09.02 Running the Family Business: Stakeholders, Values and Reputation

Aim of the project

This project aims to specify how the value orientation of smaller family businesses differs from stock market listed corporations, and how this relates to the way these businesses consider different stakeholders as well as their external reputation, which may affect the sustainability of these businesses and their functioning.

Theoretical background

Businesses can be characterized in terms of the specific narratives, choices and institutional arrangements that define who relevant stakeholders are (employees, customers, shareholders), and how they wish to cooperate with these stakeholders. Comparing different types of businesses along these dimensions can reveal the nature of the perceived responsibilities involved and, more generally, the more fundamental normative presuppositions underlying them. Prior research has compared family businesses and non-family businesses. Results of such comparisons appear inconsistent at first sight. On the one hand, family businesses are less likely to have formal ethics guidelines in place, or to formally monitor ethics compliance. On the other hand, family businesses offer more informal ethics guidance (e.g. in the form of role modeling). Compared to non-family businesses, family businesses actually display less ethically dubious behavior (e.g. engagement in aggressive tax policies), and incur less reputational problems to the extent that the family is more explicitly involved in the leadership of the business. Due to the specific nature and aims of family businesses we hypothesize that they tend to endorse different values and prioritize different types of activities and stakeholders than non-family businesses. We further propose that this has beneficial effects for the reputation for the organization, which is relevant for broader stakeholder relations and community support.

Research design

This project will compare family businesses and non-family businesses over time, to document how varieties in capitalism (including shifts from the dominance of shareholder interests to stakeholder interests and back again), define which values, interests, and stakeholders receive priority.

The project combines historical, psychological and normative perspectives.  The historical analysis will focus on archival data (1950-2010), of different types of businesses, combining a cross-temporal analysis with a comparison of different national/economic contexts. The normative focus will draw on the distinction between ethical theories that formulate general accounts of responsibility and those that emphasize the context-dependent nature of obligations. Connecting these observations to survey data pertaining to present day organizations allows us to examine how this relates to relevant factors in the reputation of the organization (attractiveness for employees, customer loyalty, community support) and how this contributes to the sustainability of the business and to a more inclusive functioning of the business.