Leana and Van Buren (1999) examine social capital in a work-oriented collective the nonfamily firm. Dess and Shaw (2001) further explore social capital in organizations and propose specific relationships between social capital, turnover, and organizational performance. Oh et al. (2006) introduce the concept of group social capital. Recently, Arregle, Hitt, Sirmon, and Very (2007) applied social capital theory to describe the creation of social capital and its transformation to organizational social capital. From a process perspective, the authors argued that the development of family social capital is accomplished through the influence of four dynamic factors, including stability (i.e., time), interaction, interdependence, and closure. Together, these factors affect the flow of social capital into the family firm, which in turn influences the development of organizational social capital. The framework includes several mechanisms that describe the effect of family social capital on the development of organizational social capital: institutional isomorphism, organizational identity and rationality, human resource practices, and overlapping social networks. Drawing on the work of Adler and Kwon (2002), the scholars define social capital as the relationships between individuals and organizations that facilitate action and create value (p. 75). However, Arregle et al. emphasize the process that influences the creation and development of family social capital rather than the content of social capital. Accordingly, the scholars examine the interactions between the family and the organization in order to understand the transformation of family social capital to organizational social capital, regarded as a critical resource reflecting the character of social relations within the firm (Arregle et al.; Leana & Van Buren, 1999, p. 538) that can contribute to a competitive advantage. Whereas Arregle et al. (2007) explore the influence of familiness on organizational social capital development from a process perspective, our theoretical model focuses on the identification of the components that make up familiness. While Arregle et al. draw attention to family interactions themselves, we broadly define familiness with respect to the resources and capabilities that are derived from the involvement and interactions of family relationships. Specifically, our conceptual framework views familiness as originating from the intersection of the family and the business rather than a sequential relationship as proposed by Arregle et al. Additionally, we suggest that in a family firm, the family and the business do not exist as distinct entities, but, instead, are enmeshed with 955

8 one another, creating a complex, interactive web of relationships encompassing both the family and the firm. Moreover, we contend that familiness arises from the synergies among the behavioral and social resources contained within this system. In summary, the conceptual framework proposed by Arregle et al. answers the critical how question, whereas our theoretical model answers the what question, both of which are needed for sound theory development (Whetten, 1989). We rely on and draw from existing works to identify social capital behavioral and social resources that are consistent with our definition of familiness idiosyncratic bundles of resources and capabilities that result from the involvement and interaction of the family in the firm. We specifically focus on social capital, as it applies to the intersection of family and business, rather than a sequential approach family social capital leads to organizational social capital, or a simply additive approach family social capital plus organizational social capital. We contend that the synergies among the family firm s behavioral and social resources and the resulting capabilities that result represent the heart of family firm social capital namely, familiness (Habbershon et al., 2003). Finally, we adopt an internal view of social capital. The internal view of social capital focuses on capital within the collective rather than external ties outside of the collective. Internal linkages among individuals and groups within the collective include features that contribute to cohesiveness and foster collective action (Adler & Kwon, 2002). Rather than an individualist, opportunistic approach, the internal view emphasizes the collective good as the outcome of social capital. As such, we believe the internal view of social capital is most consistent with the familiness concept of interaction and involvement of the collective family. Our basic model of the social capital components of familiness is shown in Figure 2. This model identifies the three dimensions of social capital that represent the behavioral and social resources of the family firm together with the capabilities that result from these resources. Figure 2 A Social Capital Perspective of Familiness: Family Firm Resources and Capabilities Family Firm Resources Structural Dimension Network Ties Appropriable Org. Cognitive Dimension Shared Vision Shared Language Relational Dimension Trust Norms Obligations Identification Family Firm Capabilities Information Access Efficient Action Exchange Associability Collective Goals Collective Actions Emotional Support Source: Adapted from Leana and Van Buren (1999), Nahapiet and Ghoshal (1998), and Tsai and Ghoshal (1998). 956 ENTREPRENEURSHIP THEORY and PRACTICE

