Family Firms and Entrepreneurial
Orientation in Publicly Traded Firms
Family Business Review
Volume 22 Number 1
March 2009 9-24
© 2009 Family Firm Institute, Inc.
10.1177/0894486508327823
http://fbr.sagepub.com
A Comparative Analysis of the S&P 500
Jeremy C. Short
G. Tyge Payne
Keith H. Brigham
G. T. Lumpkin
Texas Tech University
J. Christian Broberg
Wichita State University
There is considerable disagreement about whether family firm characteristics hinder or support entrepreneurial activities. This
article highlights the existence of an entrepreneurial orientation in family firms, and it examines differences between family and
nonfamily firms on the entrepreneurial orientation dimensions of autonomy, competitive aggressiveness, innovativeness, proactiveness, and risk taking, using content analysis of shareholder letters from S&P 500 firms. As such, family firms exhibit language
consistent with an entrepreneurial orientation for all dimensions but use less language than that of nonfamily firms in relation to
autonomy, proactiveness, and risk taking.
Keywords: entrepreneurial orientation; family firms; content analysis
F
amily firms contain unique characteristics derived from
patterns of ownership, governance, and succession that
are argued to influence the strategic processes and, ultimately, the performance of such firms (Anderson & Reeb,
2003; Carney, 2005; Chua, Chrisman, & Sharma, 1999).
However, there is some disagreement regarding the extent
to which these unique characteristics affect the strategic
processes and practices of family firms (Chrisman, Chua, &
Sharma, 2005). Indeed, when compared to our knowledge
surrounding firms in general, significantly less is known
about the strategic orientations and organizational processes that drive family firms (Sharma, Chrisman, & Chua,
1997). This is somewhat disconcerting because family
firms represent a major engine of economic growth and
wealth creation (Astrachan, 2003).
There has been an emerging interest in the family
business literature regarding how the distinctive dynamics
within family businesses might influence the strategic
Authors’ Note: Address correspondence to Jeremy C. Short 2500
Broadway, Lubbock, TX 79409; e-mail: [email protected]
management process in family firms (e.g., Chrisman
et al., 2005; Sharma et al., 1997). Whereas the basic strategic
management steps—formulation, implementation, and
evaluation—are likely to be similar in family and nonfamily
firms, family dynamics may influence the decisions and processes in all these steps (Sharma et al., 1997). Specifically,
family goals, family culture, succession, and intergenerational relationships, among others, have been identified as
family influences that can shape strategic choices and processes in family firms (Sharma et al., 1997).
Some scholars suggest that certain key characteristics give
family firms a unique set of organizational identities regarding
shared views of what is central, enduring, and distinctive about
the firm (e.g., Dyer & Whetten, 2006). Organizational identities
are relevant to the strategic processes of family firms because
they provide a referent that guides strategic processes and decisions (Albert & Whetten, 1985). Dyer and Whetten (2006)
argued that family firms espouse an identity based on the need
to project a positive image and maintain a good reputation with
stakeholders owing to a heightened need to protect the family
name and legacy. The researchers found initial support for this
9
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10 Family Business Review
argument in their study of S&P 500 family and nonfamily firms,
in which they discovered that family firms, in comparison to
nonfamily firms, exhibited higher levels of corporate social
performance on various dimensions (Dyer & Whetten, 2006).
For family firms, organizational identity may be strongly influenced by the enduring legacy of the founder (e.g., Kelly,
Athanassiou, & Crittenden, 2000). Even in cases where founders have not been involved with the company for many years,
there may still be a heavy influence of the “founder’s shadow”
on the firm’s identity that affects organizational dynamics and
processes (Davis & Harveston, 1999). For instance, in his first
letter to shareholders after he assumed the position of CEO of
Ford Motor Company, Bill Ford Jr. evoked the memory of his
great grandfather and Ford’s innovative founder, Henry Ford,
signaling Ford’s identity as an innovative company whose legacy has been passed down from generation to generation (Ford,
2001). Scholars have argued that the unique characteristics relevant to family firms’ identities foster entrepreneurship (e.g.,
Aldrich & Cliff, 2003), whereas others have argued that these
family firm characteristics may work to inhibit entrepreneurial
activities over time (e.g., Zahra, 2005). Overall, the ambiguity
regarding the impact of family ownership and control on entrepreneurial activity suggests that more work is required if we are
to fully understand “the nature of family firms’ distinctions”
(Chrisman et al., 2005, p. 559) and how these distinctions influence firms’ strategic behavior and performance.
Research on entrepreneurial orientation (EO) provides a
unique conceptual lens to examine differences in the identities espoused by family firms, as compared to nonfamily
firms. Based on the strategic choice perspective within strategic management, EO refers to the processes, practices, and
decision-making styles of firms that act entrepreneurially
(Lumpkin & Dess, 1996). A growing body of literature has
utilized the EO construct to provide a framework for
researching similar issues regarding entrepreneurial activity
at the firm level (Covin & Slevin, 1989; Lyon, Lumpkin, &
Dess, 2000). Despite EO’s utility for various organizational
contexts, it has so far been applied only sparingly in the context of family firms. Indeed, Habbershon and Pistrui (2002)
pointed out that EO is noticeably absent from the extant family business literature and so proposed that incorporating EO
in the study of family firms is a promising avenue for future
research. In studies that have examined EO among family
firms, the context has generally favored smaller family businesses as opposed to larger publicly traded organizations,
such as Ford. Thus, the boundary conditions of EO for family
firms also remain largely unexplored.
Given the limited investigation in regard to EO in family
firms, it is unclear if and how family firms differ from
nonfamily firms with regard to EO, especially in large
publicly traded firms that often cling to their family firm histories as unique elements of their organizations’ identities. A
lack of understanding about the existence of EO in family
firms and about potential differences in EO, as compared to
that of nonfamily firms, creates a gap between “what we
know” and “what we ought to know” concerning a key entrepreneurial process in family firms. In this article, we address
that gap in two ways. First, we investigate the use of language
in shareholder letters that is consistent with EO to determine
whether family firms exhibit “the mind-set and methods that
lead an organization toward a proactive and continuous
search for opportunistic growth” (Habbershon & Pistrui,
2002, p. 228). Second, we examine differences between family firms and nonfamily firms on the five dimensions of EO
developed by Lumpkin and Dess (1996). To accomplish our
goals, we use a sample of S&P 500 firms to capture differences in shareholder letters. The S&P 500 has been used in
other studies examining differences in the identities of family
firms versus nonfamily firms (e.g., Dyer & Whetten, 2006),
and it provides an especially attractive sample to examine
differences in firms’ projections of such identities through
language intended to persuade stakeholders both internal and
external. Overall, this study provides the first comprehensive
examination of EO in large family firms to date.
