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1 Copyright © Society for Business Ethics. This is a non-copyedited version of a paper forthcoming in Business Ethics Quarterly. It is available for personal scholarly use only. Any other use is subject to the same permissions terms as articles published in BEQ.

DRIVERS OF PROACTIVE ENVIRONMENTAL STRATEGY IN FAMILY FIRMS

Pramodita Sharma Professor, John Molson School of Business

Concordia University, Montreal, Canada [email protected]

Sanjay Sharma Dean, John Molson School of Business

Concordia University, Montreal, Canada [email protected]

For publication consideration in the

Special Issue of Business Ethics Quarterly

Stakeholder theory, Ethics, Corporate Social Responsibility, and Family Enterprise Edited by: Bradley R. Agle, James J. Chrisman, Ronald K. Mitchell, & Laura Spence

We thank James J. Chrisman, Ronald K. Mitchell, Laura J. Spence and an anonymous reviewer for valuable comments and guidance on earlier versions of this article. In addition, we gratefully acknowledge the funding support from Concordia University’s Seed Funding Program and the

mailto:[email protected]�

mailto:[email protected]�


David O’Brien Center for Sustainable Enterprise for this research project.


DRIVERS OF PROACTIVE ENVIRONMENTAL STRATEGY IN FAMILY FIRMS ABSTRACT Globally, family firms are the dominant organizational form. Family involvement in business and unique family dynamics impacts organizational strategy and performance. However, family control of business has rarely been adopted as a discriminating variable in the organizations and the natural environment (ONE) research field. Drawing on the theory of planned behavior we develop a conceptual framework of the drivers of proactive environmental strategy (PES) in family firms. We argue that family involvement in business influences the attitudes, subjective norms, and perceived behavioral control of a firm’s dominant coalition. Together these factors determine the extent of the dominant coalition’s intentions to undertake PES. Further, family firms with lower levels of relationship conflict within the controlling family will be more successful in translating the dominant coalition’s intentions to allocate resources for the pursuit of PES. Research implications of the theory are discussed.

During the last two decades, organizations and the natural environment (ONE) scholars

have devoted significant efforts to understand the factors that influence the environmental

strategy of a firm. The ONE literature argues that the successful pursuit of a proactive

environmental strategy (PES) or a voluntary strategy that goes beyond-compliance with

environmental regulations requires both positive managerial attitudes/values toward

environmental preservation (motivation) (e.g., Bansal, 2003; Cordano & Frieze, 2000; Sharma,

2000; Sharma, Aragón-Correa & Rueda, 2007) and resource allocations to build and deploy

organizational capabilities (ability) to pursue such strategies (e.g., Aragón-Correa & Sharma,

2003; Christmann, 2000; Hart, 1995; Marcus & Geffen, 1998; McEvily & Marcus, 2005; Russo

& Fouts, 1997; Sharma & Vredenburg, 1998).

The ONE research has been undertaken at different levels of analysis and in varied

contexts such as single and multiple industry settings, manufacturing and service industries,

private and public sector firms, and large and small businesses. However, even in studies that

may have included family controlled businesses, family involvement in the business has rarely


been adopted as a discriminating variable. This omission is notable because the family business

literature makes a strong case for family firms being the dominant organizational form around

the world (e.g., Gersick, Davis, Hampton, & Lansberg, 1997; La-Porta, Lopez-de-Silanes, &

Shleifer, 1999). The family business literature suggests that ignoring the family variable from

organizational research leads to underspecified theoretical models and empirical findings that do

not apply to a large majority of business organizations (Dyer Jr., 2003; Dyer Jr. & Dyer, 2009;

Litz, 1997). A noteworthy exception in the ONE literature is the recent study by Berrone, Cruz,

Gomez-Mejia, & Kintana (2010) that reports better environmental performance for family

controlled public firms in the U.S. as compared to non-family firms. This study reinforces the

growing evidence that family firms are fundamentally different from non-family firms

(Chrisman, Chua and Sharma, 2005). The Berrone et al. study and the family business literature

collectively point to a research opportunity for examining business phenomena such as corporate

environmental strategy using a family business lens, with a potential to lead to fresh insights.

Family firms introduce a dynamic of personalized control that is different from the

institutionalized control in non-family firms, significantly affecting the strategic orientation and

processes of these firms (Arregle, Hitt, Sirmon & Very, 2007; Chrisman et al, 2005; Miller &

Le-Breton Miller, 2005). Family firms are governed by a dominant coalition. While the dominant

coalition in a family firm is similar to a top management team (TMT) in a professional firm, its

aim is to pursue the controlling family’s vision for the firm. The dominant coalition in family

firms consists either of family members or a combination of family and non-family members

who are appointed by the controlling family, indicating the strong family influence on the

members of the dominant coalition and on the firm’s strategy (Chua, Chrisman & Sharma,

1999). Thus, the controlling family influences both of the major factors identified in ONE


research as being important for pursuit of a PES: managerial attitudes/values (motivation) and

resource allocation decisions to build organizational capabilities (ability). The respondents in

ONE research have mainly been individual managers, whether middle managers or members of

the TMT. As we argue above, the focusing on the dominant coalition in a family firm is likely to

reveal fresh insights into the motivations and ability of family firms to pursue a PES.

To illustrate, although ONE scholars have long argued for a significant relationship

between individual managerial beliefs and values towards environmental preservation and their

firms’ engagement in PES (Hart, 1995), this linkage has not yet been conclusively supported in

empirical studies (Bansal, 2003; Bansal & Roth, 2000; Cordano & Freize, 2000). One possible

explanation is that this research has been focused on middle level environmental managers who

have limited control over resource allocation decisions of the firm to undertake environmental

practices (Ashford, 1993; Cebon, 1993; Cordano & Frieze, 2000). This suggests the importance

of understanding the factors that influence the intentions of the dominant coalition that controls

organization strategy and resource allocation decisions – a task we undertake in this article.