9 A Social Capital Theory of Familiness Social capital is conceptualized as consisting of three dimensions structural, cognitive, and relational (Nahapiet & Ghoshal, 1998) that we, in turn, propose as the specific elements of familiness resources. That is, we propose that the structural, cognitive, and relational dimensions of social capital constitute the... strategically relevant behavioral and social phenomena inside a firm (Habbershon & Williams, 1999, p. 13). Family firm capabilities serve as an additional dimension of the familiness construct. These capabilities are the result of the idiosyncratic combination of the structural, cognitive, and relational dimensions of resources related to the familiness construct. Next, we define the dimensions and explain how family firms possess each. The Structural Dimension of Familiness The structural dimension of familiness is defined as the social interactions, including the patterns and strength of ties, among the members of a collective. In addition, the structural dimension contains the density and connectivity of social ties, as well as members ability to use and re-use social networks. Of particular importance to family firms is the concept of the appropriable organization a term Coleman (1988) used to describe how ties among one group could easily be transferred to another. Research suggests that the structural ties of family can and do transcend ties found in the organization (Arregle et al., 2007). It is at this point the appropriable organization that family and organizational social capital merge and create the potential for abundant social capital unique to the family firm. As a result of established patterns of interactions and involvement, families likely possess an abundance of internal network ties that are appropriable to the family firm. In contrast, individuals employed in nonfamily firms often bring few, if any, preexisting network ties to the workplace. Family firms, then, may have an advantage over nonfamily firms in the creation of structural social capital due to existing and familiar network ties. The Cognitive Dimension of Familiness The cognitive dimension of social capital includes... resources providing shared representations, interpretations, and systems of meaning among parties (Nahapiet & Ghoshal, 1998, p. 244). The cognitive dimension of social capital comprises the group s shared vision and purpose, as well as unique language, stories, and culture of a collective that are commonly known and understood, yet deeply embedded. Shared vision functions as a bonding mechanism that allows for shared communication and integration of ideas (Tsai & Ghoshal, 1998). The vision of the family firm... endows the family enterprise with meaning it conveys a profound explanation for why continuing the business is important to the family (Lansberg, 1999, p. 76). The shared purpose of both the family and firm merge to create the collective understanding that is necessary for the family to maintain collaboration and achieve long-term family goals. As such, the cognitive dimension of social capital is unique in family firms, because it is often deeply embedded in the family s history. 957

10 Relationships Between Structural and Cognitive Dimensions Tsai and Ghoshal (1998) propose that the structural dimension, including the strength of ties among members, is an antecedent to both the relational and cognitive dimensions. In short, individuals must first have shared experiences and interactions over time to develop trust, norms, and identity, as well as to believe in a common vision and purpose, which is expressed in unique language and ideas. Likewise, the cognitive dimension, including the shared purpose, vision, and language, serves as an antecedent to the relational dimension. A shared vision may lead to collective trust and norms for fulfillment of the common purpose of the family firm. Collective goals result from shared vision and serve to minimize individualistic and opportunistic behaviors (Ouchi, 1980). Both the structural and cognitive dimensions are proposed as antecedents of the relational dimension of familiness. The relational dimension is the key link between familiness resources and corresponding capabilities that are derived from these relationships. Structural social capital can lead to organizational processes and capabilities. The network ties of the structural dimension of social capital serve as the conduit for access to additional resources (Nahapiet & Ghoshal, 1998). For instance, ties among individuals provide access to information and information channels. For a collective, strong ties create the opportunity to function as a whole or team (Adler & Kwon, 2002), and can provide the structure for accessing additional benefits, such as emotional support and identification with the collective (Oh et al., 2006). The Relational Dimension of Familiness The relational dimension of social capital consists of the resources created through personal relationships, including trust, norms, obligations, and identity (Nahapiet & Ghoshal, 1998). These personal bonds create unique and often lasting attachments among individuals in a collective that influence behavior, such as cooperation, communication, and commitment to a common purpose. Trust and Familiness The relational dimension of social capital provides necessary elements to link firm resources and capabilities. For example, when individuals trust each other, they are more likely to cooperate and willingly participate in the collective actions of the firm (Fukuyama, 1995). Additionally, trust is an essential component of effective collaboration (Leana & Van Buren, 1999). The type of trust that exists in the firm has implications for the linkages between trust, organizational processes, and capabilities. Trust has been characterized along two subdimensions: fragile and resilient trust (Leana & Van Buren, 1999). Fragile trust is given in exchange for the possibility of fairly immediate rewards. Fragile trust, which is more dependent on formal rules of allocation, does not provide a strong link to the organizational capabilities of information flow and collective action. On the other hand, resilient trust is based on frequent social interaction with parties and is where the moral integrity of the parties is involved (Leana & Van Buren). This form of trust provides a more powerful link to organizational processes and capabilities. According to Dess and Shaw (2001), resilient trust creates expectations that bind individuals to groups (p. 451). 958 ENTREPRENEURSHIP THEORY and PRACTICE

