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A historical investigation of the strategic process within family firms
Patrick M. Kreiser, Jari Ojala, Juha-Antti Lamberg, Anders Melander
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A historical investigation of the strategic process within family firms
A historical investigation of the strategic process within family firms
Patrick M. Kreiser, Jari Ojala, Juha-Antti Lamberg, Anders Melander
The Authors
Patrick M. Kreiser, College of Business, Ohio University, Athens, Ohio,
USA
Jari Ojala, Department of History and Ethnology, University of Jyvaskyla,
Jyvaskyla, Finland
Juha-Antti Lamberg, Institute of Strategy and International Business,
Helsinki University of Technology, Helsinki, Finland
Anders Melander, Jonkoping International Business School, Jonkoping,
Sweden
Abstract
Purpose – The primary purpose of this paper was to perform an in-depth
analysis of the strategic process that occurs within family firms.
Design/methodology/approach – This study analyzed the historical
development of the growth strategies of four family firms in the US,
Finland, and Sweden.
Findings – The results of this study suggest that family firms typically
adopt conservative strategies in the early part of their life cycle.
During their formative years, family firms often implement financially
conservative strategies and place an emphasis on maintaining tight control
of the strategic decision-making process within the family unit. However,
the competitive pressures experienced by family firms over time often
force these companies to embrace a more entrepreneurial posture during the
latter stages of their life cycle.
Research limitations/implications – The stage in the company life cycle
plays an important role in determining the strategic behavior of family
firms. Future research aimed at replicating the results of this study may
help shed further light on the strategic process that occurs within family
firms.
Practical implications – Although the firms examined in this study were
from various cultures, their strategic development over time was very
similar. This tentatively suggests that the evolution of the strategic
process that occurs within family firms may be generalizable across
cultures.
Originality/value – Our findings indicate that there may be an important
distinction between family firms and entrepreneurial organizations. That
is, all family firms are not necessarily entrepreneurial, especially early
on in their company life cycle.
Article Type: Research paper
Keyword(s): Family firms; Paper industry; Entrepreneurs; Sweden; Finland;
United States of America.
Journal of Management History
Volume 12 Number 1 2006 pp. 100-114
Copyright © Emerald Group Publishing Limited ISSN 1355-252X
Introduction
Entrepreneurial researchers have long realized that the strategic planning
process that occurs within family firms may differ from that which occurs
in other types of organizations (Jones, 1982; Ward, 1988; Zahra et al.,
2004). However, recent research suggests that our knowledge of the
strategic process in family firms is still quite limited (Steier et al.,
2004; Upton et al., 2001). Specifically, scholars have suggested that more
research needs to be conducted assessing the manner in which family firms
develop their strategies for growth (Sharma et al., 1997; Teal et al.,
2003). Accordingly, the primary purpose of this paper was to analyze the
manner in which family firms in a variety of cultures developed their
growth strategies over time.
In order to achieve this objective, we traced the historical and strategic
development of four family firms in the paper and pulp industry. These
companies represented three different countries: the US (Gulf States Paper
Corporation), Finland (Ahlstrom and Schauman), and Sweden (MoDo). An
analysis of the companies’ enacted strategies provided insights into the
growth strategies that these firms have employed over time. Thus, a major
portion of the paper examined the evolution of strategies that occurred in
family firms in a variety of cultural settings. The cultural diversity of
the sample was particularly important, given research suggesting that
cultural attributes play an important role in determining the growth
strategies employed by family firms (Yeung, 2000).
Specifically, the major strategic actions that these four companies have
enacted since their founding were classified along two dimensions. The
first dimension examined the strategic actions employed by these companies
in relation to their competition. The primary focus was on whether or not
the actions occurred in the internal or external arena. The second
dimension categorized the type of action that was enacted, and whether it
was an opening or closing action. Particular emphasis was placed on the
emergent strategies that developed within these companies in response to
the many environmental pressures that exist in the paper and pulp industry
(Mintzberg and Waters, 1982, 1985).