The lack of a significant relationship between managerial values/beliefs and strategy may

be because ONE research does not examine family control as a variable in its models. In non-

family firms it is very difficult to link individual level beliefs, values and attitudes with

organizational level strategy without examining processes that translate these beliefs into deep-

rooted and pervasive organizational and cultural change. In contrast, in family firms, the long

tenures of the leadership and the controlling family’s influence on the firm’s dominant coalition

enables easier permeation of individual and family values into the firm’s resource allocation

decisions (McConaughy, 2000; Ward, 1987). This influence is accentuated by the significant

ties, at times extending over generations, of the controlling family on the firm (Miller & Le-


Breton Miller, 2005). Thus, family dynamics and influence has relevance for endogenous drivers

that influence an organization’s ability to allocate resources for the pursuit of a PES.

On its part, the family business literature has undertaken very limited research focused on

ethical, social, or environmental behavior of family firms. The few studies on this topic suggest

that due to a strong identification with the firm name by the dominant coalition, family firms

exhibit higher levels of corporate social and community citizenship behaviors (Craig & Dibrell,

2006; Dyer Jr. & Whetten, 2006; Post, 1993). However, this research has not yet examined the

factors that enable the resource allocation decisions to pursue a PES. Drawing from the ONE,

family business, strategic management, and social psychology literatures, we develop a multi-

level theoretical framework of factors that enable firms to allocate resources and build

capabilities for the successful pursuit of PES.

Based on the theory of planned behavior (Ajzen, 1991) we argue that dominant coalitions

in firms with higher levels of family involvement in business are more likely to have stronger

intentions to pursue a PES. As compared to dominant coalitions (TMTs) in non-family firms,

these coalitions are likely to: 1) harbor positive attitudes towards environmental preservation, 2)

believe that subjective norms favor pro-environmental activities in their firm, and 3) perceive

higher levels of behavioral control to pursue such activities. This is because of the significant and

long lasting influence of the family on the dominant coalition, longer leadership tenures of

family members in family firms, long term strategic and decision-making orientation of these

firms, higher motivation to accumulate socio-emotional wealth for future generations, and a

strong identification of the family with the firm (e.g., Berrone et al., 2010; Dyer Jr. & Whetten,

2006; Gomez-Mejia, Haynes, Nunez-Nickel, Jacobson, and Moyano-Fuentes, 2007; Miller &

Le-Breton Miller, 2005).We further suggest that dominant coalitions in family firms controlled


by a family with lower levels of relationship conflict will be more likely to translate these

intentions into investment in resources needed to pursue a PES. These relationships are depicted

in Figure 1.

In the next section, we clarify the scope of this article by discussing the unique features

of the organizational form of interest to us: family businesses. We then elaborate on the

philosophical differences between the literatures on business ethics and ONE with regards to the

environmental strategy of a firm. The following section develops a theoretical framework to

explain why firms with higher levels of family involvement in business are more likely than

other firms to exhibit positive intentions for undertaking proactive environmental strategies. The

role of the level of relationship conflict within the controlling family on the ability of the

dominant coalition to successfully deploy resources for the pursuit of PES is examined. The

research implications of the theory developed in this paper are discussed in the last section.

Family Business and Environmental Strategy

A widely accepted definition of family business is “a business governed and/or managed

with the intention to shape and pursue the vision of the business held by a dominant coalition

controlled by members of the same family or a small number of families in a manner that is

potentially sustainable across generations of the family or families” (Chua, Chrisman and

Sharma, 1999: 25). This definition includes two relevant dimensions that make family firms

unique for our theorizing. First, owing to the tenacity of the controlling family’s vision, family

firms can make decisions (via the dominant coalition) in a ‘personalistic’ manner that is

relatively unencumbered by internal bureaucracy, other competing voices in the firm, or external

pressures (Carney, 2005). Second, because of the combination of personalism and a desire to

sustain the vision across generations and retain family control, family firms are likely to act in a


‘particularistic’ manner (Carney, 2005) substituting rational and economic wealth maximization

objectives for objectives that help accumulate ‘socio-emotional wealth’ (Berrone et al., 2010;

Gomez-Mejia, et al., 2007), reputation and image of the firm (Craig & Dibrell, 2006; Dyer Jr., &

Whetten, 2006; Post, 1993), and/or other objectives that are consistent with the vision of the

controlling family. In comparison to non-family firms, family firms have been found to be more

willing to risk the uncertainty of economic outcomes related to undertaking beyond-compliance

environmental strategies (Berrone et al., 2010; Gomez-Mejia, et al. 2007).

Family business scholars have long viewed family business as composed of two

overlapping sociological systems of family and business (see Sharma & Nordqvist, 2008 for a

review of system models in this literature). It has been argued that there is an ease of

permeability of resources and values between these two systems (Aldrich & Cliff, 2003; Sharma,

2008) that influences strategy. The social and financial capital of the family helps build the

resources and capabilities in a family business (Pearson, Carr, & Shaw, 2008; Steier, 2007).

Similarly, the capital built through the family business has been found to benefit the family (Hoy

& Sharma, 2009). The family business literature distinguishes between the extent of family

involvement in business and the consequences of this involvement (Chua, Chrisman, & Sharma

1999). Two components of family involvement in business have received attention in the

literature: family involvement in ownership and/or management of the firm (e.g., Sciascia &

Mazzola, 2008). The strategy and performance consequences of active family involvement in

business can be positive or negative (Habbershon & Williams, 1999).

On the positive side, family involvement contributes to the building up of competitive

advantage for the firm through higher stocks of social capital and patient financial resources that

enhance the firm’s economic sustainability and longevity (Miller & Le-Breton Miller, 2005;


Sirmon & Hitt, 2003; Tokarczyk, Hansen, Green, & Down, 2007). These resources also

contribute to the achievement of non-economic outcomes such as the preservation of family ties

and trans-generational value creation (Basco & Rodriguez, 2009; Chrisman, Chua & Litz, 2003;

Stafford, Duncan, Dane & Winter, 1999), which affect firm performance (Sharma, 2004).

On the negative side, family involvement in business can be dysfunctional as it adds

complexity to business by intensifying the degree and tenacity of conflicts amongst family

members who may have differences in their visions and goals (Eddleston & Kellermanns, 2007;

Grote, 2003; Sorenson, 1999). In turn, such differences cause confusion in strategic direction and

possible paralysis of action in the dominant coalition as divergent powerful family groups pursue

competing objectives (Gersick et al., 1997). Both the extent of family involvement in business

and its consequences as reflected in the relationship conflicts within the controlling family, are

likely to vary across family firms and within a family firm over time. As we elaborate in our

theory, both these variables play an important role in the environmental strategy of a family firm.

