Developing a new typology of family firms based on professionalization - a conceptual framework and empirical validation

Abstract

Due to the heterogenic nature among the group of family businesses, the research field has been calling upon academics to find effective ways to distinguish between the different categories of family firms. We argue that in previous typologies the focus tends to be given to the firm composition, i.e. representation of family in ownership and/or management, which has generated static classification models in the past. In this paper, we extend and refine these previous typologies by including additional relevant dimensions which pertain to firm operations, governance activity and controlling mechanisms. In order to obtain this objective, we introduce the multidimensional concept of professionalization which encompasses each of these elements, as the basis on which we discriminate family firms. Based on existing literature we differentiate between two main components of professionalization, i.e. Effective Openness and Internal Formalization. The developed typology comprises these two continuums, which results in the distinction of four novel family firm types for which we create the labels Autocracy, Domestic Configuration, Clench Hybrid and Administrative Hybrid. For the empirical validation of the typology we first perform a factor analysis on 532 private family owned businesses. Based on the derived factors, we indentify distinct groups in the data set through the Latent Class Clustering technique, with the objective of successfully verifying the theoretical constructed groups of our typology.