Advancing Family Firm Research: The Importance of Multilevel Considerations

Legacy

With the advancement of the family business field, we have developed an encompassing understanding of the differences between family and nonfamily firms. A primary aspect of differentiation between these two organizational forms relates to the desire of the controlling family to accumulate socioemotional wealth (SEW), which includes pursuing noneconomic goals like continuing the family’s legacy (Berrone et al., 2012; Chrisman et al., 2012; Gómez-Mejía et al., 2007). A notable body of work has examined legacy as it relates to family firms, yet the literature remains divided into streams focused on different types of legacy, leaving essential questions unanswered.

In their article, “Legacy in Family Business: A Systematic Literature Review and Future Research Agenda,” Radu-Lefebvre et al. (2024) systematically review 140 articles published in over 25 journals from various disciplines. The findings of their review are organized to answer five overarching questions related to (1) what legacy is, (2) who sends and receives legacy, (3) why legacy is sent and accepted/rejected, (4) how legacy is sent and received, and (5) in which context legacy occurs. Furthermore, these five questions are answered by reflecting on four types of legacy (i.e., founder legacy, family legacy, family firm legacy, and entrepreneurial legacy). With a meaningful and pragmatic approach, the authors combine their five research questions and the four different types of legacy into a 5 × 4 matrix. Structuring the systematic literature review this way leads to in-depth insights and an integrated understanding of the multiple aspects of legacy.

The authors then use insights from the review to develop a unified process model and offer a definition of legacy in the family business. Both the model and definition emphasize the process-oriented nature of legacy and the multiple artifacts, mechanisms, and influences that span multiple levels of analysis to build, interpret, and use legacy. Overall, the review provides a synthesized understanding that highlights the individuals (senders and receivers), motivations, mechanisms (at the family and business levels), and contexts (business, industry, and country) involved in co-creating legacy. Thus, because influences at multiple levels impact legacy, considering these effects in isolation from one another is not ideal. As the authors note, “legacy fuels individuals, families, and organizations” (Radu-Lefebvre et al., 2024, p. 19). The perspective of legacy offered (focused on co-creation), along with the definition and the process-oriented model, will astutely inspire future studies examining legacy across levels and time.

Resilience

In the family firm context, the presence of legacy—given its values, traditions, and principles—is consequential to the firm’s resilience (e.g., Cucculelli et al., 2016; Zellweger et al., 2013). Furthermore, resilience, or the ability to successfully navigate adversity, is critical to the family firm’s transgenerational longevity (Azouz et al., 2022). Given its importance to the family business, a growing body of research has focused on resilience. While research indicates that family firms can be more resilient than nonfamily firms (Amann & Jaussaud, 2012; Eckey & Memmel, 2023), we need a better understanding of what contributes to this level of resilience in family firms.

Yilmaz et al. (2024), in their review titled “Resilience in Family Businesses: A Systematic Literature Review,” seek to understand the family business idiosyncrasies that unfold in the context of organizational resilience. Based on their review of 87 articles published between 2009 and 2022, the authors first develop a definition of family firm resilience that emphasizes its process orientation and recognizes the multilevel nature through which resilience occurs in the family business. The remainder of their review is organized by the family business-specific factors (e.g., the family’s values and long-term orientation, the firm’s resource and capability endowments, and the demonstration of resilience and learning) that showcase how resilience unfolds in unique and dynamic ways within family firms.

Of particular note, Yilmaz et al. (2024) provide synthesized and comprehensive insights into what makes family firms so resilient, with answers found at each level of analysis. At the individual level, findings indicate that the owner–manager’s cognitive capabilities, knowledge resources, sensemaking abilities, and gender can influence the family firm’s resilience. At the group level, findings show that the owning family’s values (e.g., loyalty, trust, and commitment) and their desire for a transgenerational firm are critical drivers of family firm resilience. At the organizational level, resource and capability endowments (e.g., social capital and capacity for strategic renewal) help make family firms resilient in times of adversity.

A noteworthy implication of these findings is that while factors at each level of analysis shape family firm resilience, consideration of the relationships across levels is necessary for advancing knowledge. Indeed, the authors call for multilevel considerations in future family firm resilience research and identify several promising future research questions. For example, how does the family’s resilience influence the family firm’s resilience and vice versa? How do nonfamily members influence the family firm resilience process? Thus, investigating the interdependencies among different levels of analysis is necessary to provide a deeper understanding of family firms and their resilience.