Corporate Environmental Strategy

At the outset, it is useful to distinguish between the environmental and sustainability

strategies of a firm, as these terms are sometimes used interchangeably. While there is lack of

complete consensus amongst scholars, there is a general agreement that a firm’s sustainability

strategy enables it to achieve its economic outcomes while achieving positive social and

environmental impacts (Gladwin, Kennelly & Krause, 1995; Starik & Rands, 1995). A firm’s

environmental strategy is a narrower concept that refers to a firm’s “strategy to manage the

interface between its business and the natural environment” (Aragón-Correa & Sharma, 2003:

71). Therefore, a firm’s sustainability strategy is more holistic as compared to its environmental

strategy. The former is a wider concept that integrates a strategy to achieve simultaneous social


outcomes such as poverty reduction, fair trade, and human rights while reducing the firm’s

environmental footprint and achieving its economic objectives. Although a few vanguard firms

have begun to develop holistic sustainability strategies (e.g., Hart & Sharma, 2004, Kanter,

2009), most firms are focused on reducing their environmental footprint or even more

specifically their carbon footprint. In this paper, we focus on corporate environmental strategy as

our outcome variable because our unit of analysis, family businesses, represents a wide range of

enterprises that are more likely to be at various stages of developing their environmental

strategies rather than holistic sustainability strategies.

A major research stream in the ONE literature attempts to understand the relationship

between a firm’s environmental strategy and its outcomes such as competitive advantage,

innovation, market opportunities, and/or operating legitimacy (e.g., Hart, 1995; Judge &

Douglas, 1998; Klassen & McLaughlin, 1996; Russo & Fouts, 1997; Sharma & Vredenburg,

1998). This literature views a firm’s environmental strategy as one that enables firms to achieve

its economic outcomes while simultaneously reducing their environmental footprint. Thus, this

research diverges from the business ethics literature that views voluntary environmental strategy

as a moral rather than an instrumental choice made by firms (e.g., Orts & Strudler, 2002; Spence,

Jeurissen & Rutherfoord, 2000). The ONE literature also argues that the natural environment is

not an “issue” like other social issues in regard to which a firm has to make moral choices but

rather a systemic multi-level context within which businesses operate and therefore requires

development and implementation of core business strategies (Starik & Rands, 1995; Shrivastava,

1995, 2000). Even though the ONE literature presents mixed evidence for a relationship between

voluntary environmental strategies and economic performance of firms, unlike the business

ethics literature it does not posit that environmental and economic performance of firms are in


conflict. In adopting an instrumental lens to examine why dominant coalitions in family firms are

driven to adopt a PES in order to simultaneously achieve economic and environmental benefits,

this article provides an alternate viewpoint to the ethics literature for strategies that significantly

benefit business and society as a whole.

Another stream of ONE research examines major drivers, exogenous and endogenous,

that influence firms to go beyond regulatory compliance in their environmental strategies. The

drivers include institutional influences (e.g., Hoffman, 1999; Jennings & Zandbergen, 1995),

stakeholder pressures (e.g., Buysse & Verbeke, 2003; Sharma & Henriques, 2005), managerial

interpretations (Sharma, 2000) and attitudes (Cordano & Frieze, 2000), managerial and

organizational values (e.g., Bansal, 2003; Bansal & Roth, 2000), leadership (Egri & Herman,

2000), organizational capabilities (e.g. Aragón-Correa & Sharma, 2003; Christmann, 2000; Hart,

1995; Russo & Fouts, 1997; Sharma & Vredenburg, 1998), organization design (Sharma, 2000),

and organizational identity (Sharma, 2000), among others. This paper contributes to this research

by building theory on endogenous factors influencing environmental strategy in family firms.

In spite of differences in nomenclature, typologies of corporate environmental strategies

can be placed broadly along a continuum that ranges from reactive/pollution control/ regulatory

compliance to proactive /pollution prevention/beyond-compliance/voluntary (Russo & Fouts,

1997; Sharma, 2000). Reactive environmental strategies focus on meeting legal requirements and

implementing pollution controls. Firms pursuing such strategies are driven by instrumental

factors such as avoiding legal sanctions or penalties and negative impacts on a firm’s image or

reputation, etc. (Russo & Fouts, 1997; Sharma, 2000). Proactive environmental strategies (PES)

focus on environmental preservation practices for reducing waste, energy, and material use at

source, which are also known as pollution prevention (Russo & Fouts, 1997; Sharma, 2000).


Higher degrees of proactivity refer to leadership strategies of redesigning products and

processes, and may include the redesign of business models to minimize the firm’s ecological

footprint along the entire operations life cycle and value chain (Aragón-Correa, 1998; Hart,

1995; Roome, 1992). Pursuit of these strategies requires the inclusion of environmental criteria

into decision-making, and the measurement, monitoring and reporting of performance on these

criteria in addition to measuring and reporting economic performance (Gladwin, Kennelly &

Krause, 1995). These are major changes in a firm’s decision-making and operating processes,

and require investments in new organizational resources and capabilities by the dominant

coalition of an organization. Thus, we focus on factors that influence the dominant coalitions’

intentions and abilities to pursue PES.

Arguably, businesses will be motivated to deploy resources and develop capabilities for

undertaking a PES that they can link directly to positive financial outcomes. Indeed, some

studies have shown that reduction in wastes translates into superior financial performance via

cost savings and improved process efficiencies (e.g., Hart & Ahuja, 1996; Judge & Douglas,

1998; Russo & Fouts, 1997). Positive stock price movements have been linked to environmental

awards won by firms (Klassen & McLaughlin, 1996). However, the overall evidence for a

relationship between environmental practices and the financial performance is mixed (e.g.,

Griffin & Mahon, 1997; Margolis & Walsh, 2003).

Despite this mixed scientific evidence, many leading companies around the globe

consistently and enduringly pursue increasingly more advanced environmental strategies over

time, often reaping significant long-term economic as well as non-economic performance

advantages. Often cited examples include firms such as SC Johnson Co. and Ford Motors—both

are family firms though this important factor has not received scholarly attention in the ONE


literature. SC Johnson Co. has endeavored to be a good corporate citizen throughout its history.