11 Family firms are fertile grounds for resilient trust. As family relationships grow and mature over time, the recurring interaction and interdependence among members builds resilient trust (Arregle et al., 2007). Alternatively, in nonfamily firms, institutionalized policies of reward and exchange may only create fragile trust, which provides a weak link to organizational processes and capabilities as compared with resilient trust. Norms and Obligations Norms represent agreement on actions in the social system (Nahapiet & Ghoshal, 1998). Norms of cooperation, openness, and teamwork strengthen the collective actions of the firm by helping to establish other norms such as the norm of reciprocity (Dess & Shaw, 2001). The norm of reciprocity helps shift individuals from a self-seeking focus to a collective action focus (Adler & Kwon, 2002). Lansberg (1999) identifies norms that are often found in the family firm. He notes that in addition to norms of behavior regarding profitability, family firms often have norms for being collaborative, successful families. These norms include egalitarianism, teamwork, and a focus on developing synergy from the collaboration and integration of the family in the business. Norms in the family firm also serve to influence firm-level decision making and create unique familial influences on the firm across generations (Sharma & Manikutty, 2005). Obligations are necessary for complimentary, reciprocal, and collective actions. Organizations with strong social capital possess mutual commitment arising from obligations that serve to foster relationships among members. Relational contracts and norms form a dynamic pattern of obligation in organizations that is stronger and more powerful than behavior resulting from formal rules, policies, and transactional agreements (Leana & Van Buren, 1999). Unique to the family firm are the obligations to both the family and the business enterprise (Gersick et al., 1997). Over time, obligations to family create stability in network ties. The old saying, you can t fire family, represents the enduring social ties and obligations that exist in family firms. Such ties and obligations are less likely to exist in nonfamily firms. Identification Identification is where individuals see themselves as part of the collective. Strong group identity is a catalyst for information exchange and cooperation (Nahapiet & Ghoshal, 1998). Without strong identification, individuals may be far less willing to cooperate, communicate, and share knowledge and information. Family identity is often a strong, enduring social force. Citing a Wall Street Journal report, Lansberg (1999) describes how approximately 25% of family business owners who sold their firms later tried to buy them back. The motivation to reclaim the family firm arose from the owners realizing, only too late, how closely their identities were tied to the family enterprise. How does the relational dimension relate to the family firm? The very goals of value creation, as opposed to purely economic wealth creation, are likely a result of the relational dimension of social capital that is unique in family firms. Relational social capital trust, norms, obligations, and identity is essential in the family firm to identify and pursue not only economic goals, but value creation goals specific to the family as well. These goals are ultimately realized as the family firm s capabilities are enhanced by the presence of the familiness resources within the family firm. 959

12 Organizational Capabilities Dimension The simultaneous presence and strength of the structural, cognitive, and relational dimensions of social capital lead to organizational processes or capabilities that are advantageous for superior firm performance, and, in particular, to family firm value creation. One of the primary organizational capabilities enhanced through social capital is the efficient exchange and combination of information. Social relationships and strong ties provide the informal structure for efficient information flow. Social capital facilitates access to broader sources of information and improves information quality, relevance, and timeliness (Adler & Kwon, 2002, p. 28). Social capital then allows information to bypass formal lines and units, transcending the formal rules, policies, and procedures of organizations. Social capital also encourages cooperative action. Leana and Van Buren (1999, p. 541) use the term associability to refer to the... willingness and ability of participants to subordinate individual goals and associated actions to collective goals and actions. Associability results, in part, from a high degree of interdependence among members, as well as from general understandings of work organization, implicit norms, and generalized, resilient trust (Leana & Van Buren, 1999, p. 549). Lansberg (1999) identifies discussion and interaction as necessary components for a family firm to develop a cohesive, value-driven purpose. The family firm s special circumstances create greater opportunities for sharing information and working collectively in the family firm. In summary, we described four dimensions of familiness from a social capital perspective that help define what aspects of familiness can be examined within family firms. The specificity of our proposed dimensions allows researchers to develop empirical measures that can be used to capture the familiness construct in family