Stoica, Michael


The paper examines the commitment relationship that exists between families and the businesses they own. The study builds on previous research on family attitudes and family involvement, and it identifies two types of family commitment: family-centered commitment and the family’s commitment toward the business they own, called business-centered commitment. The relationship between the two types of commitment and the performance of the family business is scrutinized. Results show that family-centered commitment is higher when businesses are not performing well and business-centered commitment tends to be higher when businesses are high performers.


Family businesses represent a fascinating domain for research. Family-owned companies generated between $1.3-10.4 trillion in revenues in 1996 (Heck & Trent, 1999). Between 3 and 24.2 million family companies in the United States provide employment to 27-62% of the workforce and contribute 29-64% of the national GDP (Astrachan & Shanker, 2003; Sharma, 2004). Family companies in the S&P far outperform non-family companies (Anderson & Reeb, 2003).

Family businesses represent a large majority of firms and a substantial share of the national economy. However, by inspecting the above figures, especially the range that exists in evaluating revenues, employment, and the number of companies that are claimed to be familyowned, one could easily infer that the number of family businesses depends on who is counting them (i.e., what definition for the family firm is accepted). To date there is no widely accepted definition of family business. Various definitions are reported and accepted in different studies (Aronoff, 2004; Boles, 1996; Chrisman, Chua, & Steier, 2005; Hatum & Pettigrew, 2004). Operationalizations of the family business concept differ on several dimensions: level of family involvement, level of family ownership, managerial involvement, and CEO perception of the firm being a family business (Heck & Trent, 1999; Westhead & Cowling, 1998).

Many scholars have reviewed the existing definitions and have attempted to consolidate them (Sharma, 2004). Although the main focus of these efforts has been on defining family firms so they can be distinguished from non-family firms, none of these efforts has gained acceptance (Chrisman, Chua, & Sharma, 2005; Daily & Dollinger, 1993; Sharma, 2004). Another line of inquiry relates to the lack of homogeneity of family firms, as family businesses are diverse in terms of family involvement (Astrachan & Shankar, 2003; Chrisman et al., 2005). Astrachan and Shanker (2003) proposed three operational definitions for the family business: the first level of operationalization refers to family retention of voting control over the strategy of the firm, the second level refers to the direct involvement of the family in day-to-day operations, and the third level adds to the first two the involvement of multiple generations m the firm’s management.

If we accept the operational definition advanced by Astrachan and Shanker (2003) for the family company as the company in which the founders) or their families maintain a presence in senior management, on the board, or as significant shareholders (Anderson & Reeb, 2003; Jensen & Meckling, 1976; Perrigo, 1975; Wortman, 1994), then many of the major companies in the United States, companies that constitute the basis for market indices, are family-owned businesses. There are 177 examples in the S&P 500, including Microsoft, Dell, Walgreen’s, Wrigley, and Wal-Mart.

Family business literature abounds with general papers that give a synopsis of the state of the research. Several authors (Bird, Welsch, Astrachan, & Pistrui, 2002; Chrisman et al., 2005; Handler, 1989; Wortman, 1994; Zahra & Sharma, 2004) have conducted overviews, current status reviews, or literature reviews. Family business is a hybrid organizational form with peculiar governance characteristics (Eckrich & McClure, 2004), or a series of systems within realms of ownership, family, and business. Scholarly investigation has been undertaken at all four levels of research (Low & MacMillan, 1988): individual, interpersonal (group), organizational, and societal.

In his analysis of the family business literature, Carney (2005) states that, in its preponderance, the academic community considers family businesses to be laden with factors such as nepotism and weak risk-bearing. These factors will tend to harm the efficiency, if not the longevity, of the firm (Camey, 2005). Besides inefficient risk bearing, underinvestment also has the consequence of value reduction. Other studies (Craig & Moores, 2005; Cronie, Stevenson, & Monteith, 1995; Denison, Leif, & Ward, 2004) tend to show a more positive image of the family business and the family-business relationship. They try to identify the competitive advantage attributed to the existence of the family-owner, such as low agency costs. However, there is not yet a compelling organizational theory that establishes positive factors behind the family business’s competitive advantage (Carney, 2005).