It has pursued a PES consistently over the last three decades regardless of changes in its business

environment or its leadership. At Ford, Bill Clay Ford Jr.’s assumption of the leadership as CEO

of Ford marked the beginning of a PES focused on lowering the environmental footprint of the

giant company. This strategy has endured in spite of the difficult times that the North American

auto industry has gone through in recent years. It is remarkable that Ford is the only one of the

big three US auto firms that did not require a bailout from the US government in 2008-09. At the

January 2010 North American Auto Show at Detroit it received several awards and accolades for

its hybrid and electric cars. At the same time Ford is proactively reducing the ecological footprint

of its supply chain, processes, physical facilities, and operations.

Against the backdrop of such examples, could it be that family firms are better positioned

as compared to non-family firms to embrace and exploit the multi-faceted performance

advantages of engaging in a PES? Perhaps if the family influence and control is examined as a

variable in ONE research, we could develop a more robust understanding of the linkage between

a firm’s environmental strategy and its economic performance via an understanding of how

dominant coalitions translate their attitudes for environmental preservation into resource

allocation decisions to build and deploy organizational capabilities for a PES.

ONE research provides empirical evidence to suggest that the managers’ interpretations

of environmental issues either as opportunities or threats affects their expectations of future

strategic value of investments or the deployment of resources and capabilities to undertake

environmental practices and technologies (Sharma, 2000). To overcome managerial biases and

avoid conflicts, firms use routines and processes (i.e., capabilities) to facilitate decisions

regarding resource and capability deployment, and align these decisions with the guiding values


of the dominant coalition or the TMT (Amit & Schoemaker, 1993; Bansal, 2003; Gavetti, 2005).

As the beliefs and values of the controlling family exercised via the dominant coalition of a firm

guide the development and deployment of capabilities, in the next section we look for insights in

the theory of planned behavior to examine how these beliefs and values influence organizational

outcomes and behavior.

Proactive Environmental Strategy (PES) as Planned Behavior

By its very definition, PES is a planned behavior as it is neither reactive not

serendipitous. Thus, we use Ajzen’s theory of planned behavior (1985; 1991) to develop an

exploratory theoretical framework of the drivers of PES in family businesses. This theory posits

that intentions influence actual behavior by indicating the extent of effort an individual is willing

to exert towards a particular action such as investing the firms’ resources to build organizational

capabilities to pursue a PES. In turn, intentions are determined by three factors: individual

attitudes toward a behavior (e.g., environmental preservation), subjective norms or perceptions

of the important referents’ evaluation of the behavior (e.g., whether environmental preservation

activities should be pursued within the firm), and perceptions of behavioral control, that is, the

ease or difficulty with which an individual can engage in environmental preservation activities

within the firm.

Ajzen’s theory (1985; 1991) has been employed to understand behavioral intentions of

environmental managers in non-family firms (Cordano & Frieze, 2000), and succession related

behaviors of leaders in family firms (Sharma, Chrisman, & Chua, 2003). In these studies, a

significant positive influence of conformance with subjective norms and perceived behavioral

control on intentions was revealed. In the Cordano and Frieze study, environmental managers’

attitudes positively influenced their intentions to engage in beyond-compliance pollution


prevention behaviors. However, their actual behavior was restricted due to their status as junior

managers and hence their limited influence on resource allocation decisions (Cordano & Freize,

2000). This suggests a need to understand the behavioral influences of the dominant coalition of

the firm who control resource allocation decisions rather than middle- or junior-level managers.

As depicted in Figure 1, our core thesis is that the involvement of family in business

influences the attitudes of individuals in the dominant coalition, and their perceptions of the

prevailing social norms and control over activities in a firm. That is, family involvement

influences the prevailing attitudes of individuals toward environmental preservation, norms of

whether or not it is appropriate to use the firm as a vehicle for environmental preservation

practices, and the extent of control they have to successfully undertake these activities. Together

these factors determine the intentions of the dominant coalition to undertake PES. We further

posit that the extent of relationship conflict in the controlling family, will moderate the ability of

the dominant coalition of the firm to translate these intentions into actions to allocate resources

to build and deploy organizational capabilities to pursue an enduring PES. These arguments are

developed in depth below.

Family involvement in business

Although family firms are distinguished from their non-family counterparts based on the

significant influence of family on business, the family business literature highlights the

heterogeneity within family firms (e.g., Sciascia & Mazzola, 2008; Sharma & Nordqvist, 2008;

Ward, 1987). The extent of family involvement in the ownership, management, and governance

of the business can vary significantly from one family firm to another and within the same family

firm over time. For example, in some founder-led firms such as ‘lone founder’ firms (Le-Breton

Miller and Miller, 2008), there may be no involvement of family in the business, while in others


all members of a family may pitch in their time, talent, and resources to help launch and grow the

venture (Hoy & Sharma, 2009). Across generations, while some retain the concentrated

leadership format where the controlling family occupies key ownership, management, and

governance positions, others evolve into sibling partnerships or cousin consortiums with no

dominant leader. Still others separate the management and ownership roles with family

essentially becoming an investor in the firm using non-family managers to lead the operating

business (Gersick et al., 1997).

In this article, our interest is to understand how family involvement in business influences

the dominant coalitions’ intentions to engage in PES and their ability to convert these intentions

into actions to allocate resources to build organizational capabilities to pursue a PES. In our

theorizing, we distinguish between four degrees or extent of family involvement in business: (i)

Family owned and managed firms with concentrated family involvement in ownership,

management, and governance of the firm; (ii) Family managed firms where the family dominates

the top management team though ownership may be dispersed; (iii) Family owned firms where

the CEO position is held by a non-family member but the family holds controlling ownership

(Ward, 1987); and (iv) an absence of family involvement.

Family involvement and dominant coalition attitudes

The social psychology literature suggests while attitudes are fairly stable evaluative

tendencies to respond or behave in a consistent manner, they are influenced by individuals’

beliefs and values (John & Saks, 2008; Jones & Gerard, 1967). While beliefs are assumptions or

perceptions about reality, values are a tendency to prefer certain state of affairs over others,

signaling what we consider good or bad, desirable or undesirable (Rokeach, 1973). For our

theorizing, it is the beliefs and values of individuals in the dominant coalition toward


environmental preservation that are likely to influence their attitudes towards using the family

firm as a vehicle for an environmental strategy.