Theoretical development
In this paper, we defined a family firm as 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 et al., 1999, p. 25).
As such, a family firm can be characterized by two main attributes:
it is controlled by a family or group of families; and
this family/families wishes to maintain control of the firm for an
extended period of time.
Thus, it was expected that family firms would be more long-term in their
strategic orientation than other types of organizations.
Family businesses have been and still are a central element in most
economies. For example, most companies in Western Europe and in the US can
be viewed as family firms. Family firms are usually defined as business
units, owned and governed mainly by one family or kin. However, this does
not necessarily mean that the operative leadership is also in the hands of
the family. Furthermore, the close interaction between family and firm, as
well as the continuity and succession of the firm from one generation to
another, are usually understood as determinants of the success of family
firms (Casson, 1982; Colli, 2003; Koiranen, 1998; Schulze et al., 2003).
Casson (1999) stresses that some of the features typically associated with
family firms are a small to medium size, organic growth through reinvested
profits (rather than takeovers and mergers), avoidance of stock market
finance, reliance on banks merely for short-term credit, and internal
management succession. As Ward (1988) noted, family and family business
cannot be understood separately. What is good for the family is good for
the business – and vice versa. The continuity of the family firm is an
essential question at the time of succession (Pollard, 1965; Rose, 1993).
Family firms often display certain benefits and drawbacks when viewed over
an extended period of time. Family firms can be seen as dynamic entities
due to the personal commitment of the owner (Casson, 1982; Rose, 1993).
Another advantage is often the long-term orientation, personal style of
management, independence from the resources outside of the family, family
identity and culture, and lower levels of bureaucracy. Some of the primary
disadvantages are problems related to financing (especially within the
larger companies), and related to that, constrained growth possibilities,
as well as autocratic management (as a result from lesser bureaucracy),
conservatism, nepotism, family/kin feuds, and problems within the
successions process (Casson, 1999; Koiranen, 1998).
This study examined the development of growth strategies within family
firms in a variety of cultures. Specifically, this study explored whether
the development of growth strategies in family firms more closely mirrors
the strategic process that occurs in entrepreneurial organizations or
living companies. While there tends to be an implicit assumption that
family firms are entrepreneurial in the formation and implementation of
organizational strategies, this may in fact be an inaccurate assumption.
The extant literature posits that entrepreneurial organizations exist
primarily with short-term profit goals in mind, while family firms are
most concerned with the long-term survival of the organization. Drawing
primarily upon the entrepreneurship and small business literature, this
paper performed an in-depth analysis of the organizational strategies
enacted by four family firms throughout their existence in an effort to
answer this intriguing question.
The strategic characteristics of entrepreneurial firms
Organizational researchers have often conceptualized entrepreneurial
organizations as possessing three main characteristics: risk-taking,
innovation, and proactiveness (Covin and Slevin, 1989; Miller, 1983;
Miller and Friesen, 1982). Such an entrepreneurial orientation is
demonstrated by the “extent to which top managers are inclined to take
business-related risks (the risk-taking dimension), to favor change and
innovation in order to obtain a competitive advantage for their firm (the
innovation dimension), and to compete aggressively with other firms (the
proactiveness dimension)” (Covin and Slevin, 1988, p. 218).
The concept of risk-taking has long been associated with entrepreneurship.
Early definitions of entrepreneurship centered on the willingness of
entrepreneurs to engage in calculated business-related risks (Brockhaus,
1982). In the 1800s, John Stuart Mill argued that risk-taking was the
paramount attribute of entrepreneurs (Brockhaus, 1982). This view of
entrepreneur as risk-taker continued to gain support throughout the
twentieth century, as McClelland (1960, p. 210) posited that “practically
all theorists agree that entrepreneurship involves, by definition, taking
risks of some kind”. Research also suggests that entrepreneurs tend to
categorize business situations as possessing less risk than
non-entrepreneurs (Busenitz, 1999; Palich and Bagby, 1995).