The relative instability of family unions can be attributed to several factors. Becker (1991) and Posner (1998) stressed the influence of the economic aspect. Cooperating and working together provides couples with economic incentives to stay together. Sund and Smyrnios (2005) discussed the effect of happiness on the stability of family relations. We can conclude from the above studies that the investigation of the relationship between family and family firm is critical for the understanding of why and when family businesses are good performers.

High-performing family firms are usually defined by considering both the family and business dimensions (Bird et al., 2002; Schulze, Lubatkin, Dino, & Buchholtz, 2001). These researchers understand that family firms aim to achieve a combination of financial and nonfinancial goals that are specific to the relationship between the family and the business they own (Zahra & Sharma, 2004). Research has revealed significant variations in perceptions of family firm stakeholders regarding fundamental issues related to firm management and strategy (Sharma, 2004).

The research questions flow in an expected way from the above literature examination. To what extent is family involvement in the family business influencing the performance of their business? Is the family commitment towards the business they own enhancing business performance? Is the selfishness of the family depressing family business performance?


Family-controlled firms have a distinct performance-enhancing culture, which is translated into strategy and business performance (Denison, Lief, & Ward, 2004). A fundamental issue surrounding family involvement in business is represented by the impact of the overlapping and potentially conflicting family and business roles managed by those who are in business together (Lansberg, 1983). Sharma (2004) conceptualized four variations of the performance of the family business using a two-by-two matrix based on whether a positive performance is experienced along two dimensions, family and business. Warm hearts-deep pockets, pained hearts-deep pockets, warm hearts-empty pockets, and pained hearts-empty pockets describe the four cells of the matrix in terms of the emotional and the financial capital they have.

Different scales have been developed to help define the family business and to determine the influence of the family on the business they own. Astrachan, Klein, and Smyrnios (2002) developed the F-PEC scale to differentiate family business from non-family business. However, the scale achieved more than its main objective; F-PEC can be also employed for explanatory purposes. The scale contains three subscales: power, experience, and culture (Klein, Astrachan, & Smyrnios, 2005). The latter, which is of interest in this study, encompasses two parts. The first part assesses the extent to which family and business overlap and the second evaluates the family’s influence on the business they own. Uhlaner (2005) introduced a new perspective in the operationalization of the family business variables, a family orientation index using the Guttman scale, which may help the understanding of family business behavior and its relation to performance. Although it has several similarities with the F-PEC scale, Uhlman’s index treats the culture dimension less extensively than the F-PEC scale.

Family firms are complex, with many such businesses ranking short-term issues as a primary concern (Chua, Chrisman, & Sharma, 1999; Murphy, 2005). Private family firms rank marketing and marketing techniques higher than long-term planning or succession, which become important only once operational issues are addressed (Murphy, 2005). To some extent, these results contradict the findings in other studies (Denison, lief, & Ward, 2004; Kellermanns, 2005); however, they tend to subscribe to a general trend that views family influence as a decisive factor in determining the performance of the business.

Recent convergence in definitions has helped researchers preliminarily find that family involvement may affect performance (Chrisman et al., 2005). The two approaches to defining family business, the components of involvement approach and essence approach, help clarify what a family business is. The necessity of studying the relationship between family involvement and business performance appears essential to further knowledge of family business (Bird et al., 2002; Kepner, 1983; Miller & Le Breton-Miller, 2003).

Culture comparisons between family and non-family businesses show that the corporate cultures of family enterprises are more developed than the cultures of firms without a family affiliation (Denison, lief, & Ward, 2004). Results also show that family businesses perform better because of what they do strategically. Denison, lief, and Ward (2004) proved that capability development for family businesses is higher than for non-family businesses due to substantially greater investment in the development of their people. However, further research is needed (Barney, 1986; Whyte, 1996; Winter, Danes, Koh, Fredericks, & Paul, 2004) to address questions of how culture is translated into strategy and business performance. Some studies suggest that family firms are typically autocratic, inflexible, ambiguous in direction, and resistant to investing in people (Cronie et al., 1995; Dyer, 1986; Levinson, 1971). The views above contradict general wisdom, which regards family businesses as rich in cultural advantages. Further investigation of family business might help define and measure other dimensions of business culture that play a unique role in family behavior (Denison, Lief, & Ward, 2004).

