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Altruism, agency, and the competitiveness of family firms

  • William S. Schulze

    (Weatherhead School of Management, Case Western Reserve University, 10900 Euclid Avenue, Cleveland, OH 44106-7235, USA)

  • Michael H. Lubatkin

    (Department of Management, School of Business Administration, University of Connecticut & EM Lyon, 2100 Hillside Road, Unit 2041 MG, Storrs, CT. 06269-2041, USA)

  • Richard N. Dino

    (Department of Management, School of Business Administration, University of Connecticut 2100 Hillside Road, Unit 2041 D, Storrs, CT 06269-2041, USA)

Registered author(s):

    The core belief among agency theorists is that when a firm is both owned and managed by family members, its governance structure is efficient. We argue that this belief over-simplifies the complexity of exchanges that occur among the family firm's decision agents, and does not conform to reality. We develop an alternative agency view of family firm governance that accounts for agency problems that are understated in extant agency models. These problems are rooted in the firm's ownership structure, as well as the altruistic relationships that exist between the firm's decision agents. We conclude with four propositions that address the competitive implications of this alternative view. Copyright © 2002 John Wiley & Sons, Ltd.

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    File URL: http://hdl.handle.net/10.1002/mde.1064
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    Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

    Volume (Year): 23 (2002)
    Issue (Month): 4-5 ()
    Pages: 247-259

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    Handle: RePEc:wly:mgtdec:v:23:y:2002:i:4-5:p:247-259
    Contact details of provider: Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976

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    1. Arrow, Kenneth J, 1974. "Limited Knowledge and Economic Analysis," American Economic Review, American Economic Association, vol. 64(1), pages 1-10, March.
    2. Stark, Oded, 1989. "Altruism and the Quality of Life," American Economic Review, American Economic Association, vol. 79(2), pages 86-90, May.
    3. Gary S. Becker & Nigel Tomes, . "Human Capital and the Rise and Fall of Families," University of Chicago - Population Research Center 84-10, Chicago - Population Research Center.
    4. Raghuram G. Rajan & Luigi Zingales, 1998. "Power In A Theory Of The Firm," The Quarterly Journal of Economics, MIT Press, vol. 113(2), pages 387-432, May.
    5. Fama, Eugene F & Jensen, Michael C, 1983. "Agency Problems and Residual Claims," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 327-49, June.
    6. Fama, Eugene F, 1980. "Agency Problems and the Theory of the Firm," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 288-307, April.
    7. Oded Stark & Ita Falk, 1998. "Transfers, Empathy Formation, and Reverse Transfers," Departmental Working Papers _091, Chinese University of Hong Kong, Department of Economics.
    8. Bruce, Neil & Waldman, Michael, 1991. "Transfers in Kind: Why They Can Be Efficient and Nonpaternalistic," American Economic Review, American Economic Association, vol. 81(5), pages 1345-51, December.
    9. Thaler, Richard H & Shefrin, H M, 1981. "An Economic Theory of Self-Control," Journal of Political Economy, University of Chicago Press, vol. 89(2), pages 392-406, April.
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