Other researchers considered innovation to be at the very heart of
entrepreneurship (Covin and Miles, 1999; Jennings and Young, 1990;
Schollhammer, 1982; Schumpeter, 1934). Entrepreneurial innovation can be
defined as the “willingness to support creativity and experimentation in
introducing new products/services, and novelty, technological leadership
and R&D in developing new processes” (Lumpkin and Dess, 2001, p. 431).
Schumpeter (1934) was one of the first scholars to argue that innovation,
as evidenced by the creation and development of new products and
processes, was the fundamental undertaking of the entrepreneurial
organization. Jennings and Young (1990) defined corporate entrepreneurship
as the strategic process of developing new products and/or markets. Covin
and Miles (1999) theorized that innovation was the single most critical
factor in defining corporate entrepreneurship.
A third strategic characteristic frequently associated with
entrepreneurial firms is proactiveness. The preponderance of research that
has been done on the topic posited two main attributes of proactiveness:
aggressive competitive behavior directed at rival firms; and
the organizational pursuit of favorable business opportunities (Knight,
1997; Lumpkin and Dess, 2001; Stevenson and Jarillo, 1990).
Knight (1997, p. 214) argued that the emphasis of proactiveness is on
“aggressive execution and follow through, driving toward achievement of
the firm’s objectives by whatever reasonable means are necessary”.
Stevenson and Jarillo (1990) conceptualized proactiveness as the
organizational pursuit of business opportunities that were deemed by the
firm to be positive or favorable. This view is consistent with a recent
definition offered by Lumpkin and Dess (2001, p. 431), in which
proactiveness is viewed as an “opportunity-seeking, forward-looking
perspective involving introducing new products or services ahead of the
competition and acting in anticipation of future demand to create change
and shape the environment”.
The strategic characteristics of living companies
A competing view of the firm is based on the premise that long-term
survival, not financial performance, should be utilized to ultimately
judge the success of an organization (Brenneman et al., 1998; de Geus,
1997). de Geus (1997) described companies that were successful over the
long-term as “living companies”, firms that were able to adapt and evolve
throughout their history. de Geus (1997) drew a “distinction between
‘economic companies,’ which are run as profit machines, and ‘living
companies,’ whose primary purpose is to survive and perpetuate themselves
as ongoing communities” (Stamps, 1997, p. 76). de Geus (1997, p. 52) noted
that:
… mounting evidence suggests that corporations fail because their policies
and practices are based too heavily on the thinking and the language of
economics … companies die because their managers focus exclusively on
producing goods and services and forget that the organization is a
community of human beings that is in business – any business – to stay
alive.
de Geus (1997) claimed that the majority of organizations that were able
to survive and prosper over long periods of time often shared many of the
same characteristics. According to de Geus, these successful organizations
shared four specific attributes in common with one another:
financial conservatism;
sensitivity to the world around them;
awareness of their identity; and
tolerance of new ideas.
These characteristics did not just describe the strategies employed by
these companies, but they described the entire mindset of the corporation.
Organizations that embraced these values were more likely than other firms
to enjoy long-term success, as “these four traits form the essential
character of companies that have functioned successfully for hundreds of
years” (de Geus, 1997, p. 54).
The first characteristic of these organizations, financial conservatism,
allowed these companies to save spare money that might be useful in the
pursuit of future business opportunities. Instead of spending their money
all at one time and in a haphazard manner, financially conservative
organizations invested their money carefully and only after putting a
great deal of thought into the investment. Such companies “understood the
meaning of money in an old-fashioned way; they knew the usefulness of
spare cash … money in hand allowed them to snap up options when their
competitors could not” (de Geus, 1997, p. 53).
