Asian family enterprises and family business research.pdf

Asian family enterprises and family business research

Pramodita Sharma & Jess H. Chua

# Springer Science+Business Media New York 2013

Abstract This article discusses some of the notable trends in family business re-search. The critical role of context in building usable knowledge on family enterprisesis highlighted. The Asia Pacific region offers a plethora of unique opportunities tobuild such knowledge as illustrated by some articles in this Special Issue. Familiesand their enterprises are integral to all Asia Pacific countries. However, the hetero-geneity of institutional development and conditions in which these enterprises mustoperate offer unique research opportunities for scholars to build deeper understandingof family enterprises and contribute to the global knowledge in this important field ofstudy.

Keywords Family business . Asia Pacific . Heterogeneity . Strategic management .

Context

Research on family enterprises has made impressive strides in the past 25 years asshown by the field’s growth in terms of number and diversity of scholars, disserta-tions, and articles being published in the best of outlets. As noted by the editors of the25th anniversary issue of the Family Business Review, the field has made great

Asia Pac J ManagDOI 10.1007/s10490-013-9350-z

P. SharmaSchool of Business Administration, University of Vermont, 320 Kalkin Hall, 55 Colchester Avenue,Burlington, VT 05405, USAe-mail: [email protected]

P. SharmaSuccessful Transgenerational Entrepreneurship Practices, Babson College, Wellesley, MA, USA

J. H. ChuaHaskayne School of Business, University of Calgary, 2500 University Drive, NW, Calgary, ABT2N1N4, Canada

J. H. Chua (*)School of Management, Zhejiang University, Hangzhou, Chinae-mail: [email protected]

progress in the three Rs of research—rigor, relevance, and reach (Sharma, Chrisman,& Gersick, 2012). Perhaps even more stimulating for scholars in the field is that muchexciting and important work remains to be done and the future is bright (Craig &Salvato, 2012).

Among the notable trends revealed by recent reviews of family business studies,two are particularly relevant to this Special Issue: (1) the Western slant of the currentliterature on family enterprises; and (2) the increased dominance of business ap-proaches and virtual disappearance of family focused ones. Based on a comprehen-sive review of the 251 most-cited articles on family enterprises published in 33journals between 1996–2010, De Massis, Sharma, Chua, and Chrisman (2012)observed that 73 % of the empirical studies focused on American and Europeanfamily enterprises indicating a Western skew in our current knowledge about thesefirms. These authors called for understanding contextual nuances by conducting moreresearch on the under-represented areas of Asia, Africa, and Latin America. Such anapproach, they argued, is necessary to test the robustness and generalizability ofcurrent theories and research findings, and build new knowledge applicable to familyenterprises around the world.

Another wide-ranging review and analysis of 2,240 articles on family enterprisespublished between 1985–2010 led James, Jennings, and Breitkreuz (2012) to con-clude that not only is there “the increased dominance of publication outlets andtheoretical perspectives associated with business but also the near disappearance ofthose associated with family” (87). James et al. (2012) join a growing coterie ofresearchers urging family business scholars to devote efforts to: understandingvariations among families and their involvement in business, and how such variationsaffect and, in turn, are affected by the survival, growth, and performance of familyenterprises (e.g., Colli, 2012; Yu, Lumpkin, Sorenson, & Brigham, 2012).

This Special Issue of the Asia Pacific Journal of Management (APJM) is a timelycounterpoint to the heretofore Western focus of researchers and a response to the callfor more attention to the family side of the family–business dyad. By bringingtogether insightful articles on key aspects of strategic management in family enter-prises from China, Hong Kong, India, Japan, Singapore, and Taiwan, the papers inthis Special Issue form an important compendium of research broadening the geo-graphic reach of the field. By taking a nuanced view of family and the effects of itsinvolvement in business, this Special Issue responds to the call by James et al. (2012)and De Massis et al. (2012), thereby opening rich avenues for future research.

Our aim in this introductory article is to bring attention to a few notabletrends in family business studies and point toward a few promising opportuni-ties for future research. To accomplish this objective, we start with a briefdiscussion of the role of context in research and some of the particularities ofthe Asia Pacific context. Against this contextual backdrop, we discuss thetenacious and persistent question of defining the family business and how itinfluences and opens opportunities for family enterprise research in the AsiaPacific region. In the section on strategic management, we briefly share thestatus of current knowledge on some of the most studied topics and howarticles in this Special Issue contribute to those discussions. Throughout thearticle, we suggest avenues for future research. Some reflections from a prac-titioner perspective are shared in the concluding section.