An individual’s beliefs and values have been found to be formed early in life and remain

relatively stable over the course of life (Judge & Bretz, 1992). The family into which one is born

or adopted at a young age offers unique opportunities that extend over several years, to imbue

parental values into family members (Giddens, 1984; Hoy & Sharma, 2009). For example, a

dialogue over a meal, or during a vacation, or during a drive to school can guide the beliefs and

values of the next generation of family members. Furthermore, the behaviors of senior family

members and also family legends help reinforce the values held sacrosanct by the family. Junior

generation members can also influence family beliefs as they bring new external knowledge and

discuss it with other family members. The multiple opportunities for communication and

exchange of ideas within a family help in the unification of thoughts and beliefs. This suggests a

high degree of family influence on individual family members’ attitudes towards environmental

preservation.

When family involvement and the concern for trans-generational sustainability of control

and the preservation of socio-emotional wealth are high, the welfare of the current and future

family members are linked (Chua et al., 1999; Gomez-Mejia et al., 2007). This involvement and

concern are expected to lead to strong, positive attitudes favoring environmental stewardship

since such stewardship not only favorably influences the reputation of the owning family but also

enhances the family’s legacy. On the other hand, when management or ownership is dispersed

among family and non-family members the impact of their individual or family values on the

firm is mitigated by the competing values and goals of other managers and non-family members

of the dominant coalition in the firm (cf. Cyert & March, 1963). As compared to the dominant


coalition in the family firm, the values and beliefs of lower- or mid-tier managers in a firm are

likely to have a lower influence on the firm’s strategy and resource allocation decisions. It is not

surprising therefore that Cordano and Frieze (2000) did not find a positive relationship between

managerial values and the firm’s environmental performance.

In family owned and managed firms, the dominant coalition is composed of family

members, providing a fertile arena for permeability of values from family into the business and

unification of attitudes (cf. Aldrich & Cliff, 2003; Sharma, 2008). High level of family

involvement in all aspects of business signals strong socio-emotional attachment of the family

with the business (Gomez-Mejia, et al, 2007), as the identity of the family gets intertwined with

that of the firm (Tompkins, 2010). They see themselves as stewards of the firm for future

generations, thereby exhibiting long-term orientation in their decision making and stronger

community citizenship behaviors especially at the local level (Berrone et al., 2010; Craig &

Dibrell, 2006; Dyer Jr. & Whetten, 2006; Post, 1993). As the same family continues its active

involvement in business over long periods of time, perhaps over generations (McConaughy,

2000; Miller & Le-Breton Miller, 2005), the unification of family values with the guiding

policies of the firm becomes deep-rooted and resilient (Sorenson, Goodpaster, Hedberg, & Yu,

2009). For example, during a conversation, a family member of the Benziger Family Wineries in

Sonoma County, California explained how the winery began developing biodynamic organic

farming capabilities:

“Our family has run the Benziger Winery for over two decades with a great deal of passion and love for the craft of winemaking. For many years, we followed conventional practices without giving it a second thought. One morning I looked out of the window and saw our family’s children headed to school through a cloud of herbicide being sprayed by our low flying crop duster. That is when I had my epiphany. We lived on the land—the winery was our home—our children would continue to live on this land. We owed it to the family and to our future generations and to the land that we lived on to work toward a sustainable ecosystem that would be healthy and productive forever. The


unexpected by-product of a sustainable winery has been a dramatic improvement in our wines which have won many awards for quality and taste. Perhaps the entire farm ecosystem shares the joy of the family in the land and this joy is manifest in wine quality.” Benziger Family Wineries are now a leader in California in biodynamic farming

methods. Biodynamic is the highest form of organic farming. It goes beyond the elimination of

all chemical inputs. It incorporates the environment in and around the vineyard and works with

nature to apply the knowledge of life forces to bring about balance and healing in the soil. As

stated above, this has led to a series of awards for the quality of their wines. The example

highlights how a family’s desire to protect their socio-emotional wealth could lead to positive

attitudes towards environmental sustainability. Research has revealed the significant impact of

family values on the nature of relationships of the family business with the community and its

key stakeholders, as well as on multiple dimensions of success and performance of family firms

(e.g., Basco & Rodriguez, 2009; Danes, Stafford, Haynes, & Amarapurkar, 2009; Sorenson &

Bierman, 2009). In case of family owned and managed firms the controlling family is not only

likely to have a significant influence on the attitudes of the dominant coalition of the firm, but

attitudes towards environmental preservation are likely to be more unified and positive in

comparison to family managed or family owned firms. Thus we propose that,

P1: The extent of family involvement in the ownership and management of a firm is positively

associated with favorable attitudes of the firm’s dominant coalition toward environmental

preservation.

Family involvement and the dominant coalition’s perception of subjective norms

Even when families, individuals, or dominant coalitions harbor a favorable attitude

toward environmental preservation, their perceptions of whether or not it is appropriate to use the

firm as a vehicle for the pursuit of environmental practices may vary. Such variation is


particularly important with regard to PES since the pursuit of such a strategy requires significant

investment of resources and the development of capabilities. Therefore individuals in the

dominant coalition are likely to look up to the controlling family to calibrate themselves and

establish social norms for the firm. In other words, the controlling family becomes the referent

group for key individuals in the firm (Chrisman, Chua, & Steier, 2003).

In family owned and managed firms such as Benziger Winery, members of the

controlling family are more likely to be dependent on the firm for their financial and socio-

emotional needs, thereby viewing the firm as a long term family investment to be bequeathed to

descendents (Berrone et al., 2010). The family name is associated with the firm as in Benziger

Family winery causing the firm to be seen both by internal and external stakeholders as an

extension of the family itself (Tompkins, 2010). The unification of ownership and control

provides them the authority to make decisions unencumbered by constraints of other dominant or

minority shareholders (Chrisman, Chua & Litz, 2004; Salvato & Moores, 2010). This

personalism motivates them to preserve the firm for the future and develop strong relationships

with other key stakeholders including the community and NGOs i.e., non-governmental

organizations with a mission to protect the natural environment (Carney, 2005; Miller and Le-

Breton Miller, 2005). Research confirms that firms whose key stakeholders are embedded in the

community tend to adopt pro-community strategies regardless of whether or not the economic

benefits of such strategies are well established (e.g., Henriques & Sadorsky, 1999; Kassinis &

Vafeas, 2006). In addition, the dominant coalitions in such firms have the ability to make

particularistic decisions that may not be easy to justify through a rational-calculative lens but are

supported by the non-economic goals of the controlling family (cf. Carney, 2005; Chrisman,

Chua, & Zahra, 2003). Thus, in such firms the dominant coalitions are well positioned to


exercise their own beliefs on environmental preservation through their family firm because their

views become the accepted norms of behavior in the firm.

