The Transaction Cost Economics Theory of the Family Firm: Family–Based Human Asset Specificity and the Bifurcation Bias

Alain Verbeke and Liena Kano

Entrepreneurship Theory and Practice, 2012, vol. 36, issue 6, 1183-1205

Abstract: We develop a transaction cost economics theory of the family firm, building upon the concepts of family–based asset specificity, bounded rationality, and bounded reliability. We argue that the prosperity and survival of family firms depend on the absence of a dysfunctional bifurcation bias. The bifurcation bias is an expression of bounded reliability, reflected in the de facto asymmetric treatment of family vs. nonfamily assets (especially human assets). We propose that absence of bifurcation bias is critical to fostering reliability in family business functioning. Our study ends the unproductive divide between the agency and stewardship perspectives of the family firm, which offer conflicting accounts of this firm type's functioning. We show that the predictions of the agency and stewardship perspectives can be usefully reconciled when focusing on how family firms address the bifurcation bias or fail to do so.

Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (93)

Downloads: (external link)
https://journals.sagepub.com/doi/10.1111/j.1540-6520.2012.00545.x (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sae:entthe:v:36:y:2012:i:6:p:1183-1205

DOI: 10.1111/j.1540-6520.2012.00545.x

Access Statistics for this article

More articles in Entrepreneurship Theory and Practice
Bibliographic data for series maintained by SAGE Publications ().