P. Sharma, J.H. Chua

Role of context in family enterprise research

Context refers to the surroundings associated with the phenomenon of interest(Cappelli & Sherer, 1991). For example, an organization or a family provides contextfor an individual and the economic, political, social, and technological environmentprovides context for family enterprises. Commenting on research in organizationalbehavior, Johns (2006: 386) remarked that “context can have both subtle andpowerful effects on research results,” as it is a likely culprit for the between-studyvariations in results as well as anomalous findings. He suggests that by taking thecontext into account, a scholar would be able to shed light on the relationshipsbetween variables at a lower level of analysis and help make research and theorypart of the larger whole.

The powerful influence of context is being experienced in family business studiesas well. For example, in this literature, financial performance is among the mostfrequently studied variables (Yu et al., 2012). Reviews of empirical research focusedon this variable reveal inconsistent findings and insignificant results that are affectedby the definitions used and contextual factors such as location, industry, and institu-tional environment (e.g., Amit & Villalonga, 2013; Stewart & Hitt, 2012). Theseobservations should caution family business researchers about paying more attentionto context in their research.

The Asia Pacific region is an important arena for considering context in familybusiness research for several reasons (Globerman, Peng, & Shapiro, 2011). First, thenational economies are dominated by family controlled businesses. Second, whilethere are some similarities across nations within the region, each country possesses itsown unique history, culture, and socio-political environment. Third, the countries areat varying stages of institutional development. Fourth, there have been high rates ofeconomic growth in the past few decades. These differences and changes are condi-tions that allow us to study the impacts of context on family enterprises and thevariety of pathways adopted by them in pursuing their visions.

In fact, several articles in this Special Issue incorporate the particularities of theircontext quite effectively. For example, private enterprises have proliferated in Chinasince the government liberalized the economy in 1978 and established the Economicand Technology Development Zones (ETDZs) to build high-tech industries, attractforeign capital, and boost exports. This set of contextual factors enabled Deng,Hofman, and Newman (2013) to focus their study on understanding the impact ofsingle versus multiple owners and firms’ zoning location on the R&D expenditureand product innovation by small- and medium-sized family firms across China. Au,Chiang, Britch, and Ding (2013) describe the evolution and remarkable growth of anenterprise that used the “front shop, back factory” split of value adding activitiesbetween Hong Kong and China to make the best of contextual changes in therelationship between these two economies.

In Taiwan, as a reaction to the Asian Financial Crisis of 1997, the governmentinstituted governance reforms in 2002 that require listed firms to appoint outsidedirectors. This change of laws provided Su and Lee (2013) an excellent observationperiod to study the impact of outside directors appointed voluntarily before the law cameinto effect, and after it, on the risk taking behaviors of companies listed on the TaiwanStock Exchange. The Japanese electric machinery industry, having gone through highs


and lows since the 1980s, provides another excellent context for studying how changesin industrial environment influence long-term investments by family firms—a behaviorthat is necessary for competitive advantage in this industry (Asaba, 2013).

Aside from the empirical studies taking advantage of contextual changes, twotheoretical articles in this Special Issue illustrate how contextual factors can beincorporated into theory building to provide unique insights. Drawing upon socialidentity theory, Sauerwald and Peng (2013) address factors that influence the forma-tion of informal institutions such as shareholder coalition among minority share-holders and how such coalitions, in turn, impact principal–principal conflicts. Theseauthors challenge the assumption underlying most of the governance research that“families vote their ownership stake collectively.” Instead they develop theory toexplain how and when such coalitions may or may not occur depending on theinternal structures of families. While the study is especially pertinent in Asia with itsprevalence of concentrated family ownership and weakly developed formal institu-tions, the direction of research is applicable to family firms in all other regions orcountries that operate within similar contexts.

On the other hand, Saxena (2013) uses the contextual changes in the Indianpolitical and legal environment before and after the independence of the countryfrom British rule in 1947 to help us understand the formation and growth of largefamily business groups in India. By further separating the context into eastern andsouthern India, he makes interesting observations about the differential impact offamily cohesion on family business group formation. He finds that compared to themore traditional south, family feuds are more rampant among family business groupsin eastern India. Thus, the article suggests that future research should not ignorewithin-country differences in contextual forces.