Sensitivity to the world around them was the second characteristic of
living companies. These companies were able to learn from and adapt to
their external environment. Even though the environment was constantly
changing around them, these firms maintained flexible strategies and an
open-minded posture that allowed them to change with the environment. A
living company recognized that it “can not control its environment. Rather
it must learn to continuously adapt to it” (Kelly, 1997, p. 96). The
open-minded exchange that existed between organizations and their
environment allowed these firms to “adapt themselves to changes in the
world around them … they were good at learning and adapting” (de Geus,
1997, p. 54).
According to de Geus (1997), the third characteristic that helped
organizations to achieve long-term prosperity was an awareness of their
own identity. In other words, everyone involved with the organization felt
like they were part of a larger community, that the actions of individuals
were all part of a larger whole. This sense of community helped bring
together employees and managers, helped decrease divisiveness between
different divisions within corporations, and helped nurture relationships
between corporations and their customers. At the most basic level,
individuals within these firms embodied a “feeling of belonging to an
organization and identifying with its achievements … case studies
repeatedly show that a sense of community is essential for long-term
survival” (de Geus, 1997, p. 54).
The final characteristic of “living companies” is that they tend to be
tolerant of new and innovative ideas. Instead of fearing the unknown,
these companies thrive on uncertainty and realize that opportunity is
often the twin sister of change. While other companies become tied to old
ideals and established practices, living companies are willing to try new
things in an effort to improve their current standing. The emphasis on
trying new ideas and experimenting with new concepts stresses the
important role that learning plays within these organizations (Brenneman
et al., 1998; de Geus, 1997). The willingness of these companies to
experiment and to develop innovative products and processes often allows
them to take a position of technological leadership within their industry.
Sample
Four family firms were included in these analyses. Information was
collected from personal interviews, company documents, and various other
external sources (i.e. newspapers, the internet, books, etc.). A list of
the strategic actions enacted by each firm since it is founding was then
compiled. Utilizing these strategic actions, three time periods were
determined for each firm that corresponded with the firm’s:
inception and early strategic period;
primary growth period; and
mature strategic period.
This was done in order to determine each firm’s primary strategic focus
during different times in the company’s history. It was expected that this
focus (as evidenced by the strategic actions implemented by the firm
during each time period) would evolve in each company over time. A brief
description of each of the four family firms utilized in this study
follows.
Gulf States Paper Corporation (United States)
Gulf States Paper Corporation is a privately held company that currently
employs approximately 3,000 employees in ten states. The company is the
third largest US supplier of SBS paperboard for folding cartons, is among
the nation’s top ten folding carton manufacturers, and is a major lumber
producer (www.gulf-states.com). In 1998, the company’s annual revenues
were approximately $500 million. Founded in 1884, the company has
experienced slow but steady growth over its nearly 120 years of existence.
The company has also continued to diversify its operations and expand its
strategic vision during this time period. Gulf States Paper, headquartered
in Tuscaloosa, Alabama, has diversified into new product areas in the
twentieth century. The company currently consists of five distinct
operating divisions:
natural resources;
wood products;
pulp and paperboard;
paperboard packaging; and
business solutions.
Ahlstrom (Finland)
Ahlstrom Corporation has annual net sales of approximately $2 billion and
has almost 7,000 employees (www.ahlstrom.com). Founded in 1851, Ahlstrom
has long been one of the largest industrial corporations in Finland.
Ahlstrom’s first paper mill was founded in 1907 (Kauttua) and its first
pulp mill in 1917 (Varkaus). Though the company has diversified into
several sectors, it has mainly operated within the wood-processing
cluster. Today, the company is a leader in high performance fiber-based
materials serving niche markets worldwide. One of the most critical
decisions in Finnish industrial history was made in 1987, when Ahlstrom
unexpectedly sold its paper-producing units, and concentrated instead on
producing its niche products. The owners of the company are today the
fourth through sixth generations after the founder Antti Ahlström
(1827-1896). At the moment, the company is going through a profound
structural change: the company was split into three parts in June 2001.
