AA2: Workplace experiences
Theories of Family Science & Family Business
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Lecture 1 Outline
What is Systems Theory?
What is Family Development (Life Course Theory)?
What is Social Exchange Theory?
What is Structural Functionalism?
What is Symbolic Interactionism?
Systems Theory
Systems theory looks at the family as a system and focuses on the interactions within the system. There are two key assumptions:
The family system must be viewed as a whole.
The members of the family system are capable of self-reflection meaning they can set goals and make adjustments.
Life Course Theory
Attempts to understand the stability and change of families over time and generations.
Focuses on individual experiences and recognizes the differences in families.
Social Exchange Theory
Social exchange theory explains the connectivity of human relationships through the concept of a market exchange.
Families are viewed as a social institution where relationships will likely be maintained as long as rewards are greater than the costs for each member.
Structural Functionalism
Structural Functionalism suggests that a normative family unit provides a stable environment for the socialization of children and the development of adult personalities.
In family business, this theory is used to examine the different family structures and their impact on the business.
Symbolic Interactionism
Symbolic Interactionism theory seeks to understand individual behavior through interactions with others.
In family business, symbolic interactionism theory has been used to explain understanding the importance of family values and norms.
Lecture 2 Outline
What is the first branch of agency theory—principal agency—and how does it apply to family firms?
What are the second and third branches of Agency Theory and their effect on family firms?
What is the Resource-Based View?
How can organizational competencies become competitive advantages?
How does Transaction Cost Theory apply to family firms?
Agency Theory
Traditional theory: the natural alignment of owners and managers decreases agency costs of ownership in family firms
Recent research: the altruism of owner-managers leads to increased agency costs
Agency costs can be controlled or avoided through the use of certain managerial and governance practices
The board of directors is important in monitoring managerial behavior and controlling costs
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Branches of Agency Theory
Principal-Agent
Principal-Principal
Behavior Agency
Resource-Based View
The Resource-Based View focuses on unique capabilities or resources (organizational competencies) that family firms can accumulate and leverage as competitive advantages
The interaction quality between business and family influences the value of competitive advantages
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Competencies as Competitive Advantages
Speed to market from owner-manager overlap in responsibilities and small size flexibility
More investment in people and innovation due to long-term focus and ownership concentrated with family
Higher returns on investment due to customer focus and market niches
High product/service quality because family is motivated to protect family name and reputation
Lower costs and better unity due to overlap of family, business, and ownership interaction and family commitment
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Transaction Cost Theory
Transaction Cost Theory
Why do firms exist?
When goods produced in-house vs. outsourced
Efficiency (costs of exchanges)
Tradability—how much it can be bought and sold in market
Specificity—how much development and usage are tied to organization
GNT—generic non-tradable asset
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