EO of Family Firms
There has been little attention in the family business literature given to the role that family dynamics play in influencing
entrepreneurial processes in family firms (Aldrich & Cliff,
2003). Whereas recent calls to examine the strategic orientations (Chrisman et al., 2005) and EOs (Habbershon & Pistrui,
2002) of family firms are increasing, we are aware of only a
handful of published studies that have empirically examined
either EO or its related dimensions in the context of family
firms. Zahra, Hayton, and Salvato (2004) employed Miller’s
measure (1983) of entrepreneurship (a foundational measure of
EO) as the dependent variable in their study. Using a survey of
U.S. manufacturing companies, they examined how different
dimensions of culture are related to entrepreneurship in family
and nonfamily firms. Zahra (2005) examined how various family firm ownership structures (e.g., CEO tenure, extent of family ownership) influence risk taking, which is a key dimension
of EO. Naldi and colleagues (Naldi, Nordqvist, Sjoberg, &
Wiklund, 2007) also focused on the risk-taking dimension of
EO and its impact in family firms. Additionally, Morck,
Stangeland, and Yeung (2000) investigated innovation differences (R&D spending and patents) between Canadian family
and nonfamily firms. Finally, Kellermanns, Eddleston, Barnett,
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Short et al. / Family Firms and Entrepreneurial Orientation in Publicly Traded Firms 11 and Pearson (2008) examined the antecedents and performance
implications of “entrepreneurial behavior” in family firms. In
summary, previous research suggests that differences in EO
exist between family firms and nonfamily firms; however, only
a few studies have examined elements outside of risk-taking
orientation, and no studies to date have examined the EO
dimensions of autonomy and competitive aggressiveness.
In Lumpkin and Dess’s formulation of EO (1996), an entrepreneurial firm is defined as one that exhibits five entrepreneurial behaviors—autonomy, competitive aggressiveness,
innovativeness, proactiveness, and risk taking. These dimensions continue to pervade the entrepreneurship literature as
key dimensions of EO. Prior research has suggested that multiple dimensions of EO in combination, as opposed to any one
dimension individually, are essential elements for firm-level
entrepreneurship (Covin & Slevin, 1989). However, this
approach may be too narrow for explaining the entrepreneurial
behavior of family firms, given that each dimension has individual and unique characteristics that may vary relative to firm
performance and other outcomes (Lumpkin & Dess, 1996).
Research by Brockhaus (1980), for example, suggested that
under certain conditions, some entrepreneurs become risk
averse, not risk takers. Other research suggests that entrepreneurial firms may benefit more from imitation strategies than
from innovativeness (Nelson & Winter, 1982). In summary,
some researchers have provided empirical support for adopting a multidimensional perspective consistent with the suggestions of Lumpkin and Dess (e.g., Kreiser, Marino, & Weaver,
2002). Each study concluded that individual dimensions of EO
can vary independent of one another and should therefore be
treated as independent, or unique, variables in EO research.
Although an extensive number of studies have worked
to substantiate the difference between family and nonfamily businesses on a number of characteristics (e.g., Lee &
Rogoff, 1996; Westhead, Cowling, & Howorth, 2001),
there remains some degree of ambiguity regarding family
firms and their orientation toward entrepreneurship
(Habbershon & Pistrui, 2002). Drawing on Miller (1983)
and subsequent research, several scholars have used EO to
assess a fairly consistent set of related activities and processes (e.g., Wiklund & Shepherd, 2005). Thus, the EO
construct provides a framework for making meaningful
comparisons between family firms and nonfamily firms by
investigating differences in entrepreneurial strategies, as
well as differences in the manner that firms project elements of their organizational identities. In other words, the
presence of an EO in a firm is the result of organizational
processes, methods, and styles implemented by the firm in
the pursuit of acting entrepreneurially. If family firms
indeed have an EO, such beliefs should be a part of their
unique organizational identity; consequently, such beliefs
should be highlighted in their public documents as a reflection of those beliefs.
We begin our examination of EO by presenting two
general research questions regarding the projection of EO
in shareholder letters—a key organizational narrative for
publicly traded firms. CEOs of family firms and nonfamily
firms alike have multiple reasons to be carefully attentive
to the content in their letters to shareholders. First, the letter
is the most widely read section of the annual report
(Courtis, 1982), and the letter therefore provides a forum
for the CEO to voice thoughts on important issues affecting
the organization (Goodman, 1980). Bowman (1984) specifically noted,
Although some people maintain that the prose in annual
reports is written by public relations people, the truth is
that the typical chief executive officer spends considerable time outlining the contents of the report, sketching
out much of it, and proofreading and changing most of it
to his taste. (p. 63)
As such, these documents provide a vehicle to highlight
important elements of organizational identity, such as the
decision-making processes associated with their EOs. Thus,
we begin by offering the following general research question concerning the existence of EO in family firms. Stated
formally,
Research Question 1: Do family firms exhibit an EO in
their shareholder letters?
Following a multidimensional viewpoint, consistent with
the view of other family business researchers, we assume
that the link between family business and entrepreneurship
may vary as a function of each EO dimension (Lumpkin &
Dess, 1996; Martin & Lumpkin, 2003). To date, there is
some degree of ambiguity regarding which dimensions of
EO are benefited, suppressed, or unaffected by having family
ownership and control structures, particularly as family firms
age and grow. Furthermore, we recognize that the heterogeneity of family firms can often be large (Dyer, 2006). So
although EO consists of interrelated dimensions, they may be
configured in unique combinations that vary from one firm
to the next (Morris & Sexton, 1996). Thus, in the following
subsections, the EO dimensions of autonomy, competitive
aggressiveness, innovativeness, proactiveness, and risk taking are discussed individually to address how they are used
in prior entrepreneurship and family business research and
how family and nonfamily firms compare on each d­ imension.
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12 Family Business Review
This discussion leads to five hypotheses and so follows our
second research question, which is concerned with whether
differences exist between family and nonfamily firms along
the five dimensions of EO—specifically,
Research Question 2: Do family firms and nonfamily
firms differ along the EO dimensions as expressed in
their shareholder letters?