According to the strategic plan of Ahlstrom Corporation, the ownership
share of the family members will be diminished over the next several
years. Though these plans were made in the late 1990s, they were still not
fully carried out as of August 2005. Meanwhile, Ahlstrom has continued its
concentration on fiber-based speciality materials, such as investments in
new production capacity in Germany in 2003.
Schauman (Finland)
The Finnish pulp and paper producing company Schauman ceased to exist in
1987 when it was merged with Kymmene Corporation. Today, the production
plants of Schauman are part of the UPM-Kymmene Corporation, one of the
leading paper producers in the world. During its last operating year
(1987), Schauman’s net sales were approximately ∈500 million and the
company had 7,000 employees. Although Schauman was clearly only a minor
player among the major Finnish companies, it still ranked among the top-20
largest Finnish enterprises from the 1920s onward. Schauman, founded in
1883, concentrated during the early twentieth century on saw milling and
plywood production. It entered the pulp industry in the 1930s and paper
producing in the 1960s. The company went through a structural change in
the 1970s, becoming one of the most essential (market) pulp producers in
Finland. For example, the pulp production capacity of Schauman in 1985 was
the third largest in Finland composing approximately 10 percent of the
total. The investments to the new production capacity were, however, too
overwhelming for a family owned company. As an outcome of these bold
investments, the company incurred a large amount of debt, which in turn
led to the merger in 1987.
MoDo (Sweden)
MoDo was founded in 1872 by the Kempe family. The company, although
publicly listed, was controlled by the same family until 1990. As a result
of a takeover attempt, the family was forced to sell their majority share
of the company in 1990. At that time, the company’s major operations were
sawn timber, office paper, newspaper, pulp, and folded cardboard. At the
end of 1990, the company’s core business was merged with SCA’s office
paper and a reborn company, MoDo Paper, went public. MoDo Paper was at
that time focusing on pulp and office paper. In 2001, MoDo Paper was
merged with M-Real, a company controlled by the forest owner’s cooperative
in Finland. M-Real currently employs approximately 22,000, of which 16,000
work outside Finland. Today, MoDo Paper is fully integrated in M-Real’s
home and office business division.
Methods
As is typical in historical research, we preferred a research strategy
that combined different longitudinal methods. In the literature, this
approach is seen as being especially appropriate when researching issues
that are relatively inadequately understood (Glaser and Strauss, 1967).
The aim of such inquiry is to facilitate theorizing through a careful
examination of relevant data collected from multiple sources, validated
both by extant theories and ongoing re-encounters with the data
(Eisenhardt, 1989). As the purpose of the analysis was to both “track”
realized strategies and to interpret the logic behind these trajectories,
we pursued a multi-method study.
Following earlier studies analyzing patterns of strategy (Miller and Chen,
1994; Mintzberg and Waters, 1982; Murmann, 2003), we engaged in a research
process typical in comparative case analyses (Yin, 1989). The
quantification part of the study followed the logic of a tight research
design in which the coding scheme plays an important role. On the
contrary, we also engaged in more inductive narrative analyses in order to
enhance the validity of our interpretation. This essentially follows the
example of Mintzberg and Waters (1982) when attempting to find the change
patterns in strategies but equally the mechanisms driving them. It is also
important to note that our study is not seeking a full historical account
of the particular companies as much as an understanding of the nature of
family owned companies.
Data
The material for the analysis of strategic patterns is a combination of
archival material including industry statistics and calendars as well as
annual reports and company internal materials. During the research
process, we engaged in intensive utilization of various non-public, as
well as public, archival materials in the cases of the chosen firms. We
started our data collection by examining a variety of public sources such
as company histories and magazine articles describing the historical
development of the companies. Simultaneously, we collected annual reports
and relevant trade statistics. We used this material both for historical
understanding of the companies’ development and for identification of the
strategic actions. In defining strategic actions, we followed Miller and
Chen (1994) who refer to:
… [including] major facilities expansions, mergers and acquisitions,
strategic alliances, and important new products or services … strategic
actions involve a larger expenditure of resources, a longer time horizon,
and a greater departure from the status quo than do tactical actions
(Miller and Chen, 1994, p. 2).