firms. Additionally, this social capital perspective can provide clues to the conditions that can encourage or discourage the creation of familiness within the firm. Social Capital Development Conditions We have proposed that familiness consists of three resource-related dimensions of social capital (i.e., structural, cognitive, and relational) and that these dimensions create family firm capabilities, such as efficient information access and exchange, as well as collective actions. In addition to addressing dimensionality, we need to also focus on how familiness social capital emerges in firms the antecedent conditions that help create familiness. Antecedent conditions to the creation of social capital include (1) time/stability; (2) closure; (3) interdependence; and (4) interaction (Arregle et al., 2007; Nahapiet & Ghoshal, 1998). We argue that these antecedent conditions for the development of social capital are what family firms do best, and, as such, family firms have the potential to develop dense and highly valuable social capital more effectively than other firms. Time/Stability Social capital is derived from lasting investments in social relationships (Bourdieu, 1986) and requires a significant amount of time to develop and grow (Coleman, 1988). Since it takes time to build trust, relationship stability and durability are key network features associated with high levels of trust and norms of cooperation (Nahapiet & 960 ENTREPRENEURSHIP THEORY and PRACTICE

13 Ghoshal, 1998, p. 257). The length and stability of relationships are also precursors to mutual obligation and cooperation (Misztal, 1996). The family s existing structure and long-standing internal relationships help build the stability necessary to generate social capital. Families bring with them into the economic decisions associated with a business both a shared history over time and relatively durable, lasting relationships. Family is often considered the primary influence on shaping lifelong values, with each subsequent generation adopting a portion of the parental values (Giddens, 1984). These values and other family influences over time shape the family firm s vision, norms, and patterns of behavior. The vision of the family firm is often deeply personal to the family and emerges over a period of years through the presence of interaction and determination of the family (Lansberg, 1999). The long-term goals of stability of the family nucleus and preservation of the family in the firm are often the primary objectives of family firms (Arregle et al., 2007). Additionally, the family social group undergoes change at a slower rate than other firms, such that ownership of family firms is more stable over time (Arregle et al.). Alternatively, nonfamily firms have no preexisting shared past history or relationship stability. Newly formed organizations must create social capital where none exists (Leana & Van Buren, 1999, p. 540). Lastly, organizations operating from a purely economic basis are less likely to have a history that can build enough social capital to develop collective actions (Leana & Van Buren). Closure Dense social capital results, at least partially, from boundaries to the collective called closure (Nahapiet & Ghoshal, 1998). Closure can be interpreted loosely as the degree to which boundaries exist, which prevent external influences and enhance internal focus on such management activities as information sharing and decision making. Closure establishes not only the boundaries of social networks, but also the uniqueness of the social capital context. Closure facilitates the development of norms, trust, and identity (Coleman, 1990). Hence, the closure of social networks is necessary for development of internal social capital. Arregle et al. (2007) argue that closure is particularly strong for family firms. Birley s (2001) categorization criteria for in-cluster family firms those with a strong internal focus is an example of the high closure, dense social capital within these firms. Closure is accomplished in family firms by such actions as: (1) involving children in the business at early ages; (2) keeping the founder and older generations actively involved in the business; and (3) maintaining ownership and management of the firm following family bloodlines. On the other hand, in nonfamily firms, sufficient closure is often never achieved or severely damaged with excessive turnover and/or additions to the organizations (Leana & Van Buren, 1999). Without sufficient closure in the collective, valuable social capital may not develop. Interdependence High levels of mutual interdependence drive social capital formation (Nahapiet & Ghoshal, 1998). Conversely, social capital is diminished when individuals are less dependent upon one another (Coleman, 1990). Interdependence is largely a function of the joint and shared interests and the agreement toward shared goals that members of a collective 961

14 have (Gersick et al., 1997). Leana and Van Buren (1999) argue that for social capital to contribute to organizational capabilities of collective action, it must be jointly owned by interdependent actions of the organizational members. By the very nature of family firms, interdependence within the social structure is likely to be higher than in less stable social structures of nonfamily firms. The presence of siblings, parents, cousins, and other family throughout life create a recurring opportunity for both interdependence and interaction. Lansberg (1999) argues that such interdependence among family members can lead to unique capabilities for the family firm. Interaction Interaction is an antecedent of social capital formation and necessary for the maintenance of social capital (Bourdieu, 1986). While interdependence shapes the degree to which vision and goals are developed