Autonomy
Autonomy refers to the actions of individuals and/or teams
that independently bring a new opportunity from the idea stage
to completion (Lumpkin & Dess, 1996). The unique nature of
family firms may create autonomy difficulties, given that family firms are perceived as being “breeding grounds for relationships fraught with conflict” (Dyer, 2006, p. 260) because of
differences in goals and values among family members. Part of
the conflict can be attributed to altruism, which involves treating people for who they are (i.e., family members) rather than
what they do. Altruism has been posited as making it difficult
for family members to effectively monitor other family members, thus lending to moral hazard and conflict (Morck &
Yeung, 2003). In an EO context, autonomy refers to both a
willingness and an ability to work independently when acting
on an opportunity or implementing an entrepreneurial vision
(Lumpkin & Dess, 1996). Decision making and action by
individuals or teams who are unhindered by strategic norms or
organizational traditions that may impede them are necessary
to effectively investigate entrepreneurial possibilities and
champion new venture concepts (Burgelman, 1983). Prior
research supports the view that within organizations, autonomy
encourages innovation, promotes the launching of entrepreneurial ventures, and increases the competitiveness and effectiveness of firms (e.g., Block, 2003).
Research based in agency theory suggests that family
firms will likely exhibit strong ownership controls over the
various activities of the firm (Anderson & Reeb, 2003;
Shanker & Astrachan, 1996). But whereas family ownership
can be advantageous in terms of minimizing opportunism
and although it may result in better performance (Anderson
& Reeb, 2003), family organizations are more likely to be
authoritarian, centralized, and lacking in delegation (Dyer &
Handler, 1994). This authoritarianism may begin with the
founder but perpetuate with future generations. Indeed, the
founder’s influence on the identity and strategic orientation
of the family firm has been shown to persist long after the
founder departs, across subsequent generations (Davis &
Harveston, 1999; Kelly et al., 2000). So, recognizing the
likelihood of high levels of monitoring in family firms, we
expect family firms to demonstrate levels of autonomy
lower than those of nonfamily firms—thus leading to the
first hypothesis:
Hypothesis 1: In large public businesses, family firms
will exhibit lower levels of autonomy, as a dimension
of EO, as compared to those of nonfamily firms.
Competitive Aggressiveness
Competitive aggressiveness has been recognized as a key
ingredient of business success ever since military science
books such as Sun Tzu’s The Art of War highlighted its contribution to the understanding of effective strategizing.
Competitive aggressiveness is often characterized by an
offensive combative posture or an aggressive response aimed
at overcoming threats in a competitive marketplace (D’Aveni,
1994). It includes the processes that companies engage in to
devise and enact strategies aimed at defending their market
position or combating industry trends that threaten survival
(Smith, Ferrier, & Grimm, 2001). This feat is accomplished
by, for example, cutting prices and sacrificing profitability to
achieve ambitious market share goals (Venkatraman, 1989)
and/or spending aggressively, relative to competitors, on
marketing, quality, or manufacturing capacity (MacMillan &
Day, 1987). A competitively aggressive posture is important
for firms that seek to enter new markets and/or excel in the
face of intense rivalry (Chen & Hambrick, 1995).
Family firms may possess characteristics that inhibit as well
as promote competitive aggressiveness. In regard to the former
possibility, family firms are often highly concerned with the
family’s name and with caring for the needs of their communities (Shanker & Astrachan, 1996). Because organizational leaders recognize that many companies have severely damaged their
reputations by being overly aggressive (e.g., Anthes, 1998),
family firms may be reluctant to adopt such a posture, which
could be damaging to a firm’s reputation (Harris, Martinez, &
Ward, 1994). Indeed, a family firm’s identity of projecting a
positive image may constrain family firms from taking offensive aggressive actions that might damage the positive perceptions held by stakeholders (e.g., Dyer & Whetten, 2006).
However, studies employing the Miles and Snow typology (1978) have reported that the defender mode, characterized by a strong defensive posture designed to protect
against competitive threats, is prevalent among family
firms (Daily & Dollinger, 1992). Family firms tend to place
much more emphasis on survival and family employment,
as opposed to maximizing profitability or increasing market share (Athanassiou, Crittenden, Kelly, & Marquez,
2002). So whereas family firms may not take an offensive
aggressive stance, family firm managers often identify
more strongly with the well-being of their firms than do
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Short et al. / Family Firms and Entrepreneurial Orientation in Publicly Traded Firms 13 those of nonfamily firms and so will employ more aggressive strategic actions to preserve the firm when threatened
(e.g., Gomez-Mejia, Haynes, Nunez-Nickel, Jacobson, &
Moyano-Fuentes, 2007).
Hamel (2007) espoused the benefits of speed in decision
making and cited several examples of companies in which
their increasing autonomy, encouraging innovation, and
establishing flatter organizational structures all led to more
strategic options and the ability to quickly make decisions
and respond to environmental changes and threats. Family
firms often possess more idiosyncratic governance structures, lower levels of horizontal differentiation and formal
controls, and more homogeneous top management teams
than do nonfamily firms (Daily & Dollinger, 1992; Sirmon
& Hitt, 2003). These characteristics enable family firms to
make strategic decisions quickly (e.g., Tagiuri & Davis,
1996) and respond aggressively to rivals. Family firms are
often more successful in industries that require fast strategic
decisions and responsive structures (Harris et al., 1994).
However, whereas firm characteristics that enable fast and
less comprehensive strategic decision-making processes
are likely advantageous in “high-velocity” environments
(Eisenhardt, 1989), they may also be linked to problems
such as groupthink (Janis, 1972) and consensus seeking
(Gero, 1985), which are linked to suboptimal decision outcomes in many contexts (Priem, Harrison, & Muir, 1995).
Given that competitive aggressiveness may be offensive
or defensive in nature and that family firms may have a
strong predilection to favor competitiveness from the
defensive mode, we suggest competing hypotheses. Such
hypotheses are beneficial in this case because the literature
provides conflicting evidence in regard to the potential
impact of family firm membership on competitive aggressiveness. In addition, the use of competing hypotheses
helps to avoid the “myopic tendencies” (Rousseau, 1995,
p. 158) that plague many research areas, and their use
increases the possibility of finding interpretable effects.
Hypothesis 2a: In large public businesses, family firms
will exhibit lower levels of competitive aggressiveness, as a dimension of EO, as compared to those of
nonfamily firms.
Hypothesis 2b: In large public businesses, family firms
will exhibit higher levels of competitive aggressiveness, as a dimension of EO, as compared to those of
nonfamily firms.