Third, we engaged in an extensive examination of non-public archival
material focusing on strategic issues at the corporate level. This
material includes protocols, correspondence, consulting reports, financial
information, and other data linked to the strategic management of the
companies.
Analysis
Our analysis started with an inductive historical analysis of the company
development paths. During this phase, we wrote four independent case
histories that holistically described the different strategies and
structural solutions undertaken. This effort produced an understanding of
the prime characteristics of the studied companies vis-à-vis their
competitive and institutional environments and, more generally, the
essential logic driving the different actions undertaken through their
history. After the initial analyses, we analyzed the patterns of realized
strategies. In doing so, we followed the tradition in competitive dynamics
literature (Chen and Hambrick, 1995; Hambrick et al., 1996) in plotting
strategic actions and situating them in chronological order. As is typical
in competitive dynamics research, we utilized an industry-specific code
scheme that has been used in similar research settings.
The paper and pulp industry represents a mature line of business with high
entry and exit costs, which significantly affects the strategic
possibilities that firms possess. Each of the four firms’ strategic
actions was categorized according to the classification scheme developed
by Näsi et al. (1998). First, each strategic action was categorized as:
internal, peaceful (such as buying a new plant);
internal, tense (such as lowering employee salaries);
external, peaceful (such as forming an alliance); or
external, tense (such as breaking off a cooperative agreement).
Second, each strategic action was also categorized as an:
acquisition;
sale;
merger;
breaking up of a company (merger);
alliance; or
breaking off of cooperation (alliance).
These two dimensions provided insights into the nature of a firm’s
strategic vision during a particular period in the company’s history, or
more specifically, whether the firm’s strategies tended to be focused more
so on the internal operations of the company or on the firm’s external
environment[1]. The identification of actions was conducted by the same
researchers that analyzed the historical development of each company. To
avoid differences in deciding which actions should be chosen two members
of the research group assessed the initial lists of actions and made the
final decisions. Similarly, the coding was conducted by the individual
researchers but verified by two researchers. Finally, the action databases
were combined for the initial data analysis and finally for the analysis
of the evolution of the strategic patterns.
Results
An analysis of the arena in which the four family firms’ strategic actions
took place provides support for the conclusion that these companies have
become more outward-looking in orientation over time (Table I). While
approximately 70 percent of their total strategic actions during the first
two periods took place in the internal arena, this percentage fell to
approximately 50 percent during the third-time period. The number of
external, peaceful actions employed by the companies approximately doubled
during the third period. The number of external, tense actions also
increased significantly, from around 12 percent of the companies’ total
actions during the first-time period to approximately 22 percent of the
actions over the third period. Overall, this suggests that family firms
tend to become more willing to perform external strategic moves over time.
The types of strategic actions practiced by these companies have also
continued to evolve over time (Table II). While acquisitions and sales
constituted the primary strategic actions in all three-time periods, the
emphasis on alliance formation grew significantly as the companies
matured. The percentage of alliances formed by the four companies doubled
from the second- to third-time period, increasing from approximately 9 to
20 percent. Compared to the strategies employed by these companies during
their early existence, they appear to have become much more outward
looking and proactive in their strategy formation over time. This also
suggests that strategic alliances are one important way that family firms
cope with increasing environmental pressures as they reach the maturity
phase of their company life cycle.
Discussion
Taken together, the four characteristics of living companies are extremely
similar to many of the attributes typically associated with family firms.
Family firms are often financially conservative, since a common rationale
given for the creation of a family firm is to provide for several
generations of family descendents. These firms also tend to have very
strong identities, and maintain a willingness to adapt to the world around
them, all characteristics associated with de Geus’s (1997) “living
companies”. As such, it was expected that the four family firms in this
study would embody many of the same characteristics posited for these
types of organizations. The primary focus of this study was to answer the
question of whether family firms typically adopt growth strategies more
closely associated with entrepreneurial organizations or living companies.