These empirical and theoretical articles illustrate the importance of incorporatingcontext to build rich insights into the behaviors of family enterprises. In short, whilescholars in management have argued for the critical role of context for many decades,effective incorporation of context in management research has remained lackadaisicallargely because of the challenges in designing and implementing such investigations(Johns, 2006). As evidenced by the conflicting research results concerning thefinancial performance of family enterprises (Jiang & Peng, 2011), the field of familybusiness studies also seems to suffer from the same deficiency. Thus, this SpecialIssue is refreshing in its coverage of how the Asia Pacific region’s many uniquecultures, observation periods, and institutional arrangements affect family enterprisesand are, in turn, affected by them. It is a great start but much more work lies ahead forscholars as we begin to incorporate context in our research studies.

Family enterprise and enterprising family

In addition to context, a second factor that has led to conflicting observations aboutfamily firm behavior and performance is the definition used in research (e.g., Amit &Villalonga, 2013). Since inception, researchers have focused on the business unitlevel when defining the family firm. At this firm centered level, distinction is made interms of family involvement in the business and the essence produced through suchinvolvement (Chrisman, Chua, & Sharma, 2005; Chua, Chrisman, & Sharma, 1999).


Family involvement has typically been conceptualized in terms of ownership, manage-ment, and governance while essence has been attributed to resources (Habbershon &Williams, 1999), intention (Churchill & Hatten, 1987), and behavior (Chua et al., 1999).Operationally, involvement has been easier to measure than essence. As a result, re-searchers have been employing multiple criteria in their attempts to capture bothinvolvement and essence and the heterogeneity among family firms along these twodimensions (De Massis et al., 2012).

More recently, however, with the realization that families are often involvedsimultaneously in multiple enterprises, the attention of scholars is beginning to shiftto family centered definitions (e.g., Zellweger, Nason, & Nordqvist, 2012). There aresome early articles beginning to study the different family members such as differenttypes of in-laws in the Philippines (Santiago, 2011) or adopted versus biological sonsin Japan (Mehrotra, Morck, Jungwook, & Wiwattanakantang, 2011). Overall, how-ever, despite a general agreement that family involvement distinguishes familybusiness studies from other disciplines (Litz, Pearson, & Litchfield, 2012; Yu et al.,2012), much of the research fails to either define family clearly or distinguish familiesin terms of structure, composition, or behavior. Even measures such as F-PEC or thefamily climate scale aimed to capture the nature and mode of family involvement inbusiness or family processes are silent on the items required to capture the dimensionsof variations or boundary assumptions of the respondent on the key construct of“family” (Björnberg & Nicholson, 2007; Holt, Rutherford, & Kuratko, 2010; Klein,Astrachan, & Smyrnios, 2005). Thus, the data collected may contain a mix ofassumptions and dimensions making the key construct unreliable.

Some green shoots of ideas are emerging on the components and essence baseddefinitions of “family.” For example, Sharma and Salvato (2013) proposed that whenthinking of family involvement in business, a component based instrumental defini-tion of family could address the boundary related questions such as which familymembers can be owners, managers, or governors of a firm. Variables such asrelationship (by blood, marriage, or adoption), birth order, generation, or habitationcan be considered in such a definition and measures could be developed to capturerelated variations within the sample studied. On the other hand, the essence baseddefinition of family could incorporate features such as shared history and commit-ment to a future together (cf. Hoy & Sharma, 2010). Variables such as familycohesion and adaptability can then be used as antecedents or moderators or conse-quences of variations in family involvement and behaviors (Reay & Whetten, 2011).

In the West, due to the changed societal norms and the transition into the digitalage, family structures now include cohabitating couples, nuclear families, blendedfamilies, and extended families (Becker, 1991). As kinship groups in the moretraditional Asia Pacific region slowly evolve from the predominance of extendedfamilies toward a larger variety in family composition, the region offers familybusiness researchers an exciting laboratory for studying how the dynamics of suchchanges affect the behavior and performance of family enterprises (Globerman et al.,2011; Jiang & Peng, 2011). The choice of couples to have fewer children will result ina “beanpole” structure of the family—increased height with more generations in thework place but reduced breadth for each generation (Markson, 2007). This effectmay be more pronounced in China than in other parts of the world because ofits one child policy; however, this remains to be seen because wealthy families


appear to be able and willing to pay the penalties imposed by the governmentfor having more than one child.