In firms where the dominant coalition is dominated by family members, the visibility of

the family in the firm is high providing ample opportunities to influence other managers through

words or deeds regarding role of firm in environmental preservation. However, if these

individuals do not have ownership control they are constrained in their decision-making and

cannot readily pursue or support beyond-compliance environmental practices unless they are also

supported by the controlling owners. Thus, their ability to establish norms to undertake activities

within the firm for environmental preservation is constrained.

In instances where a family is involved mainly in the ownership of the firm and not in

visible roles of management, their influence on the dominant coalitions’ perceptions weakens.

Without visibility and frequent contact with family members, non-family members in the

dominant coalition may not be fully aware of the controlling family’s thoughts about

environmental stewardship or whether it is appropriate to use the firm as a vehicle for

environmental preservation. For example, Carly Fiorina at Hewlett & Packard, Jacques Nassar at

Ford Motor Company, and Katsuaki Watanabe at Toyota Motor company, all pursued strategic

directions that later emerged as at odds with the values of the controlling family ownership. In

order to re-align the firm strategy with the family values, these CEOs were ousted and in the case

of Ford, Bill Clay Ford Jr. assumed leadership of the dominant coalition in order to pursue a

vision of environmental stewardship for the firm.

Furthermore, when the ownership is dispersed among several minority shareholders (as

might be in the case of a cousin-consortium), the likelihood of any one viewpoint becoming

dominant is low, leading to the dilution of the strength of the dominant coalition’s intention to


use the firm as a vehicle for environmental preservation. Thus,

P2: The extent of family involvement in the ownership and management of a firm is positively

associated with the firm’s dominant coalitions having subjective norms that encourage the

pursuit of a PES.

Family involvement and the dominant coalition’s perception of behavioral control

Perceived behavioral control refers to the ‘people’s perception of the ease or difficulty of

performing the behavior of interest’ (Ajzen, 1991: 183). For our purposes, this variable refers to

the expectation of dominant coalition members regarding their ability to allocate resources in

order to build organizational capabilities to pursue a PES through their firm.

Family firms with continuity of ownership, long term orientation, and dominating

influence of family in business provide the combination of stability and freedom to pursue their

preferred strategies or particularistic agendas that balance the economic and socio-emotional

goals of the controlling family (Berrone et al., 2010; Carney, 2005). A steadiness of vision over

time is more likely due to the family’s continuing influence on the firm (Tapies & Ward, 2008).

Longevity of the leadership team and long tenures helps imbue these values in the firm making it

easier for the dominant coalition to feel confident about the degree of support they are likely to

get for initiatives aimed (c.f., Miller & Le-Breton Miller, 2005) toward a PES.

A family’s vision of environmental sustainability may emerge with the founder’s vision

of the firm or may be adopted at later stages in the firm’s life cycle. Defining moments such as

simply watching the family’s children walk through a spray of herbicides (as in the Benziger

example above) or major events such as a generational transition may propel the firm towards

the vision of an environmentally sustainable business as was the case of Bill Clay Ford Jr.

discussed earlier (cf. Whetten, 2006). Furthermore, external drivers such as saturated markets


and stagnant technologies may lead a family firm to seek a major strategic re-alignment toward

clean technologies or business models (Hart & Sharma, 2004).

While the reasons for adopting a PES may vary for all firms, whether family or non-

family controlled, the power usually accorded to the family in decision-making in family firms

facilitates a quick change of strategic direction when necessary. This provides clear guidance for

the dominant coalition. For example, when Guardian Service Inds. of New York, contemplated

their move toward green strategies, four key family members from three generations made a

collective decision to ‘take the company in an environmentally friendlier direction’ (Durso,

2007: 60). The decision once made was rapidly implemented necessitating education of 1500 full

time employees, 500 part timers, 100 contractors, and 6,000 clients. “Ninety days after the

Bresslers and Herzfelds made their decision, Guardian was ready to go” green notes Durso

(2007: 61). In such cases, clearly the family control helps in diffusing the chosen direction and

establishing goals and norms to be followed by the firm (Arregle et al., 2007).

But, not all family firms are alike. In cases of dispersed ownership such as in Laird

Norton Tyee LLC that has over 400 family member unit holders making it one of the largest

ownership groups in the world, building cohesion of vision can be time consuming (Steen,

2008). In such cases, making key strategic decisions and diffusing them into the family firm can

take even more time. This would be likely to make the dominant coalition cautious in their

strategic approach. However, strong family ties and governance mechanisms such as family

councils are adopted to help smooth the pathway to shared family decisions on key strategic

directions (Steen, 2008). In cases of family owned but not managed firms, such as Ford Motors

under Jacques Nassar’s leadership or Hewlett Packard under Carly Fiorina’s tenure, at times

conflicting messages of the firm’s vision may be sent by the controlling family and the non-


family CEO, causing confusion of strategic direction for individuals in the dominant coalition.

Changes in the top management teams further alleviate the confusion.

In short, the family owned and managed firms provide the most fertile ground for

sustenance of vision across time and generations as well as a clearer transmission of the vision to

the dominant coalition. This leads to a higher level of perceived behavioral control by the

dominant coalition to pursue a PES. Based on the above, we propose that:

P3. The extent of family involvement in the ownership and management of a firm is positively

associated with high levels of behavioral control by the firm’s dominant coalition to pursue a

PES.

Thus far, we have argued that higher levels of family involvement in the management

and ownership of the business will lead to dominant coalitions with positive attitudes towards

environmental prevention, subjective norms that support using the firm as a vehicle to pursue

environmental preservation, and perceived behavioral control to undertake a PES. We elaborated

that this is because of the significant and long lasting influence of the controlling family on the

dominant coalition, longer leadership tenures in family firms, long-term strategic orientation of

these firms, motivations to accumulate socio-emotional wealth for future generations, maintain a

positive reputation of the family name, and a strong identification of the family with the firm.

