The Impact Of Family Relationship On Entrepreneurial Orientation:Examining The Heterogeneity Of Family Firms

It is widely seen the discrepancy of entrepreneurial orientation among family firms. How family relationship affects entrepreneurial orientation (EO) of family firms is a noteworthy theoretical and practical issue. As a worldwide prevalent form of business, scholars have many researches about the differences between family business and non-family business. However, there is still lack of researches about the heterogeneity of family firms. In addition, scholars do not recognize family relationship as the importance source of heterogeneity. Most of the previous researches are using family involvement as the dominant variable. Due to the lacks of attention on the "family factors", the "family power" which is "outside business system while inside family system" was not fully recognized. As the main dimensions of family relationship, cohesion and adaptability will influence the relationship between family system and business system, and even determine family’s role as the "provider" or "grabber", which will affect the entrepreneurial behavior of family firm.EO is an important strategic behavior characterization of the family business. This study analyzes the connection between family relationship and EO, explores the impact of family firm heterogeneity on business strategic behavior. To recognize the mechanism between family relationship and EO, we have to solve some basic theoretical questions. First, why family relationship becomes the important sources of family firm heterogeneity. Second, how to open the "black box" between family relationship and sub-dimensions of EO (innovation, proactiveness, risk-taking). Third, how to discover the moderator role of family relationship on the mechanism between family decision-making and EO.To answer the three questions above, we based on the research of Circumplex family model as well as entrepreneurship, used the questionnaires from 2014 All-China Federation of Industry and Commerce (ACFIC) data for the project of "The Two Healthy Index of Non-public Ownership", and explored the mechanism between family relationship and EO. The study has three findings. First, the balanced family relationship (e.g., flexibly connected) is benefited to family communication, common goals, efficiently allocation of resource, as well as family governance, and further contributing to the EO of family firm. Second, an inverted U-shaped relationship exists between cohesion and family firm innovation, while adaptability has a consistently positive impact on family firm innovation. Third, reconciling the two contradictory perspectives-stewardship and agency theory, balanced cohesion will have a positive effect to the proactiveness of family business, while organizational formalization and customer orientation play as the mediating factors. Forth, family cognition (willingness) and family relationship (ability) worked together for the risk-taking behavior of family firm, while family cognition plays as a moderator in the relationship between family relationship and risking-taking. Fifth, from the perspective of Socioemotional wealth (SEW), family-made decision is negative with entrepreneurial orientation, while balanced family relationship will weaken the negative effect of family-made decision. Finally, this study put forward the practical implication, limitation and future direction.