In short, when it comes to studying “family” involvement in business, moreattention will have to be paid to defining the family variable and understanding itsvariations. The important task of developing scales to capture such variations ispending. Scholars interested in family enterprises in the Asia Pacific region have agreat contextual advantage to understanding the nuances of variations in family, notonly because of the above mentioned reasons, but also because of the large immigrantpopulations in Western countries with roots in Asia. For example, how does migra-tion influence family boundaries, processes, and in turn, the family enterprises? Forscholars interested in undertaking this important work to enrich our understanding offamily firms, three sources are likely to be a great starting point: (1) A compendiumof scales used in family business studies by Pearson, Holt, and Carr (2013); (2) Yu etal.’s (2012) comprehensive review of all dependent variables studied in the literature;and (3) James et al.’s (2012) review of theories from family science that wouldcomplement the frequently used agency or resource based theories.

Strategic management of family enterprises and enterprising families

Between 1996 and 2010, the most studied topics in family business, based on the 251articles reviewed by De Massis et al. (2012), are the following:

& Corporate governance (45; 17.9 %)& Succession (27; 10.7 %)& Economic performance (20; 7.9 %)& Resources and competitive advantage (16; 6.3 %)& Entrepreneurship and innovation (13; 5.2 %)

Listed in parentheses is the number and percentage of articles on each topic. In thissection, we briefly comment on the current status of knowledge about each topic andsome reflections on areas where more research would be helpful.

Corporate governance Two recent thorough reviews from the theoretical and imple-mentation perspectives of studies about corporate governance in family firms pointtoward the need to incorporate the contextual factors such as legal system, capitalmarket, or cultural traditions in such research (Gersick & Neus 2013; Goel, Jusilla, &Ikäheimonen, 2013). Both observe the US and European focus of the extant literatureand urge more studies about family firms within the emerging economy context inwhich we might find more variations. Goel et al. (2013) explain context’s fundamen-tal effect on corporate governance issues of interest as follows:

In developed economies, because ownership and control are often separated andlegal mechanisms protect owners, the governance conflicts that receive thelion’s share of attention are the principal–agent (PA) conflicts between owners(principals) and managers (agents) (Jensen & Meckling, 1976). However, inemerging economies, the institutional context generally makes the enforcementof agency contracts more costly (North, 1990; Wright et al., 2005). This resultsin the prevalence of a more concentrated firm ownership (Dharwadkar et al.,


2000). Concentrated ownership, combined with an absence of effective externalgovernance mechanisms, is believed to result in more frequent conflicts be-tween controlling and minority shareholders (Morck et al., 2005). This newperspective has come to be known as the principal–principal (PP) model ofcorporate governance.

Against this backdrop, the PP focus of theorizing by Sauerwald and Peng (2013) inthis Special Issue, which extends Young, Peng, Ahlstrom, Bruton, and Jiang (2008),is not only timely but also critical. Clearly more work is needed to understandwhether the governance structures adopted in other countries might also be usefulin the Asia Pacific region. Or, as Au et al.’s (2013) impressive longitudinal studyindicates, are there governance practices and systems being developed by progressiveenterprises in Asian countries that may be usefully adopted by family enterprises inother regions of the world.

Researchers need to understand how variance in family structures and compositionor behaviors influence business related variables of interest. For example, Gersickand Neus (2013) reflected on the critical role of “family circle” on governance offamily enterprises and how it distinguishes these enterprises from all others:

[The] first two sets of governance tasks (ownership and management) aregeneric to all corporations. It is the governance tasks in the family circle thatare distinctive in family enterprise. Here the effectiveness of governance de-pends on its ability to serve the needs the family, extending beyond currentshareholders to include all those who are related by blood, adoption, or mar-riage and share a psychological sense of enterprise ownership—past, present,and future. The purposes of governance in this circle are to clarify the demandsand rewards of family membership in relation to the business, to define andcommunicate the opportunities for involvement in all of the family’s collabo-rative ventures, to facilitate information flow in ways that maximizes trust andminimizes manipulation, to establish and oversee the non-business/non-finan-cial aspects of the enterprise (often including philanthropy), and most of all toenhance a sense of belonging throughout the extended family, across the sub-categories of branch and generation. When governance in the family circle isworking well, it nurtures the emergence of the family’s shared dream (Lansberg,1999; Gersick et al., 1997), and then it structures the operationalization of thatdream in organizational practice. Governance failure in this circle risks loss ofcommitment and, as a result, loss of continuity.