Innovativeness
Innovativeness has been regarded as an essential aspect of
entrepreneurship ever since Schumpeter (1942) argued that
the competitive entry of innovative new combinations into a
marketplace advanced society by disrupting existing market
conditions and stimulating new demand through a process of
creative destruction. Innovativeness represents a willingness
to depart from familiar capabilities or practices and venture
beyond the current state of the art. Whether innovations are
incremental or radical (Hage, 1980), innovativeness refers to
a firm’s efforts to introduce newness through experimentation and creativity aimed at developing new products, services, and processes. According to Lumpkin and Dess
(1996), innovativeness, as it pertains to an EO context, is “a
firm’s propensity to engage in and support new ideas, novelty, experimenta­tion, and creative processes that may result
in new products, services, or processes” (p. 142).
Prior research suggests that family firms tend to display
fewer innovative behaviors than do nonfamily firms. For
example, Morck and colleagues (2000) found in their study of
Canadian firms that those with more old-family wealth spent
less on R&D and filed fewer patents. Two possible explanations are suggested to account for these differences. First, it is
unlikely that entrepreneurial talent is inherited; therefore, succession of the business to an heir is no guarantee that innovativeness will persist in the family business, regardless of
whether family ownership and control remain the same or
even increase. Second, innovation serves to challenge the
status quo, thereby increasing risk to the family’s financial
stake in the business. Additionally, growth driven by innovation, particularly in larger organizations, would tend to dilute
family ownership and control and consequently may be discouraged. Thus, it seems that innovativeness is more likely to
be stifled by family dominance, which typically tends toward
stability and the maintenance of control over innovation. That
is, firms may resist innovation if it is perceived to threaten or
conflict with their family-based identities. Indeed, some
scholars contend that strong organizational identities can
obstruct potentially valuable avenues of innovation (e.g.,
Kogut & Zander, 1996). Likewise, dominant family leadership has been shown to reduce the level of ideas being
brought forth and discussed by the top management team
(Ensley & Pearson, 2005).
However, many family firms were founded on innovativeness. Companies such as Ford strongly identify with an
innovative founding persona and tend to perpetuate that
image and energy within the culture of the organization, even
long after the founder ceases to be involved in the operations
of the company (Davis & Harveston, 1999; Kelly et al.,
2000). Thus, in an effort to keep the founding entrepreneurial
spirit of the organization alive, innovative thoughts and
actions are often extensively expressed within organizational
narratives. Furthermore, in an environment filled with
increasing change and threats, there is growing pressure on
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14 Family Business Review
all types of firms to become more entrepreneurial and innovative (Hamel, 2007). Therefore, family firms might have
the decision-making capabilities (e.g., speed), power, and
flexibility to pursue innovative opportunities (Miller & Le
Breton-Miller, 2005). In other words, family firms, which are
often characterized by low levels of formal control systems
(Daily & Dollinger, 1992), few outside board members
(Cowling, 2003), and weak external monitoring (Carney,
2005), may have the ability to “make decisions, invest in
projects, and pursue new [ventures] in a more informal,
intuitive and less calculated way” (Naldi et al., 2007, p. 41).
Because of the conflicting arguments regarding innovation in
family firms, as compared to nonfamily firms, we suggest
the following competing hypotheses:
Hypothesis 3a: In large public businesses, family firms
will exhibit lower levels of innovativeness, as a dimension of EO, as compared to those of nonfamily firms.
Hypothesis 3b: In large public businesses, family firms
will exhibit higher levels of innovativeness, as a
dimension of EO, as compared to those of nonfamily
firms.
Proactiveness
The importance of proactiveness was emphasized by
Penrose (1959), who suggested that forward-thinking entrepreneurial managers are essential to the entrepreneurial
process because they have the vision and initiative to pursue opportunities and growth. Proactiveness refers to acting
in anticipation of marketplace changes or future needs and
problems. Venkatraman (1989) defined proactiveness as
“seeking new opportunities which may or may not be
related to the present line of operations, introduction of new
products and brands ahead of competition, strategically
eliminating operations which are in the mature or declining
stages of life cycle” (p. 949). Thus, proactiveness suggests
an opportunity-seeking perspective, characteristic of a marketplace leader who has the foresight to act in anticipation
of changing market demand.
Even though proactiveness has been associated with strong
performance in previous EO studies (Miller, 1983), this is not
always the case with family firms. For example, in a study of
strategic postures, Daily and Thompson (1994) found that
committing resources to entering new markets was not a
strong predictor of firm growth. Indeed, the most common
strategic approach employed by family firms is the defender
strategy, which highlights cost control, efficiency, and specialization, rather than opportunity-driven behaviors, such as new
product introductions (e.g., Daily & Dollinger, 1992; Ibrahim,
1992). Moreover, in a study of multiple generations of family
ownership, Martin and Lumpkin (2003) found that secondgeneration owners exhibited lower proactiveness than that of
either first- or third-generation owners, thus suggesting that
the presence of proactiveness is equivocal across generations
of family firms. All in all, we expect that family firms will
exhibit less proactiveness than that of nonfamily firms—
therefore,
Hypothesis 4: In large public businesses, family firms
will exhibit lower levels of proactiveness, as a dimension of EO, as compared to those of nonfamily
firms.
Risk Taking
Risk taking is a defining feature of many family firms
because, as with entrepreneurs, it is often associated with
those who work for themselves rather than work for someone else for wages (e.g., Cantillon, 1734). Risk taking is
also associated with the risk–return tradeoff that is common
in financial analysis. Baird and Thomas (1985) argued that
risk taking consists of venturing into the unknown, committing a relatively large portion of assets, and borrowing
heavily. Thus, risk taking generally refers to bold actions
taken in the face of uncertainty.
In general, much of the existing literature espouses the
notion that family firms are more conservative and risk
averse with respect to strategic decisions (Carney, 2005;
Schulze, Lubatkin, & Dino, 2003). For example, Naldi and
colleagues (2007) employed the risk-taking dimension of
EO in their study of Swedish SMEs and found that family
firms had a statistically significant lower level of risk taking
than that of nonfamily firms. Although family firms can
assume higher levels of risk, especially when ownership and
control of the firm are threatened (Gomez-Mejia et al.,
2007), it seems that, in general, family dominance will tend
to encourage conservatism rather than risk taking. Thus, we
propose that family firms will exhibit levels of risk taking
lower than those of nonfamily firms:
Hypothesis 5: In large public businesses, family firms will
exhibit lower levels of risk taking, as a dimension of EO,
as compared to those of nonfamily firms.