Throughout the early part of their history, these four organizations
embodied many of the characteristics often associated with living
companies. The firms in our sample tended to enact financially
conservative strategies, and were willing to spend money when need be, but
also tried to avoid excessive amounts of corporate spending. The
geographic expansion of these firms and the diversification of their
product lines indicate that the companies were willing to adapt to changes
in their external environment. However, these companies did not embody the
prototypical characteristics of entrepreneurial firms during their early
years. They were neither overly willing to take risks nor were they
extremely proactive in their decision-making. During the early part of
their existence, they tended to be tightly managed companies that
maintained a very inward-looking perspective. However, the companies
tended to become more involved in proactive behaviors (alliances, joint
ventures, etc.) as they matured. As such, a strong case can be made that
these companies became more entrepreneurial over time.
Throughout their evolution, the strategies enacted by these four companies
have been formulated with two main issues in mind:
security; and
control.
The financial conservatism that has been so typical of these companies, as
well as the lack of willingness by top management to take extreme risks,
has been an effort to maintain their financial security. The continuous
diversification of their product lines has also helped diminish the
companies’ overall risk of poor economic performance (Freeman and Hannan,
1983). The more recent use of mergers and acquisitions in the face of
environmental pressures is also a common strategy employed by
organizations in uncertain environments (Freeman et al., 1983; Hannan and
Freeman, 1977). The second goal of the companies appears to have been
maintaining the ownership of the firm within the family unit.
Implications
The results of this study suggest that family firms typically adopt
conservative strategies associated with “living companies” in the early
period of their strategic growth. During their formative years, family
firms often implement financially conservative strategies in an effort to
conserve their limited resources. Such firms also place an emphasis on
maintaining tight control of the strategic decision-making process within
the family unit. This is not surprising, given previous research
suggesting that the primary focus of family firms is on “maintaining
family control and avoiding debt” and that family firms often maintain a
long-term strategic perspective (Upton et al., 2001, p. 62).
However, this study also suggests that increasing environmental pressures
often force family firms to embrace a more entrepreneurial posture as the
company matures. Over time, these firms tended to make riskier investments
and often undergo a transition from family management to professional
management. It is interesting to note that, while each of the firms in
this study tended to become more entrepreneurial over time, several of the
firms were more successful in doing so. For example, Ahlstrom has
continued to expand and grow and is a significant player in its respective
industry. Also, Ahlstrom is currently in the process of being transformed
to a listed company. Gulf States has experienced modest levels of growth,
but still remains primarily a regional player. On the other hand,
Schaumann and MoDo both merged with other companies. While this study has
primarily examined the historical development of growth strategies within
family firms, future research should examine the various environmental and
competitive factors that impact the success of these chosen strategies.
This study has several important implications. First, it appears that the
stage in the company life cycle plays an important role in determining the
strategic behavior of family firms. These results suggest that family
firms tend to be very conservative and inward looking during their early
years, but become more entrepreneurial over time. This study also suggests
that family firms tend to maintain a long-term orientation when crafting
and executing their organizational strategies. Second, even though the
firms considered in this study were from various cultures, their strategic
development over time was very similar. This tentatively suggests that the
evolution of the strategic process that occurs within family firms may be
generalizable across cultures. Third, our findings indicate that there may
be an important distinction between family firms and entrepreneurial
organizations. That is, all family firms are not necessarily
entrepreneurial. This research suggests that, at least early in their
history, family firms may embrace conservative strategies as a means of
maintaining tight control over the company. Future research aimed at
replicating the results of this study may help shed further light on the
formation of growth strategies that occurs within family firms.
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Corresponding author
Patrick M. Kreiser can be contacted at: kreiser@ohio.edu