Dysfunctional Behaviors

Legacy and resilience can be distinctive competencies of the family firm. However, the strong familial bonds and nonfinancial objectives that are foundational to these unique benefits may also be responsible for dysfunctional behaviors. Nonetheless, why dysfunctional behaviors are more likely in some family firms remains to be fully understood.

With this question as their focus, Kidwell et al. (2024) review these negative acts within the family firm in the article titled “Families and their Firms Behaving Badly: A Review of Dysfunctional Behavior in Family Businesses.” Their broad, multidisciplinary search for literature resulted in 160 articles published in 64 journals. From their analysis of these articles, the authors identified the range of dysfunctional behaviors studied in the family firm context—including relevant behaviors focused internal to the family firm and those focused beyond the family firm—and developed a multilevel framework outlining the causes and consequences of these dysfunctional behaviors.

The framework offered by Kidwell et al. (2024) conceptualizes the individual, family, firm, and environmental root causes and antecedents that instigate dysfunctional behaviors in the family firm. The framework also identifies the multilevel consequences that can result from these maladaptive behaviors. In addition to their review, the multilevel model developed by the authors offers insight into why some family firms are more likely to engage in dysfunctional behaviors: the root causes often stem from an individual’s early interactions with a (dysfunctional) family system and from environmental factors. Further, the authors offer explanations about the family interactions that explain these differences and the role of societal and cultural effects on these differences. For example, the root causes of dysfunctional behaviors in the family firm are linked to an individual’s early interactions with their parents and siblings (individual level) and the family system (family level), emphasizing a multilevel scheme of factors that ultimately manifest within the family firm.

Through their review, Kidwell et al. (2024) bring consistency and organization to studying the family firm’s dysfunctional behaviors. Moreover, their multilevel framework underscores the interconnectedness of various levels and highlights the complexity involved in diagnosing, preventing, and addressing dysfunction in the family business. Given that much remains to be known about dysfunctional behaviors in and around the family firm, the insights shared in this review will serve as a valuable resource for future studies on this topic.

Strategic Change

Dysfunctional behaviors may lead to unwanted outcomes for family firms, perhaps resulting in the need for change. Strategic change refers to the alterations a firm makes over time in the form, quality, or state of its products and markets to improve firm performance and/or survival. Family firm research tends to examine either the firm’s external environment or its internal resources in studies of strategic change, resulting in a fragmented understanding.

In the article “Strategic Change in Family Firms: A Review from an Institutional Environment and Firm Size Perspective,” Skorodziyevskiy et al. (2024) examine the family firm’s strategic change by using a framework that concurrently accounts for both the family firm’s institutional environment and its resources. The authors review 193 articles on strategic change—including empirical research on internationalization, innovation, and diversification—published in 28 management, entrepreneurship, finance, and family business journals from 1996 to 2022. They generate findings primarily at the macro level of analysis. However, given the interwoven family and business systems, the review’s pronounced focus on the macro level is naturally linked to the additional levels of analysis associated with the family and the business.

Arranging their review using a framework that integrates the central factors that drive change in strategy, the authors uncover the consensus that exists concerning how family firms internationalize, innovate, and diversify across institutional contexts and the role that the size of the family firm plays herein. Interestingly, Skorodziyevskiy et al. (2024) find that family firms tend to engage less in strategic change than nonfamily firms, yet small- and medium-sized family firms seem to be more aggressive in their change efforts if they operate in a favorable institutional environment. They also find that research is inconclusive regarding the nature and extent of strategic change in large family firms, which is likely attributed to the heterogeneity within this population.

The review provides essential contributions to our understanding of the ways strategic change decisions differ between family and nonfamily firms while clarifying the effects of the institutional environment and firm size on pursuing strategic change. Further, Skorodziyevskiy et al. (2024) offer novel insights to guide future studies that examine the relationships among environmental-level factors (e.g., institutional environment), firm-level factors (e.g., family involvement in management and governance, generation in charge, and ownership distribution within the family), and strategic change. In fact, given that families and their firms are embedded in their institutional context, deconstructing the aspects of the environment (e.g., legal and political environments) is a needed approach that will offer a more granular understanding of the conditions that affect family firms and their strategic decisions. Moreover, extending these studies to account for individual and family-specific differences will better capture the multilevel nature of strategic change decisions and processes.