Method
Our sample was drawn from the S&P 500 for the
years 2001 through 2003. The S&P 500 has been a popular
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Short et al. / Family Firms and Entrepreneurial Orientation in Publicly Traded Firms 15 sampling frame for examining differences in firms’ strategic
decision-making processes (e.g., Carpenter & Sanders,
2002), and it has been used to assess characteristics of interest, such as differences in family firms (e.g., Anderson &
Reeb, 2003; Dyer & Whetten, 2006). The S&P 500 provides
an attractive sample for the present study because it includes
publicly traded firms that have a vested interest in articulating their values, beliefs, and strategic orientations to multiple shareholders through publicly available documents.
Thus, comparisons can be made on a large scale using similar narrative texts, such as the documents that we used to
content-analyze EO dimensions—namely, CEO letters to
shareholders. To provide a stable measure of a firm’s EO that
would not be skewed by language usage in a particular year,
3-year averages were used for all measures and study variables. Thus, our criterion for inclusion in the sample was that
the firm was consistently listed in the S&P 500 for the 3-year
period of 2001 to 2003; four other firms were excluded as
statistical outliers. Overall, this selection process resulted in
1,278 letters from 426 firms.
Measuring Family Firms
Definitions of what constitutes a family firm vary (Chrisman
et al., 2005). In this study, we followed Chua et al. (1999) in
defining a family firm as
a business governed and/or managed with the intention to
shape and pursue the vision of the business held by a
dominant coalition controlled by members of the same
family or a small number of families in a manner that is
potentially sustainable across generations of the family or
families. (p. 25)
Based on this definition, family firms are extremely
prevalent throughout the world, constituting small privately
held firms, large publicly traded firms, and everything in
between. In the United States, family firms represent at least
80% of all firms (Beehr, Drexler, & Faulkner, 1997), with
about 35% of the Fortune 500 being family firms (GomezMejia, Larraza, & Makri, 2003). In such firms, founding
families continue to retain significant shares of the company and/or hold positions as senior managers or members
of the board of directors (Dyer & Whetten, 2006).
Content Analysis of EO
Content analysis is a qualitative research method that
uses a set of procedures to classify or otherwise categorize
communications (Weber, 1990). Strategic management
scholars typically rely on archival data to extract criteria of
interest; as such, content analysis has aided in the analysis
of corporate strategies (Bowman, 1978), new product
development (Simon & Houghton, 2003), organizational
resources (Mishina, Pollock, & Porac, 2004), and elements
of cognition (e.g., Barr, Stimpert, & Huff, 1992).
Content analysis of narrative texts offers a number of
potential benefits. First, it can be used to identify individual
differences among communicators (Weber, 1990), and it has
been used to highlight key strategic decision-making processes (Short & Palmer, 2003). Compared with other techniques, such as interviews, the content analysis of narrative
text is recognized as being a less obtrusive technique
for capturing managerial cognitions (Phillips, 1994).
Additionally, content analysis tends to avoid recall biases
(Barr et al., 1992), and it is a highly utilized means of obtaining otherwise unavailable information (e.g., Kabanoff,
Waldersee, & Cohen, 1995). Finally, gathering data through
content analysis of commonly used narrative texts, such as
shareholder letters, has been encouraged because it allows
for greater reliability and replicability (Finkelstein &
Hambrick, 1996). D’Aveni and MacMillan (1990) asserted
that “content analysis of written communications is useful
for reconstructing perceptions and beliefs of their authors”
(p. 639). Even when authorship of the text is uncertain (e.g.,
a shareholder letter), there is widespread agreement that
executives are heavily involved in its preparation (Barr et al.,
1992). Therefore, the content analysis of text offers considerable potential in gaining key insights into the thinking of top
managers and in following the choices they make.
We followed a deductive process where theory guides
the coding scheme (Potter & Levine-Donnerstein, 1999).
Thus, we developed word lists independent of organizational
documents and then applied our validated lists to meaningful
firm-level narratives (e.g., Porac, Wade, & Pollock, 1999). We
relied on the Lumpkin and Dess definition of EO (1996) that
conceptualized it as a multidimensional construct consisting of
the following dimensions: autonomy, competitive aggressiveness, innovativeness, proactiveness, and risk taking. Based on
these five dimensions, we developed an exhaustive list of
words to capture each dimension. To generate a broad list of
potential words for each dimension, we relied on The Synonym
Finder (Rodale, 1978), a resource used in previous semiotic
analysis (e.g., Markel, 1998), to identify synonyms for each
element of EO. For example, the word list created for the term
innovativeness included variants of the word (e.g., innovation), as well as synonyms (e.g., invention). Following established content analysis texts (e.g., Neuendorf, 2002), our word
lists were mutually exclusive, and each word was associated
with a single EO dimension.
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16 Family Business Review
Table 1
Word Lists for Entrepreneurial Orientation Dimensions
Dimension
Content Analysis Words With Expert Validation
Autonomy
at-liberty, authority, authorization, autonomic, autonomous, autonomy, decontrol, deregulation, distinct, do-it-yourself,
emancipation, free, freedom, free-thinking, independence, independent, liberty, license, on-one’s-own, prerogative,
self-directed, self-directing, self-direction, self-rule, self-ruling, separate, sovereign, sovereignty, unaffiliated,
unattached, unconfined, unconnected, unfettered, unforced, ungoverned, unregulated
achievement, aggressive, ambitious, antagonist, antagonistic, aspirant, battle, battler, capitalize, challenge, challenger,
combat, combative, compete, competer, competing, competition, competitive, competitor, competitory, conflicting,
contend, contender, contentious, contest, contestant, cutthroat, defend, dog-eat-dog, enemy, engage, entrant, exploit,
fierce, fight, fighter, foe, intense, intensified, intensive, jockey-for-position, joust, jouster, lock-horns, opponent,
oppose, opposing, opposition, play-against, ready-to-fight, rival, spar, strive, striving, struggle, tussle, vying, wrestle
Competitive
aggressiveness
Innovativeness
ad-lib, adroit, adroitness, bright-idea, change, clever, cleverness, conceive, concoct, concoction, concoctive, conjure-up,
create, creation, creative, creativity, creator, discover, discoverer, discovery, dream, dream-up, envisage, envision, expert,
form, formulation, frame, framer, freethinker, genesis, genius, gifted, hit-upon, imagination, imaginative, imagine,
improvise, ingenious, ingenuity, initiative, initiator, innovate, innovation, inspiration, inspired, invent, invented,
invention, inventive, inventiveness, inventor, make-up, mastermind, master-stroke, metamorphose, metamorphosis,
neoteric, neoterism, neoterize, new, new-wrinkle, novation, novel, novelty, original, originality, originate, origination,
originative, originator, patent, radical, recast, recasting, resourceful, resourcefulness, restyle, restyling, revolutionize,
see-things, think-up, trademark, vision, visionary, visualize
Proactiveness
anticipate, envision, expect, exploration, exploratory, explore, forecast, foreglimpse, foreknow, foresee, foretell,
forward-looking, inquire, inquiry, investigate, investigation, look-into, opportunity-seeking, proactive, probe,
prospect, research, scrutinization, scrutiny, search, study, survey
adventuresome, adventurous, audacious, bet, bold, bold-spirited, brash, brave, chance, chancy, courageous, danger,
dangerous, dare, daredevil, daring, dauntless, dicey, enterprising, fearless, gamble, gutsy, headlong, incautious, intrepid,
plunge, precarious, rash, reckless, risk, risky, stake, temerity, uncertain, venture, venturesome, wager
Risk taking
Word lists were validated through a multistep process.
