Essays on Founder and Family Involvement, Firm Performance, and International Behavior of Family Firms

Abstract

Family firm principals are key to shaping the organization's vision, strategic choices, and overall outcomes. They establish unique relationships with both family and non-family stakeholders and have distinct identities; founders tend to have entrepreneurial identities that prioritize growth and performance outcomes, whereas their family members tend to have familial identities that emphasize the preservation of socioemotional wealth (SEW). Their relationships and identities influence these principals’ goals and behaviors, ultimately affecting family firm outcomes. However, previous research has largely ignored these relational and identity differences among family-firm principals when studying firm performance outcomes and strategic choices. For instance, the literature offers mixed findings on whether family firms outperform and on whether they exhibit greater or lesser internationalization breadth (foreign market presence) compared to non-family firms. My dissertation addresses these gaps through three essays. The first reviews the literature on family members' relationships and proposes a research agenda that examines how these relationships affect individual, dyadic, and organizational outcomes in family firms. The second and third essays examine how founder and family member identities, and the relative power of founders and family members, shape family-founder firm performance and internationalization compared with lone-founder firms. Using a longitudinal dataset of S&P 1500 firms from 2008 to 2018, my results support the predictions from both identity theory and the power perspective. In Type I founder-family firms, where founders remain the sole family owners, founders’ entrepreneurial identities and growth-oriented goals are preserved, resulting in performance and internationalization breadth levels similar to those of lone-founder firms. Conversely, Type II founder-family firms, in which founders and family members share ownership, exhibit lower financial performance and narrower internationalization breadth than lone-founder and Type I founder-family firms, suggesting that when family owners join founder owners, these Type II founder-family firms tend to prioritize family- and SEW-oriented goals aligned with their salient family identities, which reduces their firm performance and their foreign market presence. Taken together, my dissertation highlights the value of a microfoundations approach to understanding family firm heterogeneity. Moreover, my dissertation sets the stage for future research that refines our understanding of two new types of family firms – Type I and Type II founder-family firms.