Future research on corporate governance will need to incorporate familyrelated variables to understand how systems and processes used to govern thefamily influence (and are influenced by) those established for oversight ofownership and management of an enterprise (Sharma, 2004). Gersick andNeus (2013) call for more research to understand changes in governance overtime as families and their enterprises evolve. Another promising area of re-search is the role of non-family directors. In this Special Issue, Su and Lee’s(2013) study begins to understand this role pointing to the need to distinguish“outside directors” according to their varied degrees of separation from thecontrolling family. As the legal and financial institutions evolve in the Asia


Pacific region, it would be interesting to understand how the informal andformal means of governance are balanced.

Succession A perennial favorite of family business scholars, succession lost itsnumber one spot as the most researched topic in the field only in the most recentreviews (De Massis et al., 2012; Yu et al., 2012). Nevertheless, it remains a core topicencompassing a breadth of sub-topics such as process and the event of succession; theincumbent’s and the organization’s readiness; and the motivations, preparation, anddesirable attributes of the successor. Based on a review of research on succession infamily business studies, Long and Chrisman (2013) observed that research hasheretofore been directed toward understanding intra-family transitions in a familyfirm. Although scholars differentiate between management and ownership transition,most work remains focused on top management transition. For interested scholars,the systematic and thorough description of the current status of knowledge onsuccession and avenues for future investigation by Long and Chrisman’s chapter isa great resource. These scholars suggest the need to simultaneously model “themicro-, meso-, and macro-level constructs and cross-level interactions” if we are tounderstand succession in family enterprises more completely. Highlighting the im-portance of context, they encourage researchers to explicate the social dynamics andinstitutional factors amidst which succession is taking place.

Resonating with studies from other regions, some research from India indicates thereducing importance of primogeniture and gender in successor selection (Sharma &Rao, 2000). Related to this, Saxena (2013) models the role of family relations andchanges in the external environment on succession in family business groups. Au etal. (2013) describe how providing the next generation family members with system-atic guidance, through educational and experiential targets to accomplish in differentlife stages, can imbue in the next generation the entrepreneurial spirit needed to keepthe family enterprise competitive and growing.

The Asia Pacific offers a large diversity of family enterprises ranging from some ofthe oldest ones in the world, such as the Japanese innkeepers Houshi Ryokan foundedin 717 and operated by the Houshi family for 46 generations, to young high growthfirms such as the Automatic Manufacturing Limited in Hong Kong (Au et al., 2013).Following the cue from Long and Chrisman’s (2013) encouragement of includinginstitutional and multi-level factors in the study of succession, research can bedesigned to understand the similarities and differences in long-lived firms acrossthe world in terms of how cultural factors and economic evolution impact succession.Additionally, the younger firms within the region can be compared to the long-livedones in terms of their strategic orientation when it comes to planning for survival andtransitions.

Economic performance Research on economic or financial performance of familyenterprises has largely been focused at the firm level of analysis (Jiang & Peng,2011). While conflicting results are common, in general, founder managed familyfirms tend to outperform their non-family counterparts but superior performance isless clear for descendant managed firms (Amit & Villalonga, 2013; Stewart & Hitt,2012). Most of the research has focused on publicly listed large firms although asmall segment of literature has involved private firms. The empirical relationship


between family involvement and firm performance appears to be multi-faceted andcomplex, influenced by factors such as the definition of family firm used (Villalonga &Amit, 2006), espoused goals of the enterprise (McKenny, Short, Zachary, & Payne,2012), balance of economic and non-economic goals of the controlling family (Berrone,Cruz, & Gomez-Mejia, 2012), and the nature of family involvement in business(Sciascia & Mazzola, 2008). Reflecting on the measurement of family firm perfor-mance, business historian Andrea Colli (2012) noted the critical role of context asfollows: “Performance as value creation and transmission thus becomes a “mobile,”or multiple, concept, which varies across time and space, according to prevalent values,which are, in turn, the production of culture and institutions” (italics added; 255–256).