Habbershon, Williams, and MacMillan (2003) introduced the concept offamiliness to encompass the complex interactions between family members, the family, and the business they own. Familiness represents the synergies obtained through these interactions. The discussion about distinctive familiness suggests that family firms are formed to institutionalize the unique resources, capabilities, and vision that families have and use in the quest of both economic and non-economic motives. Although the family business literature has neglected the issue of business adaptability (Hatum & Pettigrew, 2004), familiness may be related to the concept. Research into a firm’s flexibility suggests two possible determinants: structural design and managerial capabilities. Family involvement in the business offers a unique opportunity to explore business adaptability within the context of the concept of familiness, since family commitment can provide capabilities and a vision that can make the firm more quickly adaptable to signals from the market place (Hatum & Pettigrew, 2004).


Family-owned businesses have a distinct performance-enhancing culture. This culture is decoded into governance that leads to business performance (Denison et al., 2004). A fundamental issue surrounding family involvement in business is the impact of overlapping and potentially conflicting family and business roles managed by those who are in business together (Lansberg, 1983). There might be increased conflict in a family business compared to a nonfamily business because of the underlying role conflict when family members work together. Denison, Lief, and Ward (2004) concluded that family business culture promotes better performance than non-family business culture. Family involvement is the crux of this difference.

Sustainability, which results from the confluence of family and business success. It involves the ability of the family and business to respond to disruptions in a way that does not inhibit their success (Denison et al., 2004). The inclusion of family members in a business setting can create a dedicated work force that is more committed to the success of the business than typical employees would be (Lee & Rogoff, 1996). This represents the result of qualified family members being encouraged to enter the family business and influence its course.

Based on the literature review and the above considerations, we offer the following hypothesis:

H^sub 1^: Family commitment is positively related to family business performance.

The firm might display the characteristics of nepotism, with poorly performing, unqualified, and unmotivated employees protected by their family status. Family norms and business norms differ. The family system is based on a norm of providing opportunities to relatives who are in need or have the desire to work in a family setting while the business system norm is to hire only those who are competent (Lansberg, 1983). The norm for training in a family system is to provide learning opportunities to solve the needs of the individual family member, while the business system norm is to offer training that meets the firm’s needs (Lee & Rogoff, 1996). However, Kirchhoffand Kirchhoff(1987), in their research on compensation of family members in the family business, concluded that family members are more productive than non-family members even when they are paid comparably with non-family members. Profitability shows an increase when family members are committed to the family business.

We therefore offer the following hypothesis:

H^sup 2^: The higher the family commitment for the family business, the higher the performance of the business.

The F-PEC subculture scale assesses both the extent to which family and business overlap and the family’s commitment to the business they own (Astrachan et al., 2002). Families that are highly committed to their business are highly likely to have a substantial impact on the business. TMs impact, however, could be negative.

As Lansberg (1983) and Lee and Rogoff (1996) point out, two different sets of goals and attitudes characterize the family business system: a business-oriented set and a family-oriented set. Given the model of overlapping systems (Lee & Rogoff, 1996), we expect areas of conflict to appear. The family business must focus its strategic goals on the needs of the family over the needs of the business, so that family goals dominate (Lee & Rogoff, 1996).

We therefore offer the following hypothesis:

H^sub 3^: The higher the family commitment to the family, the lower the performance of the family business.


The Family Attitudes Towards the Business scale was incorporated in a comprehensive study done by the Massachusetts Mutual Financial Group and Raymond Family Institute. This study analyzed planning, growth, and succession issues in family businesses (Astrachan, Allen, & Spinelli, 2002). The attitude scale was part of a comprehensive, twenty-page questionnaire that included items related to a company’s characteristics, ownership structure, strategy and organization, business climate, succession planning, etc. The basis for the attitude scale is represented by the seminal study done by Astrachan, Klein, and Smyrnios (2002), wherein the authors proposed the F-PEC scale, a comprehensive scale that measures the impact of family on business outcomes, including strategy and operations. The designers of the survey modified the F-PEC subculture scale by deleting two items from the original scale (9 and 11) and introducing a new item. Table 1 shows the instrument and the changes that were made by the authors of the questionnaire in the data collection process.

