Bound by Laws, or by Values? A Multi‐Level and Cross‐National Approach to Understanding the Protection of Minority Owners in Family Firms

• Author: Charles E. Stevens,Roland E. Kidwell,Robert Sprague
• Published date: 01 May 2015
• DOI: http://doi.org/10.1111/corg.12089
• Date: 01 May 2015

Bound by Laws, or by Values? A Multi-Level

and Cross-National Approach to Understanding

the Protection of Minority Owners in

Family Firms

Charles E. Stevens,* Roland E. Kidwell, and Robert Sprague

ABSTRACT

Manuscript Type: Conceptual

Research Question/Issue: How do f‌irm-level attributes and country-level institutions affect cross-national and f‌irm-level

differences in how minority owner rights in family f‌irms are protected?

Research Insights: We consider differences in family dynamics,stewardship-oriented organizational culture, and countries’

legal and cultural dimensions to develop theory predicting differences in minority owner protection in family f‌irms. We

advance propositions and a model delineating the role of these key f‌irm-level and country-level constructs.

Theoretical/Academic Implications: We contribute to the literature in three ways: (1) We illustrate the importance of family

dynamics for predicting the likelihood of a stewardship-oriented culture to emerge in a family f‌irm; (2) our multi-level and

cross-national approach extends earlier explanations of agency and stewardship that are centered at the f‌irm, family, and

individual levels of analysis; and (3) we consider the impact of cross-cultural dimensions on family f‌irms, an area that has

received limited attention in the literature.

Practitioner/Policy Implications: Our research implies that individuals considering becoming a minority owner in a family

f‌irm should take into account not onlythe legal institutions of that country (which might not be as strong as they f‌irst seem)

but also intra-f‌irm family dynamics and the prevalentnorms and values of the f‌irm’s national culture to get a more complete

picture of the protections available to them.

Keywords: Corporate Governance, Family Dynamics, National Culture, Agency Theory, Stewardship Theory

INTRODUCTION

The distinctive attributes of family f‌irms result in unique

governance issues around the globe (Young, Peng,

Ahlstrom, Bruton, & Jiang, 2008). Whereas family owners

can often monitor managers better than owners in non-

family f‌irms, family owners have an incentive and ability to

seek and gain private benef‌its at the expense of minority

owners (Aguilera & Crespi-Cladera, 2012; Setia-Atmaja,

Tanewski, & Skully, 2009). This illustrates the principal–

principal agency problem, a critical governance issue

impacting minority owners in family f‌irms worldwide

(Filatotchev, Jackson, & Nakajima, 2013; Yoshikawa &

Rasheed, 2010). Not all family f‌irms have such an agency-

oriented culture, however. Others may be characterizedby a

stewardship orientation that promotes the welfare of all

stakeholders, including non-family owners and future gen-

erations (Le Breton-Miller, Miller, & Lester, 2011; Zahra,

Hayton, Neubaum, Dibrell, & Craig, 2008). Yet, the literature

is not suff‌iciently clear in predicting when a family f‌irm’s

dominant culture will have an agency or a stewardship ori-

entation (Giovannini, 2010; Siebels & Knyphausen-Aufseß,

2012). Moreover, even though researchers are increasingly

focused on the role of country-level institutions in ensuring

that minority owners are safeguardedfrom expropriation by

dominant family f‌irm owners (de Holan & Sanz, 2006; Le

Breton-Miller & Miller, 2006), Aguilera and Jackson (2010:

490) argue that the cross-national corporate governance

*Address for correspondence: Charles E. Stevens, Departmentof Management, Lehigh

University, Bethlehem, PA 18015, USA. Tel: 1-610-758-5526; Fax: 1-610-758-6941;

E-mail: ces213@lehigh.edu

© 2014 John Wiley & Sons Ltd

doi:10.1111/corg.12089

Corporate Governance: An International Review,2015, 23(3): 203–215

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