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Goal Tolerance, outside Investors, and Family Firm Governance

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  • Jaume Villanueva
  • Harry J. Sapienza

Abstract

Le Breton–Miller and Miller argue that as the family becomes more embedded in the firm, the firm's decision makers become more susceptible to influence by the family, and agency problems rise for outside investors. We contend that the family's embeddedness in the business does not, in itself, explain whether the assumptions of agency theory are warranted. Our commentary offers an alternative way in which outside investors might look at family firms‘ goals. Outsiders should assess the complementarity of the family firm's objectives with their own if they are to make rewarding investments in family firms.

Suggested Citation

  • Jaume Villanueva & Harry J. Sapienza, 2009. "Goal Tolerance, outside Investors, and Family Firm Governance," Entrepreneurship Theory and Practice, , vol. 33(6), pages 1193-1199, November.
    • Handle: RePEc:sae:entthe:v:33:y:2009:i:6:p:1193-1199
    DOI: 10.1111/j.1540-6520.2009.00340.x
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    References listed on IDEAS

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    1. John R. Graham & Alok Kumar, 2006. "Do Dividend Clienteles Exist? Evidence on Dividend Preferences of Retail Investors," Journal of Finance, American Finance Association, vol. 61(3), pages 1305-1336, June.
    2. Habbershon, Timothy G. & Williams, Mary & MacMillan, Ian C., 2003. "A unified systems perspective of family firm performance," Journal of Business Venturing, Elsevier, vol. 18(4), pages 451-465, July.
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    Cited by:

    1. Nehme Azoury & Elie Bouri, 2015. "Principal–principal conflicts in Lebanese unlisted family firms," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 19(2), pages 461-493, May.
    2. Jess H. Chua & James J. Chrisman & Lloyd P. Steier & Sabine B. Rau, 2012. "Sources of Heterogeneity in Family Firms: An Introduction," Entrepreneurship Theory and Practice, , vol. 36(6), pages 1103-1113, November.
    3. Vazquez, Pedro & Rocha, Héctor, 2018. "On the goals of family firms: A review and integration," Journal of Family Business Strategy, Elsevier, vol. 9(2), pages 94-106.
    4. Luis R. Gomez–Mejia & Joanna Tochman Campbell & Geoffrey Martin & Robert E. Hoskisson & Marianna Makri & David G. Sirmon, 2014. "Socioemotional Wealth as a Mixed Gamble: Revisiting Family Firm R&D Investments with the Behavioral Agency Model," Entrepreneurship Theory and Practice, , vol. 38(6), pages 1351-1374, November.
    5. Cabrera-Suárez, M. Katiuska & de la Cruz Déniz-Déniz, Mª & Martín-Santana, Josefa D., 2011. "Familiness and market orientation: A stakeholder approach," Journal of Family Business Strategy, Elsevier, vol. 2(1), pages 34-42, March.
    6. Yoon Lee & Maria Marshall, 2013. "Goal Orientation and Performance of Family Businesses," Journal of Family and Economic Issues, Springer, vol. 34(3), pages 265-274, September.
    7. James J. Chrisman & Esra Memili & Kaustav Misra, 2014. "Nonfamily Managers, Family Firms, and the Winner's Curse: The Influence of Noneconomic Goals and Bounded Rationality," Entrepreneurship Theory and Practice, , vol. 38(5), pages 1-25, September.
    8. Jan-Philipp Ahrens & Andrea Calabrò & Jolien Huybrechts & Michael Woywode, 2019. "The Enigma of the Family Successor–Firm Performance Relationship: A Methodological Reflection and Reconciliation Attempt," Entrepreneurship Theory and Practice, , vol. 43(3), pages 437-474, May.
    9. Kimberly A. Eddleston & James J. Chrisman & Lloyd P. Steier & Jess H. Chua, 2010. "Governance and Trust in Family Firms: An Introduction," Entrepreneurship Theory and Practice, , vol. 34(6), pages 1043-1056, November.
    10. Josip Kotlar & Alfredo De Massis, 2013. "Goal Setting in Family Firms: Goal Diversity, Social Interactions, and Collective Commitment to Family–Centered Goals," Entrepreneurship Theory and Practice, , vol. 37(6), pages 1263-1288, November.
    11. Lloyd P. Steier & Jess H. Chua & James J. Chrisman, 2009. "Embeddedness Perspectives of Economic Action within Family Firms," Entrepreneurship Theory and Practice, , vol. 33(6), pages 1157-1167, November.
    12. Al-Shammari, Marwan & Rasheed, Abdul & Al-Shammari, Hussam A., 2019. "CEO narcissism and corporate social responsibility: Does CEO narcissism affect CSR focus?," Journal of Business Research, Elsevier, vol. 104(C), pages 106-117.
    13. Ralph I. Williams & Torsten M. Pieper & Franz W. Kellermanns & Joseph H. Astrachan, 2019. "Family business goal formation: a literature review and discussion of alternative algorithms," Management Review Quarterly, Springer, vol. 69(3), pages 329-349, September.
    14. Sławomir Dorocki & Anna Irena Szymańska & Małgorzata Zdon-Korzeniowska, 2015. "Family Agritourist Enterprises in Poland: Preliminary Survey Results," Entrepreneurial Business and Economics Review, Centre for Strategic and International Entrepreneurship at the Cracow University of Economics., vol. 3(1), pages 151-163.

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