Two authors examined whether each word generated by
The Synonym Finder matched the theoretical definition of
EO, and where necessary, they made deletions. The raters
agreed that of the 407 words generated by The Synonym
Finder, 173 captured EO across the various dimensions and
149 failed. To demonstrate interrater reliability of the
nominal coding scheme (agree/disagree between the raters), we used Holsti’s method (1969):
PAO = 2A/nA + nB,
where PAO is the proportion of agreement observed, A is the
number of agreements between the two raters, and nA and nB
are the number of words coded by the two raters. Although
there is no generally accepted rule of thumb for interrater
reliability coefficients analogous to the .70 heuristic for coefficient alpha, coefficients between .75 and .80 are generally
indicative of high reliability (Ellis, 1994). Our observed reliabilities of .80 for autonomy, .85 for competitive aggressiveness, .75 for innovativeness, .88 for proactiveness, and .83
for risk taking demonstrate acceptable consistency between
our two raters. Table 1 displays the word lists generated by
this process. To test our hypotheses, we applied the word lists
developed in our coding scheme to the dominant text used
in the management literature—namely, the CEOs’ letters to
shareholders (Duriau, Reger, & Pfarrer, 2007).
To ensure reliability when coding shareholder letters, we
used computer-aided content analysis. Like many manual
coding schemes, computer-aided techniques generally assess
content via word usage (Morris, 1994). Relying on text to
study cognition assumes that insights about the authors’
mental models can be detected through the presence or
absence of certain concepts and the frequency with which
they are used in text (Carley, 1997). Computer-aided content
analysis is advantageous in that multiple texts can be analyzed in minutes with perfect reliability and without bias.
Specifically, we relied on the software package DICTION
5.0 (Hart, 2000). This program is attractive because it has
been used in previous research examining constructs germane to management research, such as charismatic leadership (Bligh, Kohles, & Meindl, 2004). Furthermore,
researchers have advocated DICTION as a content analysis
software with the potential to measure a number of theoretically based constructs of interest to strategic management
and entrepreneurship research (Short & Palmer, 2008).
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Short et al. / Family Firms and Entrepreneurial Orientation in Publicly Traded Firms 17 Table 2
Description of Industries Represented
Industrial Sector
Industry Description and Sample Sizes
Mining Metal mining (n = 2); oil and gas extraction (n = 11)
Construction
Building construction–general contractors and operative builders (n = 2); heavy construction other than building
construction contractors (n = 2)
Manufacturing Food and kindred products (n = 15); tobacco products (n = 2); apparel (n = 4); lumber and wood products except
furniture (n = 4); furniture and fixtures (n = 2); paper and allied products (n = 8); printing, publishing, and
allied industries (n = 8); chemicals and allied products (n = 35); petroleum refining and related industries
(n = 6); rubber and miscellaneous plastics products (n = 5); primary metal industries (n = 6); fabricated metal
products (n = 5); industrial and commercial machinery and computer equipment (n = 25); electronic equipment
except computer equipment (n = 31); transportation equipment (n = 14); measuring, analyzing, and controlling
instruments (n = 23); miscellaneous manufacturing industries (n = 2)
Transportation, Railroad transportation (n = 4); motor freight transportation and warehousing (n = 1); water transportation
communications, (n = 1); transportation by air (n = 2); communications (n = 12); electric, gas, and sanitary services (n = 35)
electric, gas, and sanitary services
Wholesale trade Durable goods (n = 2); nondurable goods (n = 5)
Retail trade Building materials, hardware, garden supply, and mobile home dealers (n = 2); general merchandise stores
(n = 11); food stores (n = 4); automotive dealers and gasoline service stations (n = 1); apparel and accessory
stores (n = 4); home furniture, furnishings, and equipment stores (n = 4); eating and drinking places (n = 5);
miscellaneous retail (n = 7)
Finance, insurance, Depository institutions (n = 23); nondepository credit institutions (n = 7); security and commodity brokers,
and real estate dealers, exchanges, and services (n = 8); insurance carriers (n = 25); insurance agents, brokers, and service
(n = 2); holding and other investment offices (n = 3)
Services Hotel, rooming houses, camps, and other lodging places (n = 3); personal services (n = 1); business services
(n = 28); automotive repair, services, and parking (n = 1); motion pictures (n = 1); amusement and recreation
services (n = 1); health services (n = 5); educational services (n = 1); engineering, accounting, research,
management, and related services (n = 2)
Unclassified Unclassified firms (n = 3)
Results
Table 2 provides information on the industries included in
our analysis and the number of firms represented in each
industry. Table 3 contains the descriptive statistics and correlations for all variables in the analyses, based on our content
analysis of EO dimensions in CEOs’ letters to shareholders.
To test our first research question concerning the existence of
EO in family firms and to ensure our ability to move forward
with further hypotheses testing, we first isolated and examined letters for the family firms in our sample to assess if
those firms utilized language consistent with EO. These
results are displayed in Table 4. These numbers refer to the
average word count from our deductively defined lists used to
represent each dimension. Thus, on average, 0.83 words indicating autonomy were found in CEO letters from family
firms. Comparisons were made via a one-sample t test compared to a test statistic of zero (which would indicate no evidence of language consistent with EO). Use of EO in
shareholder letters for family firms was detected for autonomy (mean number of words indicating autonomy = 0.83, t =
11.36, p < .01), competitive aggressiveness (mean number of
words indicating competitive aggressiveness = 2.52, t =
18.06, p < .01), innovativeness (mean number of words indicating innovativeness = 9.55, t = 20.72, p < .01), proactiveness (mean number of words indicating proactiveness = 1.99,
t = 13.04, p < .01), and risk taking (mean number of words
indicating risk taking = 0.70, t = 7.75, p < .01). Thus, there
was a clear indication that the EO dimensions existed within
our subset of family firms, and our research question concerning the existence of EO in family firms was fully supported,
thus providing a basis for further tests.