Nonfinancial Outcomes

As noted, strategic change is pursued to achieve desired outcomes. In family firms, desired outcomes often include those that are nonfinancial. The type (and degree) of nonfinancial outcome pursued is a primary distinction between family and nonfamily firms and a determinant of differences among family firms. Nonfinancial goals have received abundant attention from family business scholars, yet these nonfinancial aspects have been conceptualized broadly, making comparisons of findings across studies remarkably challenging.

Recognizing this limitation, Martin et al. (2024) review nonfinancial outcomes in family firm research. Based on their systematic review of 267 family firm articles that examine 322 nonfinancial outcomes, the authors observed that nonfinancial outcomes are often used in ambiguous and inconsistent ways. Therefore, they first offer a definition of nonfinancial outcomes that is used to develop a four-quadrant (2 × 2) classification scheme, organizing nonfinancial outcomes based on the level of analysis (i.e., macro vs. micro) and context (i.e., specific to family firms vs. generalizable beyond family firms).

Categorizing nonfinancial outcomes into these four quadrants illuminates new insights. For instance, macro-level nonfinancial outcomes specific to the family firm are the least examined, indicating that knowledge in this quadrant remains at a relatively nascent stage of development. Conversely, macro-level nonfinancial outcomes that are generalizable beyond family firms represent a more developed quadrant of research, which is not necessarily surprising given the evolution of the field (evolving from a focus on comparisons between family and nonfamily firms to a greater focus on family firm heterogeneity). The categorization also highlights micro-level nonfinancial outcomes specific to the family firm. While these outcomes are central to family business research, much potential exists for future studies focused on these outcomes, the extent to which the family desires them, and the multilevel factors that lead to their pursuit and achievement. Finally, similar to generalizable nonfinancial outcomes at the macro level, similar outcomes at the micro level have been key to comparisons of family and nonfamily firms. Examining generalizable factors has supported the development of the field to its present stage; however, continuing to focus on generalizable outcomes may hinder future development of the field as the authors note.

In all, researchers have a unique opportunity to gain insights into nonfinancial outcomes by studying family businesses. While nonfinancial outcomes are not unique to the family firm, some goals are certainly more salient in this context. By using family businesses as a platform for future studies, researchers can better understand the nuances of these outcomes, develop generalizable insights, and produce knowledge that contributes to various disciplines. In addition, numerous advances are to be gained from studies that account for temporal dynamics, consider multilevel issues, and employ mixed-method research designs.

Microfoundations

Understanding how nonfinancial (and other firm-level) outcomes emerge requires an examination of the family firm’s microfoundations. The microfoundations perspective—offering “. . . an explanation of how firm-level outcomes emerge from the characteristics, behaviors, and interactions of individuals”—has gained increasing attention in recent years because of its potential to advance our understanding of family firm phenomena (De Massis & Foss, 2018, p. 386). Despite an increasing interest in the microfoundations of the family firm, what is known about relationships that span the primary levels of analysis remains insufficient.

In their review of family firm microfoundations, titled “Microfoundations in Family Firm Research: A Review and Agenda for Theoretically Driven Future Inquiry,” Ellen et al. (2024) examine 291 articles to determine the ways scholars have examined macro-level conditions and micro-level factors to inform macro-level outcomes in family firms. To identify and categorize the distinct microfoundational links, the authors rely on the Coleman “boat” as an organizing framework. This framework depicts microfoundations in terms of stacked layers, which include a layer of macro-level elements positioned above a layer of micro-level elements. The Coleman “boat” is built around four nodes connected by four links. Concentrating on assessing our knowledge of essential links among micro- and macro-level factors in family businesses, Ellen et al. (2024) address the salience of multilevel considerations in the family business literature. In other words, the literature reviewed is organized based on the links outlined by the Coleman “boat” with a core focus on the theories used within each group of studies.

Interestingly, the authors conclude that most research does not incorporate all microfoundational links; instead, a few selected links are often examined. In addition, Ellen and colleagues (2024) report that nearly 25% of the articles reviewed are atheoretical, and of the studies that invoke a theory, the majority integrate the theory’s tenets only superficially. While studies have reported “what” factors are linked at the micro level (e.g., family risk aversion, family tension) and macro level (e.g., family firm innovation, family firm performance), the lack of theoretical development severely restricts our knowledge of the family firm’s multilevel complexities and prevents us from understanding “why” and “how” these relationships exist. As this review suggests, future research must be explicitly theory driven.

