Entrepreneurial Experience, Support for Community and Family Firm Performance: A Cross-Study of Product and Service-based Family Businesses

Abstract

INTRODUCTIONFamily owned businesses play a significant role in the global economy yet face major challenges in trying to succeed and survive generational transition (Brenes, Madriga, & Molina-Navaro, 2006; Chrisman, Sharma, & Taggar, 2007). A family business is defined as a business "that will be passed on for the family's next generation to manage and control" (Ward, 1987). Previous studies on family firms have focused on succession planning (Handler 1994; Sharma et al., 2003) and conflict among family members in the business (Handler 1994). Although the literature on family business is often subsumed and overlaps with the literature on small and medium enterprises (Getz & Carlsen, 2000), family businesses are unique entities and have been described as a complicated phenomenon (Lindsay & Craig, 2002). Family businesses are distinguished from non-family businesses in that their pattern of ownership, governance, management and succession affect the business structure, goals and strategies (Chua et al., 1999). Family and lifestyle aims often influence the objectives of family businesses without prioritizing the maximization of the profit (Peters & Buhalis, 2004). Family business owners are forced to balance business objectives with family interests (Getz & Carlsen, 2005). Consequently, family business owners become more risk averse and reluctant to accept investors from outside the family (Gallo et al., 2004). Empirical evidence from around the world suggests that a family owned business structure has advantages. For example, in a study of 100 family and 75 non-family businesses in Chile, family businesses outperformed their non-family counterparts when measured over a 10-year period (Martinez et al., 2007). In addition, Peters and Buhalis (2004) explored the management behaviors of 156 small family-owned hotel businesses in Austria and reported that family members working in a family business had higher motivation to work and that products and services offered by a family business were more personalized to the customer. More significantly, family businesses have familial assets and lower agency costs that can give the business a distinct advantage (Dyer, 2006). However, running the family business can put a lot of strain on the entrepreneur and the family (Mendonsa, 1983); in other words, family business owners' capability to successfully run the business and succeed at the challenges associated with being an entrepreneur can have a varying effect on performance.In this study, we draw on theories from corporate social responsibility, entrepreneurship and human capital to examine a structural model of family business strategies and performance. Family firms display distinctive socially responsible behaviors due to family firm's relationship with its local community (Niehm et al., 2008). Specifically, the family business owners' attitudes towards the community and their perception of the role of business in the community drive the strategies of the business and the decisions made (Niehm et al., 2008). Furthermore, the commitment to the community, which is the first and most important aspect of the corporate social responsibility that embodies a mutual relationship between the business and the community, is based on increasing efforts that support the public good of the community and improve business sustainability (Niehm et al., 2008).In this study, we examined the extent to which a family business owner's 'entrepreneurial experience (EE) affects the business' corporate social responsibility, focusing specifically on support for community activities, as well as family firm performance. Moreover, we examined these relationships in the context of family businesses in two different industries, product based vs. service based organizations. In doing so, we advance the body of knowledge on family business entrepreneurship and the antecedence of family firm performance. The data for this study was collected from businesses in Lebanon, a country with 4. …