Scholars interested in pursuing research on performance of family firms will benefitfrom thinking of this variable as a plural—performanceS rather than a singular—because enterprising families have long been known to embrace a combination ofeconomic and non-economic objectives (e.g., Ward, 1987). Furthermore, given thatthe large majority of family enterprises are private and capital market measures of valuecreation are unavailable, researchers will benefit from employing multiple methods tocapture performance and value creation by these firms. For this purpose, measures ofperformance and value creation are now available in the literature (e.g., Amit &Villalonga, 2013; Berrone et al., 2012; Colli, 2012; Pearson et al., 2013; Stewart &Hitt, 2012). Of course, which combination of measures is the most appropriate for astudy will vary depending on the objectives of the investigation and context withinwhich it is conducted. A recent Special Issue of Family Business Review on this topic islikely to be a good resource for this line of inquiry (Sharma & Carney, 2012). Anotherfruitful direction of research lies in understanding performance at the group or portfoliolevel rather than at the firm level of analysis (cf. Zellweger et al., 2012).

Resources and competitive advantages It was in 1999 that Habbershon and Williamsintroduced the construct of “familiness” to describe the idiosyncratic resourcescreated as a result of family involvement in business. According to these authors,family involvement in business could have a positive or negative effect on resources(Habbershon, Williams, & McMillan, 2003). This work sparked interest of scholars tounderstand the creation and utilization of different forms of resources such as thesocial-, human-, survivability-, knowledge-, and family-capital (e.g., Sirmon & Hitt,2003). Hoy and Sharma (2010) built a conceptual framework indicating the key roleof human capital in effective building and utilization of other forms of capital. DeMassis et al. (2012) provide a succinct summary of this research.

While research focused on financial capital is largely conducted under the rubric ofeconomic performance, several interesting studies of pathways used by dynastic andprogressive family firms to expand their human and family capitals are available. Forexample, boundaries and networks of the controlling family are expanded througharranged marriages in Thailand or adoption of adult sons in Japan (Bunkanwanicha,Fan, & Wiwattanakantang, 2008; Mehrotra et al., 2011). Non-family directors andexecutives have been found to play an integral role in the continuity and transforma-tion of firms in all regions of the world (e.g., Hatum, 2007; Landes, 2006; Salvato,Chirico, & Sharma, 2010; Salvato, Minichilli, & Piccarreta, 2012). Au et al.’s (2013)article in this Special Issue is likely to open new avenues of research as it provides thefirst indication in the field of how entrepreneurial family firms are using their


enterprises to imbue and build the entrepreneurial skills and capabilities of the nextgeneration of family members. It is interesting to note that, in some stages of thedevelopmental process, non-family executives play a critical part while, in others,they do not. Such warp and weft of family and non-family members in dynasticinnovative firms as they professionalize has been observed in other regions as well(e.g., Bergfeld & Weber, 2011; Stewart & Hitt, 2012). Much interesting work on thedevelopment and career planning of family and non-family members in familyenterprises awaits attention. For example, how do family business groups use theresources and opportunities available to them in developing and testing the leadershiptalents of its high potential family candidates?

Social capital is another type of resource that has attracted the attention of familyenterprise researchers. For example, Arregle, Hitt, Sirmon, and Very (2007) andPearson, Carr, and Shaw (2008) theorized the dimensions of social capital, whileSteier (2007) traced the role of family’s social capital in the creation of a new venture.Distinction is made between internally focused bonding capital and externally focusedbridging capital (e.g., Sharma, 2008). Based on multiple case studies, Su and Carney(2013) distinguish between four levels of bridging social capital: (1) ties with govern-ment or state-owned organizations, (2) geographical or interest based community socialcapital, (3) organizational social capital between employees, and (4) kinship basedfamily social capital. They suggest that as kinship based capital is abundant in China,the competitive advantages for family enterprises lie in richer orchestration of the otherforms of capital. Song and Wang’s (2013) article provides empirical support for thesecond form of social capital proposed by Su and Carney (2013). Their study of 132small and medium enterprises in the Yangtze River Delta region of China indicates thatrelational strength lowers interest rates and collateral required to support the loan. Theseare important pioneering works in this direction, but more work lies ahead to understandhow family enterprises build different forms of social capital and how social capital atdifferent levels and aggregates may work in complementary and opposing ways indifferent contexts.

