Social identity theory and the family business: A contribution to understanding family business dynamics

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Abstract

The combination of the family unit and the business entity has been a major focus within family business research. While some research suggests that their combination is beneficial; other research indicates that it is detrimental - one of the main reasons being intra-family conflict. Due to its potential to account for inter- and intragroup conflict, social identity theory will be used to offer a lens from which to understand family business, at both the individual and organisational level. Using a single in-depth case study, the various dimensions of social identity theory will be applied to the family business context. The findings indicate that social identity can go some way in helping us better understand the dynamics of longstanding family businesses. Three dimensions that contribute to the development of a common identity among family members are proposed.

Authors

Torsten Schmidts
Business School, Faculty of Business & Economics, University of Auckland, Auckland, New Zealand

Deborah Shepherd
Business School, Faculty of Business & Economics, University of Auckland, Auckland, New Zealand

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Keywords

social identity, family business, family dynamics

Meta

PP: 76 - 86

Introduction

Throughout history, family businesses have been the prevailing organisational form (Poza, 2007). Even nowadays, with much attention focusing on multinational corporations, many of the largest organisations either originated or are still operated as family businesses (Hoy and Sharma, 2009). Indeed it is estimated that family businesses constitute upwards of 80% of businesses in the western world, with similar levels in New Zealand (Evans, 1998; Grant Thornton, 2009).

While it has been argued that family and business are incompatible entities that should be kept separate due to their distinct objectives (Benson, Crego and Drucker, 1990), the increasingly established research field of family business over the last three decades in particular would suggest this argument is less accepted now than it was earlier. Carlock and Ward (2001) illustrate that the objectives of the family system and the business system, while certainly diverse (with the former emphasising the emotional aspects and needs of the family members and the latter emphasising business performance and fostering change), can be reconciled.

The successful combination of these two seemingly contradictory dimensions has been suggested as a main factor for their continued significance (see Gersick, Davis, McCollom Hamption and Lansberg, 1997 for an overview). Poza (2007) argued that the unique dynamics that result from the combination and intersection of these two entities may present the business with a competitive advantage. This results from family businesses allowing the characteristics of modern corporations to be balanced by the family side, which is described as more caring and nurturing (Carlock and Ward, 2001).

While family businesses are prevalent and their potential synergies and advantages abound, there is no guarantee of success. It was highlighted by Lansberg (1999) that only 10% of family firms make it to the third generation. This finding was attributed, at least partially, to intra-family conflict, mainly with regards to the succession and differences between the branches of the family (see also Poza, 2007). Not surprisingly, lower levels of intra-family conflict have been found in family businesses that have been in existence for longer periods of time (Neubauer and Lank, 1998).

 Cohesiveness and family unity, as well as family members' identification with the business, have been highlighted to positively impact on family business survival (Pieper, 2007). Therefore, we suggest that social identity theory is a fruitful lens through which to explore family business dynamics, due to its potential to account for 'intra-group' dynamics (or in this context intra-family dynamics), including conflict and cohesiveness. An illustrative case from a fourth generation New Zealand family business will be offered to illustrate how social identity can shed light on family business research, and to highlight factors that contribute to the development of a common identity amongst family members. In this paper we will firstly review relevant family business characteristics before exploring the key dimensions of social identity theory as it relates to family business. This will be followed by the details of this study, and the findings from the case organisation. The themes that surfaced will be analysed and discussed in relation to the dimensions of social identity. Finally, the contribution this research offers along with the limitations of this study and potential future research will be outlined.

Family business

Despite the diversity of family businesses, researchers have largely agreed that the family business is distinctive from others because of the combination of the three dimensions: family, management, and ownership (see Astrachan, Klein and Smyrnios, 2002). Poza (2007) further highlight that certain characteristics recur across family businesses, and describe the family business as a unique synthesis of four key dimensions: (1) family involvement; (2) overlap between family, management and ownership; (3) the competitive advantage that is derived from the interaction of the three dimensions (especially when family unity is high); and (4) the owner's dream to build a family legacy.

Family and business - Are they compatible?

