Defining the Family Business by Behavior

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Authors: Jess H. Chua, James J. Chrisman and Pramodita Sharma
Date: Summer 1999
From: Entrepreneurship: Theory and Practice(Vol. 23, Issue 4)
Publisher: Sage Publications, Inc.
Document Type: Article
Length: 7,584 words

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In their editorial note in the first issue of Family Business Review, Lansberg, Perrow, and Rogolsky (1988) asked: what is a family business? The question continues to be asked because definitions of family business abound in the literature (Desman & Brush, 1991) and definitional ambiguities persist (Upton, Vinton, Seaman, & Moore, 1993).

Researchers generally agree that family involvement in the business is what makes the family business different (Miller & Rice, 1967). Most researchers interpret family involvement as ownership and management (Handler, 1989). Churchill and Hatten (1987) prefer to add to this the existence of a family successor. One could interpret this to imply that the family-owned and operated ethnic restaurant or farm, where the next generation is being educated to become professionals rather than to continue in the restaurant or farm business, is not a family business. If we accept this, we would then have to exclude from the family business literature all empirical studies based on such firms.

Family firms themselves do not do better. In interviews we conducted with family business managers, the CEO of a firm with minority public shareholders and managed by a family for three generations denies that it is a family business while another with similar attributes declares itself to be one. Members of the same family who, together, fully own and manage the business vehemently argue that theirs is not because they believe that only a business fully owned by the family and without a single non-family worker is a family business. Meanwhile, siblings and in-laws who own and govern but do not manage another insist theirs is.

No business can escape some family involvement because even the decisions of a widely held corporation's CEO are influenced sometimes by the spouse and children. Definitions based on the components of family involvement - management, ownership, governance, and succession - are easy to operationalize. Unfortunately, they cannot distinguish between two firms with the same level of family involvement when one considers itself a family business and the other does not. Therefore, there is a need to develop a definition that captures the essence of the family business and, as such, may be used to distinguish the family business, in theory, research, and practice, from the non-family business.

In this paper, we first review the literature on the definitions of a family business. We then propose a theoretical definition based on a firm's intention and vision. We believe that this definition captures the essence of a family business.

We examine the operational definitions used in the literature against our theoretical definition both conceptually and empirically. Conceptually, by identifying the overlaps and discrepancies, it appears that family businesses will be a subset of the populations identified by all except one of these operational definitions. The implication for empirical research is that data on a firm's intentions and vision must be collected to properly identify which are the family businesses within a sample delineated by the components of family involvement.

Empirically, we test how well the components...

Source Citation

Source Citation
Chua, Jess H., et al. "Defining the Family Business by Behavior." Entrepreneurship: Theory and Practice, vol. 23, no. 4, summer 1999, p. 19. Accessed 30 Sept. 2022.
  

Gale Document Number: GALE|A57590765