Performance is a complex concept and different measures have been used to assess how successful companies are. Profitability, return on assets, return on sales, growth, and self reporting levels of goals achievement are several ways in which performance is measured in the literature. According to several studies on small and medium-sized companies, growth might be a better choice to measure performance (Bhide, 2000; Carter, 1990). We selected sales growth as the measure of performance (Cavusgil & Zou, 1994). Respondents were asked to give the level of current sales and the trend they noticed for sales during the past three years. Businesses were split into three categories based on their revenue trend: weak performers, average performers, and high performers (Liao, Welsch, & Stoica, 2000).


The authors used raw data from the Mass Mutual Financial Group/Raymond Institute research project. Data were collected in 2002 (following a previous collection in 1997) through a twenty-page questionnaire that was sent to more than 38,000 family businesses. The study gathered 1,143 responses from family businesses, generating a response rate of 3%. Respondents were businesses that were at least ten years old at the time of the data collection, had sales in excess of $1 million, and had at least two officers or directors with the same last name. The CEO, president, or board chair represented 87.9% of the respondents.

The respondents answered questions regarding issues that included owner/CEO and company characteristics, ownership structure, family attitudes towards the family business, personal development, etc. The present study focused on the answers regarding a family member’s attitudes towards their family business.

The respondents came from different industries. A breakdown by industry type is presented in Table 2.

The biggest share of respondents came from the manufacturing industry (24.5%), followed by distribution (16.6%), construction (11.2%), and retail (11.1%). All other industries had less than a 10% share.

Exploratory factor analysis and ANOVA were used to test the hypotheses.


The findings are presented in Tables 3 through 5. Table 3 gives the results of the exploratory factor analysis performed on the family attitudes scale.

Two factors, whose total variance is over 59%, have been loaded. Four items belong to the first factor; all tend to put the family at the center of attention. The perception is that support for the family comes first, activities are family-centered, and the family influences the business. We therefore called this factor the Family-Centered Commitment (FCC). The second, BusinessCentered Commitment (BCC), shows the degree to which the family puts the firm’s interests first. Elements that define BCC include unusual effort, loyalty towards the business, and pride in the business.

Table 4 presents the ANOVA descriptive results. The mean values, standard deviations, and minimum and maximum values for Family-Centered Commitment and Business-Centered Commitment are shown for high, average and low performers as defined in the previous section. Figure 1 aggregates in a visual tool the data from Table 4.

The results are statistically significant. Table 5 presents the ANOVA summary results, wherein Family-Centered Commitment has an F-value of 4.394 significant at 0.05, and BusinessCentered Commitment has an F-value of 2.989 significant at 0.1. H1 states that family commitment is positively related to family business performance. The results show a relationship between commitment and performance if commitment is viewed on a finer spectrum. Thus, H1 is partially supported. H2 states that the higher the family commitment for the family business, the higher the performance of the business. This hypothesis is fully supported. We found a significant positive relationship between family commitment to the family business and the performance of the business (F-value of 4.394 significant at 0.05). H3 states that the higher the family commitment to the family, the lower the performance of the family business. Results showed partial support for this hypothesis. Though significant (F-value of 2.989 significant at 0.1), the relationship is nonlinear with a maximum for average performers (see Table 5 and Figure 1).

Results show partial support for H3. While Business-Centered Commitment shows a linear relationship with performance, Family-Centered Commitment has a more interesting and intriguing evolution, reaching its maximum at the average performer level. Family-Centered Commitment is at its lowest level when the family business performs well, higher when the business is poorly performing, and attains its maximum level when the business is showing no significant increase in sales.


The F-PEC scale was designed along two dimensions: the overlap between family values and business values and family commitment to the business they own (Astrachan et al., 2002). In this study, we have identified two variables that split family commitment: Family-Centered Commitment (the family primary commitment is directed towards the family) and BusinessCentered Commitment (the family primary commitment is directed towards the business they own).