According to Ajzen’s (1991) Theory of Planned Behavior, intentions to perform behaviors can

be predicted with high accuracy through these three factors working together. Based on this

theory, we propose that,

P4. Dominant coalitions of family owned and managed firms will have stronger intentions of

using the firm as a vehicle for pursuit of a PES, as compared to dominant coalitions in other

family or non-family firms.


Relationship conflict in the controlling family

Research on conflict within groups, both within and outside the family business context,

suggests the prevalence of three types of conflict: task about the ends to accomplish, process

about how work should be accomplished, and relationship conflict based on perceptions of

animosity and incompatibility (e.g., Eddleston & Kellermanns, 2007; Jehn, 1995, 1997;

Kellermanns & Eddleston, 2004). While task and process conflicts do not carry negative

emotions and may even be positive for achieving the firm’s objectives, relationship conflict

interferes with work efforts, is detrimental to firm performance, and individuals’ satisfaction

with work. Relationship conflict has been found to moderate the outcomes of task and process

conflicts in family firms, negatively influencing performance (e.g., Eddleston & Kellermanns,

2007; Kellermanns & Eddleston, 2004).

Relationships within the family that controls a firm vary from one firm to another and

within one firm from one point in time to another (Hoy & Sharma, 2009). Several structural

factors contribute towards the levels of conflict. These include: the ease of permeability between

the family and business systems, the nature and extent of family involvement in the business, the

number of family members, the current and expected shareholders of the firm, and the prevailing

family norms regarding the nature of intra- and inter-generational relationships, etc. The intensity

of relationships and relationship conflicts within the family group is generally higher both in

positive and negative directions as compared to similar non-family groups. Furthermore, because

family firms are more likely than non-family firms to base their decisions on non-economic

criteria that relate to the creation and preservation of socio-emotional wealth, relational conflicts

(or a lack thereof) are more likely to influence decision-making. In non-family firms decisions

are more likely to be guided by formal, rational, and economic considerations. Therefore, the


extent of relationship conflict is an important variable affecting resource allocation decisions in

family firms. Thus, we focus on relationship conflict within family firms, rather than family

versus non-family firms in this section.

When relationship conflict is minimized in family firms, the kinship ties and shared

history of the family and business can facilitate the development of shared norms and trust in

family, leading to causally ambiguous decision making mechanisms that are critical for

organizational capability development and deployment (cf. Coleman, 1990; Pearson, Carr, &

Shaw, 2008). Such positive family relationships can facilitate the development and deployment

of organizational capabilities that are socially complex and require group interaction. Such

capabilities include higher-order learning (Sharma & Vredenburg, 1998), cross-functional

integration (Russo & Fouts, 1997), and continuous innovation (Hart, 1995; Sharma &

Vredenburg, 1998). Decisions within the family unit are often made via informal interactions as

compared to formal meetings with recorded minutes in non-family firms, contributing to high

causal ambiguity. Mutual interdependence based on shared goals and interests is high in family

firms and leads to collective action (Leana & Van Buren, 1999) in the form of capability

deployment. Family interaction reflects the quantity, quality, and strength of those relationships

(Pearson et al., 2008). Focus on the pursuit of socio-emotional wealth or non-economic goals

such as environmental sustainability can strengthen the shared meaning and interaction for

collective action (Berrone et al., 2010). In other words, positive family relationships can become

a difficult to replicate force and capability in family firms.

On the other hand, dysfunctional family relationships are characterized by disagreements

and internal family conflicts, especially those that have deep historical roots. Such conflicts

could lead to conflicting visions and goals of family members and the spread of ownership and


power between family members can have a paralyzing negative effect on decisions related to the

development and deployment of resources for building organizational capabilities towards the

pursuit of any strategy and especially a perceived risky strategy such as a PES.

Family business scholars have made attempts to capture the intensity and directionality of

these relationships through scales such as family climate, family orientation, family harmony etc.

(e.g., Björnberg & Nicholson, 2007; Danes et al., 2009; Lumpkin, Martin, Vaughn, 2008).

Amongst other factors, the nature of relationship within the controlling family members impacts

the ease or difficulty in decision making at the dominant coalition level. Family firms are living

systems as are their dominant coalitions. Power accorded to members of a family is based on

familial norms and assumptions of the expected modes of behavior between siblings and across

generations (Sharma & Manikutty, 2005). Thus, members of the dominant coalition in family

owned and operated firms, may not necessarily be the same individuals who exercise power in

the family system. However, due to the intertwinement of the two systems of family and

business, powerful family members can significantly influence the decisions of the dominant

coalition using different pathways of control to impede decisions especially where significant

investment of resources are at stake.

Consequently, we argue that the extent of relationship conflict in the controlling family

will moderate the ability of the dominant coalition to convert its intentions to turn a PES into

actions. We therefore propose that,

P5. The level of relationship conflict within the controlling family will moderate the

extent to which the dominant coalition can translate its intentions into actions to allocate

resources to build and deploy organizational capabilities needed for the implementation

of a PES.


Discussion

In this article, our objective was to examine how the introduction of family as a key

stakeholder in business influences the endogenous drivers for the adoption of a proactive

environmental strategy (PES). We distinguish between the beliefs and values of individuals

versus those of the dominant coalition towards environmental preservation. Attitudes towards

environmental preservation in general, and intentions to adopt the firm’s strategy as an

instrument for environmental preservation, are also differentiated. Finally, the intentions of the

dominant coalition to develop a strategy for environmental sustainability are differentiated from

its actual ability to allocate resources to build organizational capabilities to pursue a PES.

Using the theory of planned behavior (Ajzen, 1985, 1991), we argue that three factors

influence the intentions of dominant coalition to pursue PES: (i) beliefs and values of the

controlling family towards the environment, (ii) perceptions of the prevailing social norms

regarding the usage of the firm as a vehicle for environmental preservation, and (iii) the extent of

their perceived behavior control. As compared to other family and non-family firms, family

owned and operated firms will be more likely to have dominant coalitions with positive

intentions to pursue PES and use the family firm as a vehicle for environmental preservation.

