Stewardship or Agency? A Social Embeddedness Reconciliation of Conduct and Performance in Public Family Businesses

Isabelle Le Breton-Miller (), Danny Miller () and Richard H. Lester ()
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Isabelle Le Breton-Miller: HEC Montreal, Montreal, Quebec H3T 2A7, Canada; and University of Alberta, Edmonton, Alberta T6G 2R6, Canada
Danny Miller: HEC Montreal, Montreal, Quebec H3T 2A7, Canada; and University of Alberta, Edmonton, Alberta T6G 2R6, Canada
Richard H. Lester: Mays School of Business, Texas A&M University, College Station, Texas 77845

Organization Science, 2011, vol. 22, issue 3, 704-721

Abstract: Two contradictory perspectives of family business conduct and performance are prominent in the literature. The stewardship perspective argues that family business owners and managers will act as farsighted stewards of their companies, investing generously in the business to enhance value for all stakeholders. By contrast, the agency and behavioral agency perspectives maintain that major family owners, in catering to family self-interest, will underinvest in the firm, avoid risk, and extract resources. This paper argues that both these views have application but under different circumstances, determined in part by the degree to which the firm and its executive actors are embedded within the family and thus identify with its interests. Stewardship behavior will be less common, and agency behavior will be more common the greater the number of family directors, officers, generations, and votes, and the more executives are susceptible to family influence. These findings are supported among Fortune 1000 firms, as well as among the subsample of those firms that are family businesses.

Keywords: corporate governance; strategy; social embeddedness; family business (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (129)

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