We performed a multivariate analysis of variance to test
our second global research question, which proposed that
differences in the espousal of EO in shareholder letters
would be evident when comparing family firms and nonfamily firms. The multivariate analysis of variance overcomes
several limitations inherent in conducting individual analyses of variance (ANOVA) with multiple dependent variables.
For instance, independent ANOVAs of our five dimensions
ignores the correlation between dependent variables and thus
does not account for any overall group difference that may be
present in an examination of all five dimensions as a composite group of variables. Also, examining an ANOVA for
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18 Family Business Review
Table 3
Means, Standard Deviations, and Correlations Among Study Variables
Dimension
M
1. Autonomy
2. Competitive aggressiveness
3. Innovativeness
4. Proactiveness
5. Risk taking
SD
1.04
2.70
9.44
2.33
0.93
1
2
3
1.14
2.09
.17**
5.57
.12*
.41**
2.41
.20**
.18**
.27**
**
**
1.24
.13 .18 .10
4
5
.18**
p < .05. **p < .01.
*
Table 4
Evidence of Language Representing Entrepreneurial
Orientation Dimensions in Shareholder Letters of
Family Firms in the S&P 500
Dimension
Autonomy
Competitive aggressiveness
Innovativeness
Proactiveness
Risk taking
M
SD
0.83
2.52
9.55
1.99
0.70
t
0.88
11.36**
1.69
18.06**
5.57
20.72**
1.84
13.04**
1.09 7.75**
Family Firms Nonfamily
(n = 146) Firms (n = 280) F
Autonomy
Competitive aggressiveness
Innovativeness
Proactiveness
Risk taking
0.83
2.52
9.55
1.99
0.70
1.12
2.87
9.46
2.50
1.07
6.47*
2.63
0.03
4.64*
8.26**
*
Table 6
Post Hoc Comparisons of Family Firms to Nonfamily
Firms on Entrepreneurial Orientation Dimensions
Using Matched-Pairs Design
Autonomy
Competitive aggressiveness
Innovativeness
Proactiveness
Risk taking
Dimension
p < .05. **p < .01.
Note: N = 146.
**
p < .01.
Dimension
Table 5
Comparisons of Family Firms to Nonfamily Firms on
Entrepreneurial Orientation Dimensions
Family Firms
(n = 72)
Nonfamily Firms
(n = 72)
F
0.95
2.72
9.90
2.04
0.67
1.05
2.89
9.09
2.87
0.71
0.32
0.24
0.82
4.02*
0.09
Note: Firms were matched on industry, firm size, and ownership structure.
*
p < .05.
each dimension individually likely increases the Type I error
rate (Hair, Anderson, & Tatham, 1987). Our multivariate
analysis of variance on our full sample of S&P 500 firms
revealed a significant difference between family and nonfamily firms (Wilk’s lambda = .963, F = 3.27, p < .01).
Individual hypotheses were tested via a series of separate
ANOVA tests. As displayed in Table 5, significant differences
in EO between family firms and nonfamily firms were
detected for the autonomy, proactiveness, and risk-taking
dimensions; specifically, family firms exhibited significantly
less use of words associated with these dimensions. Differences
between family firms and nonfamily firms were not detected
for competitive aggressiveness and innovativeness; thus,
Hypothesis 1, Hypothesis 4, and Hypothesis 5 were supported.
No support was found for our competing hypotheses. Overall,
we found support for three out of five hypotheses.
Post Hoc Analysis
As noted by Jorissen and colleagues (Jorissen, Laveren,
Martens, & Reheul, 2005), many detected differences between
family and nonfamily firms could be explained by other firm
or environmental characteristics. For example, industry
norms could affect reporting practices and create mimetic
behavior within a given industry (DiMaggio & Powell, 1983).
To attempt to isolate differences between family and nonfamily firms, we conducted a post hoc analysis exploring differences in EO dimensions between family and nonfamily firms,
controlling for three firm characteristics using a matchedpairs design. Such a design is a common method to examine
differences between groups to control for demographic differences that may be confounding results between samples
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Short et al. / Family Firms and Entrepreneurial Orientation in Publicly Traded Firms 19 (e.g., D’Aveni & MacMillan, 1990; Jorissen et al., 2005;
McConaughy, Matthews, & Fialko, 2001).
Using firms from our S&P 500 sample, we matched a family firm with a nonfamily firm if they matched on industry,
managerial ownership structure, and firm size. Such matching
criteria are similar to those of other studies that examine differences between family and nonfamily firms (e.g., McConaughy
et al., 2001), and such characteristics may influence the degree
to which EO is articulated by firm executives. For example,
Oswald and Jahera (1991) found that firms with higher levels
of insider ownership exhibited greater financial returns than did
firms with lower levels of insider ownership, thereby suggesting that executives with high levels of ownership may have
incentives to adopt an EO to increase firm wealth and, in turn,
their own wealth. Additionally, a firm’s industry may dictate
norms of entrepreneurial action that influence the firm’s EO
(Morris & Kuratko, 2002), and a firm’s size is likely related to
the resources that it has available to engage in entrepreneurial
activities, which in turn may influence its EO (e.g., Lyon et al.,
2000).
Our matching procedures yielded two matched subsamples
(family and nonfamily firms), each with 72 firms, thus resulting
in a total of 144 firms. Industry matching was based primarily
on two-digit Standard Industrial Classification codes, but we
also attempted to match on four-digit codes, where applicable.
Of our 72 matches, 42% matched at the four-digit level. Using
data from the Corporate Library database, we measured managerial ownership as the percentage of the firm owned by insiders (firm executives and directors). As in other studies
examining ownership structure, we created ownership groups
based on 5% of insider ownership (e.g., Donnelly & Lynch,
2002). Hence, we separated ownership groups into two groups:
those that had more than 5% insider ownership and those that
had less than 5% insider ownership. Finally, we used the log of
sales as our measure of firm size. Firms were matched on firm
size if their log-of-sales figures were within 0.50.