Sauerwald and Peng (2013) highlight a finding from previous research that, due tolower levels of out-group trust, individuals from collectivistic societies such as Japanhave been found to cooperate less with groups external to the family than those fromindividualistic societies such as the United States (e.g., Yamgishi, 1988). Similarresults are found in Deng et al.’s (2013) study of 43,728 small and mediummanufacturing firms in 31 provinces and regions of China. These firms face signif-icant challenges in attracting and retaining skilled non-family employees, therebybecoming more reliant on family members. Labor market demand–supply conditionscause firms to be reluctant to invest in training and development of non-familyemployees for fear of losing them and the firm’s trade secrets to rival firms. Recentstudies from Europe have been directed toward understanding the career developmentpathways of CEOs and non-family directors of family firms (e.g., Salvato et al.,2012). More research is clearly needed to compare and contrast the buildup of humancapital in family enterprises within different institutional contexts.

Entrepreneurship and innovation About 77 % of new ventures in the United Statesare established with significant family involvement in business and another 3 %become family firms within the first two years (Chua, Chrisman, & Chang, 2004).


Thus, family enterprises inspire new creations as a large majority of entrepreneurswho launch new enterprises are raised in business owning families (Fairlie & Robb,2007). Not only are they the crucibles that imbue confidence in next generationmembers to launch their own new firms (e.g., Au et al., 2013), dynastic family firmsbranch out to create new ventures both in stable and turbulent contexts (e.g., Bergfeld& Weber, 2011; Hatum & Pettigrew, 2006). Researchers’ attention is now beingdirected to understand the processes and factors that enable some family firms tocontinue on innovative paths while others fade away after the first generation’s tenure(e.g., Miller & Le Breton-Miller 2005). A combination of factors such as the criticalrole of top management teams formed of a mix of family and non-family profes-sionals working in concert is being revealed. For example, such teamwork was foundto successfully turn around dynastic firms in Argentina (Hatum & Pettigrew, 2006),Germany (Bergfeld & Weber, 2011), and Italy (Salvato et al., 2010).

While family members enable continuity of the core values held sacrosanct by thecontrolling shareholders, the non-family members energize the company by bringingnew perspectives that contribute to the progress. It is interesting to note that suchcombination of family and non-family working together is incorporated in the careerplanning used at the Automatic Manufacturing Limited case presented by Au et al.(2013) in this Special Issue.

Overall, research on entrepreneurship and innovation in family firms is gettingmore sophisticated and nuanced. For example, in their study of 740 CEOs of Belgianprivate firms, Lybaert, Voordeckers, and Huybrechts (2013) found a positive influ-ence of non-family CEOs on the entrepreneurial risk taking levels of family firms.However, this relationship is at its highest in the earlier years of the CEOs’ tenure. Asthe CEOs’ tenure lengthens, this relationship weakens leaving no difference inentrepreneurial risk taking by family and non-family CEOs. Longitudinal researchcan reveal whether such leveling out of entrepreneurial activity is simply part of theexploration and exploitation cycle, or there are other factors such as plateauing on thejob might be at play (cf. Sharma & Salvato, 2012). In addition to examining theantecedents of sustainable entrepreneurial firms and their activities, efforts are beingdevoted to understanding corporate, habitual, and portfolio entrepreneurship byfamily firms as indicated by reviews on these topics by McKelvie, McKenny,Lumpkin, and Short (2013) and Rosa, Howorth, and Cruz (2013). Other scholarshave reviewed work on social and technological innovation in family firms (e.g., DeMassis, Frattini, & Lichtenthaler, 2013; Zahra, Labaki, Gawad, & Sciascia, 2013). Allthese works review the limited but growing research on entrepreneurship and inno-vation in family firms suggesting several promising avenues for future researchespecially for scholars interested in the highly innovative region of Asia Pacific.

Concluding observations

In 2012, as part of celebrating the 25th anniversary of Family Business Review, twoSpecial Issues were produced. First, the March issue provided an overview of thefield from different perspectives. Second, the September issue focused on the varietyof methods and measures to capture the value creation and performance of privatefamily enterprises. In addition, the annotated bibliography of the most cited research


published between 1996–2010 rounded off these Special Issues (De Massis et al.,2012). In this article, we have mentioned several other notable review pieces on specifictopics. Most of these are appearing in for the SAGE Handbook of Family Business(Melin, Nordqvist, & Sharma, 2013). In short, interested scholars have an effectivelyorganized base of knowledge to become familiar efficiently with current knowledge anddiscourse in the field. From this launching point, interesting research can be designed tobuild a nuanced understanding of families, and the large variety of their enterprises.