Results show a linear relationship between the business-centered commitment of the family and the performance of the family firm. However, family-centered commitment shows a U-inverted relationship with performance. For low values of performance (characterized by a decrease in sales in the last three years), the Business-Centered Commitment of the family is low. Business-Centered Commitment is at its highest level for companies that experience average performance (sales growth is O or very low), and is lower for very high levels of performance (sales growth of more than 11%). All results are statistically significant (see Tables 4 and 5). Figure 1 visualizes the relationships between family commitment and business success. It offers a graphic representation of the ANOVA results, showing the main differences that emerge between different levels of commitment and their relationship with performance.

Figure 1 suggests, from the point of view of the Family-Centered Commitment variable, both the opportunistic and altruistic behavior of the family-owner. The family system is powerful in every family-owned business. In the troubled firm, the family is strong enough to prevent sound business decisions, and good advice might often be resisted (Aldrich & Cliff, 2003; Anderson, Jack, & Dodd, 2005). Success seems to alter the balance between Family-Centered Commitment and Business-Centered Commitment. Indeed, as Figure 1 shows, low performers, and even average performers, tend to have higher Family-Centered Commitment than BusinessCentered Commitment. However, high performers show much higher Business-Centered Commitment than Family-Centered Commitment.

Sund and Smyrnios (2005) argue that the relative instability of family unions can be attributed, among other things, to the influence of economic aspects. One could speculate that the instability of the family might push the family business owner to turn to him/herself when confronted with poor business results. However, they might tend to neglect the business and try to draw gains from it when the firm is very profitable.

Agency theory might help explain the behavior of the entrepreneur and the bend noticed in family commitment (Bitler, Moskowitz, & Vissing-Jergensen, 2005). Owners might be less committed to the long-term performance of their own business and more focused on short term profit to the potential detriment of the company.

Kellermanns’ (2005) model of family firm resource management, built on the model developed previously by Sharma and Manikutty (2005), could help explain the way families reach decisions and commit resources. Family structure and family involvement were identified as variables that introduce biases in the resource evaluation process. These biases will determine the way resources are accumulated or divested in family firms. The Family-Centered Commitment and Business-Centered Commitment variables could add to the explanation of resource utilization.

Since exploratory factor analysis is considered research and sample specific (Cliff & Jennings, 2005), the use of an exploratory factor analysis instrument limits the generalizability of the study. However, to some degree, these results have support in the literature. As mentioned by Bitler, Moskowitz, and Vissing-Jørgensen (2005), the extent of the entrepreneur’s influence and the relationship between the main variables might be limited by the nature of the sample and/or the way concepts have been operationalized and measured. Indeed, the results might be methodand data-dependent.

The purpose of this empirical study is to lend some credibility to the proposed concepts of family-centered commitment and business-centered commitment rather than to confirm the validity of those concepts. The data used, though collected for other purposes, represent a prototype of the population of family firms that is difficult and very costly to obtain. The size of the sample adds credibility, and one can conclude with a reasonable degree of confidence that the results are not the product of chance.


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Michael Stoica

Washburn University

David Pistrui

Illinois Institute of Technology


Michael Stoica is Professor of Management at Washburn University. He holds a Ph.D. in Business Administration from Washington State University and a Ph.D. in Engineering from the Institute for Atomic Physics, Bucharest. His research interests are small business strategy, entrepreneurship, and international marketing. He has published in Entrepreneurship Theory and Practice, the Journal of Developmental Entrepreneurship, the Journal of East West Business, the Journal of Nonprofit and Public Policy Marketing, and the Journal of Vacation Marketing, among others.

David Pistrui is the Coleman Chair in Entrepreneurship at the Illinois Institute of Technology. He holds a Ph.D. in Business Administration from the University Autonoma de Barcelona and a Ph.D. in Sociology from the University of Bucharest. His research interests are in Family Business and Entrepreneurship. He has published in the Family Business Review, Frontiers in Entrepreneurship, Entrepreneurship Theory and Practice, and the Journal of Developmental Entrepreneurship, among others.

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