As outlined above, it has frequently been suggested that the family and the business system are incompatible, due to their different objectives. The combination of these two systems has been shown to create conflict due to factors such as a lack of professionalisation (Stewart and Hitt, 2012), individual rent-seeking (Hollander and Elman, 1988) or operational inefficiencies (Kaye, 1991). However, Carlock and Ward (2001) suggest that despite the differing needs of the family and the business system, there is a reciprocal relationship when both systems are considered to an equal extent. These authors argue that an overemphasis on the business side may erode family communications, family identification, family loyalty, family time, and family emotions. Conversely, overemphasising the family side may be unfavourable with regards to business communications, business relations, performance appraisals, decision-making and strategic options. Gersick and colleagues (1997) argue that holding the balance between the two dynamic entities of family and business is a challenging task in family businesses (see also Poza, 2007). Overemphasising any one of the three dimensions of family, management, and ownership can lead to higher levels of conflict, and even to the termination or sale of the business or to irreconcilable conflict between family members (Gersick et al., 1997).

Sundaramurthy and Kreiner (2008) highlight that a high level of integration between the business and family identity of an individual may lead to strong commitment and fast decision-making, which may be attributed to the higher degree of 'familiness' of the organisational members. However, an overly strong integration between the entities can lead to psychological difficulties in separating the roles for some family members (see also Stafford, Duncan, Dane and Winter, 1999). Also, Tagiuri and Davis (1996) highlight that individuals within the family and the business often face competing requirements from the simultaneous fulfilment of several roles, which may result in identity conflict due to the difficulty in adjusting to the expectations towards a role (e.g. father or CEO). However, if a family is able to develop a family-business meta-identity, this may be a source of competitive advantage due to the ability to cope with identity conflict more effectively, leading to reduced levels of conflict (Shepherd and Haynie, 2009).

Social identity

Originating in the work of social psychologists Henri Tajfel and John Turner (e.g. Tajfel, 1978; Turner, 1978), social identity theory was used to investigate inter-group behaviour, stereotyping and in-group favouritism. The concept has found application in many other areas since, including the organisational context, leading to the concept of organizational identity (see Ashforth and Mael, 1989).

Following Tajfel's (1978) definition, social identity has most frequently been conceptualised according to three components; namely, the cognitive component (the knowledge of being a member of a group), the evaluative component (the value associated with the membership of a social group) and the affective component (the emotional significance associated with a group membership).

Cognitive component

The cognitive component is necessary for members of a social group to develop an emotional significance related to that membership (see Jackson, 2002). Tajfel and Forgas (1981) argue that social categorisation also involves the acknowledgment of the values and meaning the group membership has for an individual. This was further elaborated on in the self-categorisation theory, which captures how a collection of individuals forms a psychological group, how they perceive themselves as a single unit, what effect the group membership has on their social relations, and whether there is a distinction from a merely social arrangement (Turner, 1985; Turner et al., 1987). The process of social categorisation consists of both an intra-category comparison and an inter-category comparison, increasing distinctiveness between members of the in-group and the out-group, while enhancing the similarities of the members of the in-group (Mael and Ashforth, 1989).

With regards to family business there is likely to be a categorisation due to being a family member. However, we suggest that a categorisation with regards to the business may depend on the involvement in the business, due to the impact on the salience of the business category.

Affective component

The affective component has been described as 'emotions directed towards one's own group' (Tajfel, 1978; p. 29). According to a number of researchers, the affective component supports a positive impact on the identification process (Jackson and Smith, 1999). For example, friendship among the group members has a positive impact on the cohesiveness of the group. Jackson and Smith (1999) refer to this as the feeling of 'oneness'. Nonetheless, Hogg and McCarthy (1990) have emphasised that this type of interpersonal affect is unlike genuine interpersonal attraction. In terms of group membership it relates to the prototypicality of the member. Therefore, this type of affect would be 'attraction to the group as the group is embodied by specific group members' (Hogg and McCarthy, 1990; p. 20).

Ellemers, Kortekaas and Ouwerkerk (1999) give empirical evidence for what they term affective commitment, which highlights the extent to which one feels emotionally involved with the group rather than merely show awareness of group membership (Bergami and Bagozzi, 2000). Cameron and Lalonde (2001) describe the emotional component of social identity as in-group ties, which they defined as the extent to which individuals feel they are attached to the group by a common bond with other members. They argue that people with strong subjective ties tend to have positive in-group affect and a sense of emotional involvement in the social group (Cameron, 2004; Harris and Cameron, 2005). For family business members, the affective component is likely to manifest due to the subjective ties that individuals have with other members of the family.

The dimensions outlined above will be considered in the context of an in-depth case study to explore the applicability of the social identity categories to family business research and to promote the understanding of the intersection of the family and the business dimensions. We particularly focus on the cognitive and affective components due to their significance in the development of a social identity.


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