Timely and valuable suggestions are offered regarding what theories future scholars can apply in empirical and conceptual studies to investigate the microfoundations of the family business. For example, the authors suggest that one promising route is to conduct more research on the psychological underpinnings of microfoundations, where psychological theories will likely serve as relevant conceptual frameworks (Ellen et al., 2024). Suggestions include self-determination theory, the theory of planned behavior, social cognitive theory, and social cognitive career theory.

Family Topic 1: Involvement and Influence

The family’s involvement in the firm creates dynamics that are not common in other forms of organizations, if present at all. When the family is involved in the business, the family shapes (and is shaped by) each topic examined in this review issue: legacy, resilience, dysfunctional behaviors, strategic change, nonfinancial outcomes, and microfoundations. Common to each of these reviews, a multilevel approach was identified as a necessary pathway forward for future research. Multilevel studies related to the family and its influence will continue developing along numerous pathways; however, particular benefit lies in a more comprehensive understanding of how the aspirations and values of individual family members shape organizational goals and strategies (i.e., furnishing microfoundations), underscoring multilevel relationships involving personal, family, and business objectives. Referring to Figure 1, this represents a “bottom-up” approach to multilevel research, assessing the impact of the individual (Level 1) on the family (Level 2) and the firm (Level 3). Accordingly, we suggest the following research question:

The interplay between the family firm’s institutional environment and strategic change, as addressed by Skorodziyevskiy et al. (2024), calls for multilevel considerations that incorporate external environmental factors with internal family and organizational dynamics. Business families and their members are influenced (directly and indirectly) by their broader institutional contexts, which is the result of historical events, experiences, (in)formal regulations, and other forces that warrant investigation (Aldrich et al., 2023). Future research should explore how family firms navigate and adapt to changing institutional landscapes and how these adaptations are affected by governing family members, family dynamics, and family firm influences, ultimately resulting in the family firm’s response to its environment. Further, the extent to which an appropriate response is successful is likely related to the resilience of the family firm as noted by Yilmaz et al. (2024). This recommended research considers the bidirectional influence of different levels of analysis (e.g., “top-down” and “bottom-up” views) in that it simultaneously explores the effect of the institutional environment (Level 4) on the family (Level 2), and the family’s influence (Level 2) on their firm (Level 3). Along these lines, the following research questions may be investigated:

Family Topic 2: Distinctive Social Capital

Social capital—a topic highly relevant for multilevel considerations (Payne et al., 2011)—is not specific to a particular organizational form. However, family social capital, characterized by the unique ties among kin in the family firm, is specific to the family business (Herrero, 2018). Anchored on elements like trust, norms, values, and familial social networks, family social capital is crucial to the functioning and prosperity of the family enterprise. This distinctive form of social capital influences a family firm’s strategic choices and is shown to affect financial and nonfinancial outcomes (Sanchez-Ruiz et al., 2019).

Family social capital is a double-edged sword. On the one hand, it can enhance unity, expedite decision-making, and reinforce dedication to business objectives. On the other hand, it can instigate favoritism, create internal strife, and raise barriers to resilience when not managed appropriately. Managing family social capital demands a careful balance between family-oriented and business-related priorities, but when managed well, it can facilitate competitive advantage. Poor management of family social capital, though, can lead to challenges such as intergenerational disputes, erosion of legacy transmissions, dysfunctional behaviors, and challenges in making strategic changes. When managed appropriately, these unique bonds can support advantages across numerous aspects of the family firm. The process through which this occurs, beginning with interpersonal relationships, remains to be clearly articulated. We suggest this process can be better understood by considering the interplay of multiple levels of analysis, exploring to what extent and how family social capital (Level 2) is impacted by factors at the individual level (Level 1) and institutional level (Level 4) along with the impacts of family social capital on the firm (Level 3). Formally stated, the following research questions deserve attention:

Family Topic 3: Transgenerational Succession

Succession across family generations is a salient nonfinancial outcome among family firms and one of the most intensively studied topics in the field (see Daspit et al., 2016). While several studies focus on individual-level determinants, such as motivations of potential successors (e.g., Zellweger et al., 2011) or their gender (e.g., Combs et al., 2023; Kubíček & Machek, 2019), many studies have long indicated that factors beyond those related to the individual are consequential. For example, studies have examined family-level factors such as SEW considerations and the relevance of primogeniture (Calabrò et al., 2018; see also Davis & Harveston, 1998), firm-level factors (e.g., in terms of organizational characteristics; see Porfírio et al., 2020), and institutional- or regional-level issues (Baù et al., 2013; Le Breton-Miller et al., 2004; Porfírio et al., 2020).

