Parent/child businesses stronger than those of cousins and colleagues

Jan 28, 2007 at 9:29 p.m. ET

Some say that the combination of family and business is a bad idea as it creates a need for trade-offs in family demands and business demands. A new study published in the latest issue of Entrepreneurship Theory and Practice examined the behavioral differences of the top management teams (TMTs) across parental, familial, and non-family firms to find that some family bonds are beneficial.

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TMTs with a parent and child yielded more effective critical behavior dynamics such as less conflict and more cohesion than their counterparts. Compared to the non-family TMTs, the authors found that the parental groups "... had a stronger belief in their abilities, a greater sense of belonging to the team, greater consensus on the strategic direction of the firm, and less detrimental conflict, relationship conflict." However, they had less good conflict, idea conflict. In contrast, the alternate familial TMTs consisting of siblings, cousins, or distant relatives in management positions had less group potency, cohesion, shared strategic cohesion and greater relationship conflict than their non-family counterparts.

The authors examined cohesion, conflict, group potency, shared strategic cognition (i.e. the extent that TMTs share mental models about strategy) in 44 parental, 78 familial, and 102 non-family TMTs. Companies were selected in 1994, 1996, and 1999 from the inc. 500, a list of the fastest growing private firms in the U.S. in that year. Familial or loosely constructed family TMTs appeared to be the most dysfunctional with the highest level of relationship conflict among the three groups while parent-child businesses were the opposite. "Parental teams may have had years, prior to the business, to establish the values of responsibility and accountability," the authors explain.

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