Developing governance structures in family firms From adoption to institutionalization

Abstract: This dissertation deals with family business governance. More specifically it focuses on why and how family businesses develop their governance structures.This is an important topic because governance plays an essential role in the business world, as it links ownership and management and defines its relationships. In the case of family businesses it is especially important because the boundaries of ownership and management are blurred by the overlapping of the two systems of family and business. This overlap makes the creation of governance structures challenging and elusive. Approaching the creation of governance structures as a process of development and understanding the reasons behind the pattern of adoption becomes a key element for family businesses.Drawing on institutional theory, I suggest that legitimacy and efficiency seeking, two seemingly opposing reasons, motivate the development of governance structures over time. I also rely on institutional work and bring back individuals to institutional theory by showing how family members act as institutional champions and lead governance changes within their organizations while interacting with other interested actors involved.Combining quantitative and qualitative methodologies, I study the development of governance structures in a processual way. On the one hand, using Mokken scale analysis, I test a sample of 1,596 cases for whether family businesses follow a specific sequence in the development of governance structures. Subsequently, I use Poisson regression analysis to test eleven hypotheses related to efficiency and legitimacy seeking and the degree ofdevelopment of such structure. On the other hand, qualitative case-based research is used to shed light on how governance structures change over time. The purposeful efforts of individuals are observed in the qualitative cases. Empirical findings suggest that, in the broad picture, family businesses follow a specific sequence that goes from business governance to family governance. When observing in detail with a process perspective individual cases show that family businesses follow different patterns of development due to four different motives. Legitimacy seeking has a strong influence in the decision to adopt governance structures, but if not aligned with efficiency seeking, this adoption may be ceremonial, meaning that despite not being really implemented and internalized they still allow these structures to exist. Efficiency seeking triggers substantive adoption and full institutionalization of such structures. In my research two other major reasons for the development of governance structurese merge: power and learning. Both can act in a positive way (power seeking or accumulated know-how) or in a negative way (resistance to give up power or lack of know-how). This appears as institutional work which takes place where different actors get involved with possible institutional champions guiding the process.