Family identity and family governance

• Main Authors: Wee Liang TAN, PEI, Rong
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2016
• Subjects: Family business; family governance; family identity theory; Entrepreneurial and Small Business Operations
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/5017
• Institution: Singapore Management University

Family business governance is of great interest to researchers as the family membersby purpose and design determine if the business continues to be a family business through ownership, management, direction or influence through subsequent generations. Family business governance has primarily focused on the business sphere, examining the governanceof the corporations within the fold of a family business. The theoretical basis for corporate governance of these corporations stems from the field of finance and economics. On the family sphere, family business literature has provided case examples of family governance and best practice. Empirical research has examined the influence of family succession and selected family governance practices on corporate governance and firm performance. The perspective applied has the business as the priority: that the family governance systems are recommended for the purposes of keeping the businesses intact as family businesses. Yet this approach has put the cart before the horse because the family is central to a family business. Families, who are not well governed, are often replete with conflicts and strife, causing issues for the business. However, there has been little examination of the theoretical basis of the family governance prescriptions with the family at the forefront. Researchers have recently employed social identity theory in family business research to explore the boundaries between the family and business spheres, and to theorise the linkage between family identity and the non-financial goals of the family firms (e.g. Sundaramurthy and Kreiner, 2008; and Zellweger, Nason, Nordqvist & Brush,2013). This paper extends this stream of research. Family identity theory posits that organizational, symbolic and dynamic principles are at work in a family in the relationships and interactions resulting either in the continuity of the family or its breakdown (generativity or degenerativity). This paper seeks to explore the applicability of this theory as an explanation for family governance. Family identity theory might provide an alternative explanation or family governance mechanisms as opposed to the suggestion that they are substitutes for the corporate governance mechanisms absent from the family sphere. It argues that the family identity is key to understanding the development of family systems, particularly the informal systems that keep the family together. It argues that family governance is an outworking, or extension of family activities and characteristics that distinguish a family as a well-defined unit in society. What the “family” becomes, constrains the shape of its family governance.