Moreover, research has pointed to numerous multilevel effects related to succession intentions, the succession process, or related outcomes. For instance, investigations have been made into family-individual interactions in terms of parents’ emotional support and next-generation member’s succession intentions (Lyons et al., 2023) and the relationships among the personal characteristics of successors and organizational characteristics (Porfírio et al., 2020). However, even though Baù et al. (2013) discussed the multilevel nature of succession and called for further corresponding empirical research, and despite Porfírio et al. (2020) reiterating the need for multilevel studies focused on succession in general, we echo these calls given the limited studies that exist.

In their review of microfoundations, Ellen et al. (2024) note that the majority of studies overlook examining the role of individual actions (as the Coleman “boat” and a microfoundations perspective suggest). Doing so will offer a more proximal understanding of the succession outcome. More could be learned from examining individual actions that drive succession success (or failure) while simultaneously accounting for the conditions of individual action and macro-level conditions. In addition, new insights will be gained by investigating the relationships among individual-level motivations, attitudes of potential successors, and firm-level characteristics (e.g., whether high-performing firms attract certain types of successors).

Furthermore, the potential exists to examine how institution-level factors, such as the wealth of a nation or cultural dimensions (Hofstede, 2001; House et al., 2004), affect relevant aspects of succession by considering family-level variables like the preference for primogeniture (Calabrò et al., 2018). This research could also consider how informal and formal institutions impact transgenerational succession intentions in different institutional environments (e.g., Berrone et al., 2022). For instance, in some institutional environments, there might be a strong legal framework associated with inheritance law that drives succession decisions, while in other environments, such decisions are mainly a result of informal norms and expectations. We, therefore, suggest that a more comprehensive understanding of transgenerational succession can be gleaned through examinations that simultaneously consider the multiple levels and directions of such effects. In more formal terms, scholars may consider these research questions (among others):

Family Topic 4: Ownership and Governance

Family ownership is another critical component of the family business system. Researchers have increasingly paid attention to the role of ownership in the long-term development and performance of the family business, for instance, in studies on the importance of the family owner’s mixed motives (Gedajlovic et al., 2012) and the protection of SEW endowments (Gómez-Mejía et al., 2007; Swab et al., 2020). While family ownership is often concentrated and homogeneous, not every family firm is the same. In fact, notable differences exist in ownership concentration and structure. A family business may have multiple owners, and ownership can be divided among several family members, families, nonfamily members, and even other organizations.

Taking a multilevel approach, future research can examine in greater depth to what extent (and how) different types of owners and ownership structures impact family business processes, strategic changes, outcomes, and survival. Haag et al. (2023), for example, used a history-informed longitudinal case study design to understand the micro- and macro-level dynamics that drive family firm longevity, finding that the owner’s change in objectives—and the willingness of the family to sacrifice (some) ownership—contributed to the family firm’s ability to survive environmental changes. Studies that more closely examine family firm ownership and identify the multilevel factors, mechanisms, and outcomes contributing to transgenerational survival are needed to demystify the embedded complexities.

Further, future researchers are encouraged to consider time-related issues (e.g., short-term vs. long-term perspectives of ownership, including entry and exit into ownership of a family business), recognizing that nested factors vary over time. Multilevel assessments that allow for nested and repeated measures are essential to better observe long-surviving family firms (Mathieu & Chen, 2011). In addition to changes within the family firm, the family, and the individuals involved, studies must also consider the institutional conditions that impact changes to ownership and governance (e.g., changes to property rights and ownership protection regimes). Considering factors across multiple levels will offer a more robust understanding of the ways ownership is organized and exercised, that is, the family firm’s governance. Notably, we look forward to future studies that can explain the effects of contextual influences on different owners (and ownership structures) and how their business is impacted. Understanding how family firm owners organize and draw on structures, such as the board of directors and family councils, to navigate factors and pressures that manifest at various levels (e.g., ownership dynamics among kin, firm-level issues, family goals, institutional norms, and industry changes) is necessary. Thus, future studies can consider investigating questions such as: