Professionalization of TMT in Private Family Firms - the danger of institutionalism

Abstract

We examine the determinants of top management team professionalization in private family firms from an institutional perspective. Professionalization, conceptualized here as the inclusion of non-family managers in the TMT, can be more challenging due to the unique composition of family firms. In this paper, we try to answer the call for a multi-theoretical approach to determine which family firms are more or less eager to hire non-family managers, by using institutional drivers, complementary to the mostly used agency arguments. Institutional theory encompasses three forms of institutional isomorphism as possible antecedents for professionalization of the top management team: coercive, normative and mimetic isomorphism. Furthermore, the specific ties within a business family, translated by socioemotional wealth, can affect the extent to which isomorphism drives TMT professionalization. Propositions are made about the direct effect of coercive, normative and mimetic isomorphism on TMT professionalization on the one hand, while SEW is assumed to play a moderating role on these direct relationships. Hence, professionalization of top management teams in family firms is a complex process due to the unique combination of family and business goals. This complexity also implies that the institutional viewpoint may be a double-edged sword. From the bright side of the institutional perspective, these forces can be a mechanism to break the barrier for integration of non-family managers in private family firms. On the contrary, the dark side may lead to hiring non-family managers due to institutional pressures, while the underlying functional need may be absent. These contradictions may lead to further conceptual exploration as well as empirical testing in this field. Hence, this study makes several contributions to both family business research and institutional theory.