The level of relationship conflict in the family is theorized to moderate the ability of dominant

coalition to translate these intentions into actions by investing in, and allocating resources to

build organizational capabilities to pursue an enduring PES. Lower levels of relationship conflict

will enhance their ability to build these organizational capabilities.

This is because of the long-term orientation of family firms, their ability to pursue a

combination of financial and socio-emotional objectives through the firm, power to make

particularistic decisions that do not necessarily follow a strictly economic rationale and strong


influence of family on the dominant coalition of the firm. Such influence of individual or familial

values and beliefs on organizational level attitudes is much less likely in non-family firms due to

competing managerial perspectives, shorter managerial tenures and the rotation of dominant

coalition members between units/divisions/jobs, and the lower co-mingling of individual and

organizational identities.

The proposed theoretical framework is not intended to be comprehensive in explaining

the organizational factors that influence the allocation of resources for the development and

deployment of organizational capabilities by family firms for generating a PES. Rather, it

highlights the unique characteristics of family owned and managed firms that will make them

more likely to develop and deploy capabilities for such a strategy. Ethical frameworks certainly

help individual managers and family members in family firms develop moral rationale for

preserving the natural environment for its own sake. However, managers and family members

operate in highly competitive, complex, and fast-paced business environments where they must

develop equally strong economic and instrumental rationale for undertaking social and

environmental practices. The ONE literature usefully complements the business ethics literature

in helping managers make decisions that will move their firms toward a more sustainable

strategy.

Implications for research: To test this framework, it is obvious that any empirical

research will need to compare family owned and managed firms with other family and non-

family firms. These populations would need to be fairly similar in terms of geographic location,

size, and distribution of revenues. As the focus of our theorizing is on endogenous factors

influencing the adoption and successful implementation of PES, it would be prudent to start with

single industry studies as they would be subject to similar environmental, legal, political


considerations. Cross industry comparisons can follow once an in-depth understanding of

internal drivers is specified using controlled single industry studies.

The winery industry offers a unique context for testing the theoretical model developed in

this article. Previous research on the Canadian winery industry has revealed three different type

of wineries based on extent of family involvement: corporate, traditional family, and life-style

family wineries (Reay & Hinings, 2007). These different types of wineries were found to co-

exist peacefully within the same location although each adopted a different logic and strategic

approach (Reay & Hinings, 2007). Research on the US winery industry suggests that this

industry is at early stages of transformation in its implementation of environmental strategies,

although the pressure from external agencies to curb usage of pesticides and stop encroachment

on habitats of endangered species continues to escalate (Marshall, Cordano, Silverman, 2005;

Sogg, 2000). At this stage of development, while some wineries such as Benziger Family winery

mentioned earlier are at the forefront of PES, there is a wide variation of practices and strategies

amongst firms in the industry.

The focus of our theorizing has been on the attitudes, perceptions, and beliefs of

dominant coalitions of the firm, and how it is affected by family involvement in business and

relationships in the controlling family. These variables would necessitate data collection from

multiple individuals who form the dominant coalition in family and non-family firms. In the first

instance, this would require the identification of these members. The measures would involve

multiple respondents and a heuristic for aggregation of responses. Given the penchant for privacy

in family firms, it is likely that multiple responses from dominant coalitions of family can be

more effectively obtained via personal interviews rather than through mailed or electronic

questionnaires. Thus, comparative case studies would be the first step towards empirically testing


this framework. In addition to providing the preliminary test of the theoretical framework, such

preliminary research could also be used to develop or refine measures for constructs in the study.

For the main dependent variable of the study, proactive environmental strategy, the ONE

literature has developed a wide variety of measures and instruments. These range from measures

with high reliability but with a very narrow representation of environmental sustainability (e.g.,

pollution data in the form of toxic release inventories (King & Lennox, 2000) or pollution

prevention registries, to measures with lower reliability that capture a wide range of

environmental practices of firms (e.g., Sharma & Vredenburg, 1998). Thus, there are major

opportunities to develop robust measures of corporate environmental strategy that captures a

wide range of environmental practices and are reliable and replicable at the same time.

Measures for values regarding environmental preservation, norms regarding role of

business in environmental sustainability, and perceptions of their behavioral control on actions

related to pursuit of PES, the three key variables from theory of planned behavior used in this

study, have been developed in non-family business contexts and in family business to understand

succession issues (Cordano & Freize, 2000; Sharma et al., 2003). Although these can provide an

important starting point, these measures will need to be further developed for testing our model.

The aggregated vision of the top management team of non-family firms, as a comparison point,

would use the same measures.

The family business literature can provide guidance for measures to understand the

degree or extent of family involvement in business (e.g., Chrisman, Chua, & Litz, 2004; Holt,

Rutherford, & Kuratko, 2010; Klein, Astrachan, & Smyrnios, 2005). Relationship conflict has

well developed measures that have been successfully used both in family firm and non-family

firm contexts (e.g., Jehn, 1995, 1997; Kellermanns & Eddleston, 2007). Preliminary comparative


case study research should prove valuable in developing robust scales for the variables in the

model.

Family firms present a unique set of internal dynamics for strategic decision-making that

motivate this research. Therefore, it may be worthwhile to explore if the theoretical framework

presented here can be generalized to major strategic decisions by family firms other than the

development of environmental strategies. As the family business literature argues, family

controlled businesses represent a dominant segment of the global economy. Given the

complexity and magnitude of environmental issues, research on how to motivate family firms to

embrace sustainability strategy and to move toward a sustainable world becomes imperative.


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Figure 1: Drivers of Proactive Environmental Strategy (PES) in Family Firms

P 1

P 5

ATTITUDES

toward

environmental preservation

INTENTIONS

To

Undertake a PES

Dominant Coalition’s ACTIONS

to build

Organizational

Capabilities to pursue a

PES

Organizational

OUTCOME

Proactive Env.

Strategy

Relationship conflict in the

controlling family

SUBJECTIVE

NORMS regarding the usage of firm as a vehicle for environmental

preservation

PERCEIVED BEHAVIORAL

CONTROL regarding ability to build organizational

capabilities to pursue a PES

Family Involvement in Business

P 2

P 3

P 4

Education

Beq21 2 6