and shared among group members, interaction reflects the quantity, quality, and strength of those relationships among group members. Social ties and relationships tend to be strengthened with interaction and weakened without it. Firms operating from a purely economic, wealth creation perspective may have a tendency to operate with less emphasis on social structure and interaction, and greater emphasis on impersonal relations and transactions. In the absence of interaction, social capital cannot effectively develop (Adler & Kwon, 2002). Family firm members, particularly those in the family, may continue to interact and facilitate ties and relationships long after working hours. Frequent and close social interactions permit actors to know one another, to share important information and to create a common point of view (Tsai & Ghoshal, 1998, p. 465). As such, family firms may produce more social capital. Our full model of familiness, including the dimensions and antecedents of social capital, is shown in Figure 3. The social capital dimensions and antecedents are embedded into the basic RBV model of familiness to denote the unique behavioral and social resources of the family firm. Additionally, we include value creation (Chrisman et al., Figure 3 A Social Capital Model of Familiness: Family Firm Interaction/Involvement as Unique Developmental Conditions for Social Capital Social Capital Development Conditions: Family Firm Systematic Interaction and Involvement Time and Stability Interdependence Interaction Closure Family Firm Social Capital Resources Structural Dimension Network Ties Appropriable Org. Cognitive Dimension Shared Vision Shared Language Relational Dimension Trust Norms Obligations Identification Family Firm Capabilities Information Access Efficient Action Exchange Associability Collective Goals Collective Actions Competitive Advantage Family Firm Wealth and Value Creation Source: Adapted from Arregle et al. (2007), Leana and Van Buren (1999), Nahapiet and Ghoshal (1998), Oh et al. (2006), and Tsai and Ghoshal (1998). 962 ENTREPRENEURSHIP THEORY and PRACTICE

15 2003) as a key organizational performance dimension for family firms. As such, we hope we have added clarity to the components of family firm resources and capabilities that create unique competitive advantage, and in turn, contribute to the wealth and noneconomic value creation goals of the family firm. These unique behavioral and social resources are familiness. Discussion and Conclusion We set out to explore the family firm construct of familiness. As one of only a few constructs unique to the field of family firm research, further development of this important construct is needed to develop a theory of familiness based on social capital theory. Focusing on the intersection of family and business, we identify the behavioral and social resources that result from family interaction and involvement in the business, called familiness. Familiness may result in organizational performance outcomes that go beyond economic performance. Value creation (Chrisman et al., 2003) is identified as the organizational performance dimension most closely aligned with family interaction and involvement in the firm. Social capital theory then guides our elaboration of the unique behavioral and social resources and capabilities found in family firms. Antecedents of social capital are explored and assessed to determine how family firms provide a unique context for the creation of social capital. Finally, these ideas are integrated and synthesized with a variety of social capital theoretical works to create a social capital model of familiness. Our examination of the familiness construct and social capital model of familiness contributes to family firm research in four ways. First, we applied construct development guidelines to the examination and review of the familiness construct (Schwab, 1980). This type of examination is necessary for the sound development of one of the few unique constructs in family business literature. Further, it would be inappropriate and careless to delve into theory building without first ensuring the soundness of the central construct, in this case, familiness. Second, we identified areas of the familiness construct definition that need further elaboration before substantive theory building could proceed. Our examination concluded that the unique behavioral and social resources that constitute familiness have not been identified, and the nomological net of familiness has not been sufficiently conceptualized. In prior research, the familiness construct has been loosely defined and operationalized, creating generalization problems from study to study. Without adequate construct definition, including identification of the resources and capabilities of familiness, as well as antecedents and outcomes, scientific inquiry using the construct would continue in a haphazard fashion. Third, drawing from a social capital perspective, the specific behavioral and social resources that constitute familiness are identified. The structural, cognitive, and relationship dimensions of social capital serve as the behavioral and social resources that constitute familiness. We identify how family firms uniquely possess these familiness resources. In addition, behavioral and social capabilities of information access and associability are identified as unique to family firms. The adoption of social capital theory as an additional theoretical basis of familiness allowed greater definitional clarity than that provided by the RBV. Finally, using social capital theory as a guide, four antecedents of the familiness construct are identified time, interdependence, interaction, and closure. We explored how family firms are uniquely able to create dense social capital from these antecedents. 963