The inception and evolution of the field of family business studies has been drivenby practice (Sharma, Hoy, Astrachan, & Koiranen, 2007). To ensure the maintenanceof the crucial link between research and practice, we offer some thoughts on how bestto ensure we do not lose sight of relevance of our work, as we continue to improve itsrigor and reach in the Asia Pacific region (Sharma, 2010). The practitioner might bean owner manager of a family enterprise or an advisor, working with the mission ofimproving the performances of a family enterprise both on economic and non-economic dimensions.

Cautioned by the increasing gap between research and practice in management(e.g., Rynes, Bartunek, & Daft, 2001; Vermeulen, 2007), scholars and institutions infamily business studies continue to devote significant efforts to build strong commu-nication networks between scholars and practitioner communities. Examples includedevelopment and dissemination of practitioner friendly executive summaries ofresearch published in Family Business Review; articles in practitioner outlets suchas the Family Business Magazine and FFI Practitioner; research dissemination in theform of books some of which are classics in the field; active participation of scholarsin practitioner conferences such as the FBN network and practitioners in researchconferences such as IFERA and FERC; and projects such as the SuccessfulTransgenerational Entrepreneurship Practices (STEP) wherein knowledge is co-created by scholars and practitioners. STEP Summits held in Hong Kong, Taiwan,and most recently in Thailand reinforce such linkages in the Asia Pacific region.

The important role of context is further reinforced when considering how apractitioner might use research findings, as s/he must first decipher how the resultsapply to his/her enterprise. The contextual factors will include those related to thebusiness (e.g., size, industry, profitability, capital adequacy, stage of professionaliza-tion, ownership distribution), the family (e.g., size, founder/sibling/cousin generation,gender mix of potential successors, willingness to accommodate/generosity towardeach other), and the external environment (e.g., rate of technological obsolescence,competitive structure of the market in which the firm operates, intensity of the rivalryamong competitors, societal norms, financial market’s attitude toward family firms,government corruption). In the short run, most of these contextual factors cannot bechanged and must be accepted as constraints within which the practitioner mustoperate. In the long run, however, many of the ones related to the family and thebusiness’s internal attributes can be changed. From the viewpoint of the enterprisingfamily, even the external context can be changed by altering the business mix in thefamily’s portfolio, as has been observed by research on dynastic families (Bergfeld &Weber, 2011; Hatum, 2007). The family can sell out of businesses in which the rivalryis too intense or the rate of technological obsolescence is too high for family membersto live with. The size or composition of a family might be altered either by trimmingthe family tree or adopting new family members (e.g., Lambrecht & Lievens, 2008;


Mehrotra et al., 2011). Nevertheless, it behooves scholars to clarify the context andscope of their research findings, so as to enable practitioners to determine whetherfindings from a particular study are applicable to their situations. And, practitionersmust equally be cautioned that as with any young discipline, findings from researchmust be questioned for applicability to their context.

While family business advising has been at the core of the development of familybusiness studies and continues on its fast growing trajectory (Sharma et al., 2007), itis only recently that efforts are being undertaken to investigate the efficacy andefficiency of such advising (e.g., Strike, 2012). The Special Issue of FamilyBusiness Review on this topic to be published in September 2013 is likely to providean important boost to this line of inquiry. Similarly, other Special Issues of FamilyBusiness Review on accounting and marketing lay the grounding for more scholarlyinvestigations along these lines. In short, the future of family business studies ingeneral, and in Asia Pacific in particular remains bright as much exciting work awaitsscholarly attention (Craig & Salvato, 2012).

Acknowledgment We thank APJM Special Issue Editors Kevin Au, Mike Peng, and Yuan Lu for helpfulcomments.

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Pramodita Sharma (PhD, University of Calgary) is the Sanders Professor of Entrepreneurship and FamilyEnterprise Studies at the University of Vermont. She serves as the academic director of the Global STEPproject at Babson College and is the Editor of Family Business Review.

Jess H. Chua (PhD, University of Michigan) is a Professor of Finance and Family Business Governance atthe Haskayne School of Business of the University of Calgary, Canada and the Fotile Professor of FamilyBusiness at the School of Management of Zhejiang University, China.


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