Mean differences between family and nonfamily firms
in our matched-pairs sample were examined using an
ANOVA, the results of which are found in Table 6. Similar
to our previous results based on our full sample, results from
the matched-pairs sample revealed a significant difference
between family firms and nonfamily firms on the dimension
of proactiveness, thus suggesting results similar to those
reported in Table 5. Whereas autonomy and risk taking were
not significantly different in our matched-pairs tests, the
directionality of the mean differences for these two dimensions were the same as in the full sample analysis. Indeed,
the directionalities of family- and nonfamily-firm mean
differences were similar in both the full and the matchedpairs sample for all five EO dimensions.
Discussion
Family firms represent an important engine of growth in
economies around the world (Astrachan, 2003). However,
our understanding of how family businesses add value and
create wealth is limited. Investigating the entrepreneurial
practices of family firms provides a means to understand
how they contribute to economic well-being through new
value creation. This study indicates that family businesses
exhibit entrepreneurial tendencies and that the EO framework is potentially useful for understanding how family
firms act entrepreneurially.
Specifically, our study makes three contributions to the literature on family firms. First, we find evidence that family
firms’ language usage in CEO letters is consistent with all the
EO elements articulated by Lumpkin and Dess (1996), providing the most comprehensive examination of EO in family firms
to date. Although family firms are often perceived as being
highly entrepreneurial, relatively little research has examined
how family structures affect entrepreneurial practices (Sharma
et al., 1997). The present research addresses this deficit by
examining how family firms project an EO in shareholder
letters, a key document used to communicate to a variety of
internal and external stakeholders. Our finding that family
firms (as well as nonfamily firms) exhibited elements of EO in
their shareholder letters suggests that CEOs of large firms (such
as our sample of S&P 500 firms) consistently articulate elements of EO to external audiences. Future research could build
on our initial findings by providing a more in-depth analysis to
assess linkages between EO and firm growth. Such an examination could shed light on the degree to which an EO aids a
firm in its evolution from a new venture (where many a family
firm is rooted) to a large publicly traded enterprise.
Second, in comparing S&P 500 family firms and nonfamily firms, we found that family firms tended to use relatively less language indicating autonomy, proactiveness,
and risk taking. Previous research has suggested that there
may be few differences in the strategic orientations of family and nonfamily firms (Daily & Thompson, 1994); thus,
family businesses should be able to strengthen their performances by ascribing to business practices that are known to
yield a competitive advantage. However, family firms may
have a distinct set of identities because of their patterns of
ownership, governance, and succession (Chua et al., 1999);
as such, these differences are expected to create unique
issues as family firms endeavor to deploy various business
strategies. Thus, our findings suggest that family firms
may differ in more elements than what some scholars have
suggested, while being homogeneous to other large corporations on other entrepreneurial characteristics. Future
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20 Family Business Review
research should build on our findings by examining direct
relationships between specific family firm characteristics,
such as the extent of family leadership (e.g., if the CEO is
a family member), and the specific elements of EO.
Third, our use of content analysis has important implications for future family firm and entrepreneurship research.
One criticism of EO research is that single informants are
often used to capture the firm-level construct of EO (Lyon
et al., 2000). By using public correspondence to stakeholders, as prepared by the top management team of the firm, we
overcome some of the inherent limitations associated with
employing a single informant. To date, content analysis has
been sparingly employed in entrepreneurship research.
Indeed, Chandler and Lyon (2001) found that only 1.6% of
416 entrepreneurship articles from 1989 to 1999 had used
content analysis methods. Whereas the frequency of content
analysis in entrepreneurship studies appears to be increasing
(e.g., Barringer, Jones, & Neubaum, 2005), the approach is
still far from prevalent. Within the field of family business,
content analysis has also been scant (e.g., Bird, Welsch,
Astrachan, & Pistrui, 2002). Yet, our findings were strikingly
consistent with those of other studies that revealed lower
associations with risk taking for family firms versus nonfamily firms (e.g., Naldi et al., 2007). And although proactiveness and innovativeness have been measured through content
analysis in strategic management research (e.g., Chen &
Hambrick, 1995), the use of annual report texts to capture
EO has been scarce in entrepreneurship research. Given that
annual report texts constitute the most common texts for
content analysis in the organizational literature (Duriau et al.,
2007), our study demonstrates the value of such narratives to
both entrepreneurship and family firm literatures.
Our study’s findings should be viewed in light of its limitations. When examining differences in the identities of large
publicly traded firms similar to those in our sample, researchers view, define, and operationalize family firms from a
variety of perspectives (e.g., Chrisman et al., 2005). Although
we designated family firm status in a manner that highlighted its potential influence in large publicly traded
firms—specifically, in a way consistent with Dyer and
Whetten’s examination of S&P 500 firms (2006)—other
scholars have designated family firm status based on a percentage of family ownership (e.g., Anderson & Reeb, 2003).
Others view family firms from not only ownership and management control perspectives but also from the perspective
of whether the firm considers itself a family firm (Naldi et
al., 2007; Westhead et al., 2001). Still others evaluate the
essence of the family firm or whether the firm actually
behaves as a family firm (e.g., Chua et al., 1999). Accordingly,
future examinations of EOs in family firms could benefit
by comparing firm-projected language across different
operationalizations of family firms, to capture the breadth of
such conceptualizations.
Our investigation of EO language within family firms
examined only one source of data: shareholder letters. Future
studies could reinforce our findings by applying a process of
triangulation or by analyzing a firm’s EO through a variety
of texts (e.g., Weber, 1990). For example, Bligh and colleagues (2004) examined speeches and media coverage in
their examination of language associated with charismatic
leadership. Thus, content analysis of language used in press
coverage of family firms and nonfamily firms could augment
our study to gauge if external audiences view differences in
EO dimensions between family and nonfamily firms.
Our content analytic approach followed a deductive
logic where theory guided the coding scheme. However,
inductive content analysis could be used in future research
efforts examining EO in shareholder letters or other narrative texts of interest to family firm research. Inductive
content analysis is often conducted by first examining patterns in data and then seeking to make sense of those patterns (e.g., Potter & Levine-Donnerstein, 1999). In contrast
to our approach, where keywords were generated before
text analysis, an inductive approach could proceed by
examining the extent to which keywords in each document
illustrated EO. An empirical examination comparing inductive and deductive approaches to content analysis might
provide additional value for researchers interested in examining differences in the use of language associated with EO
between family firms and nonfamily firms.
The suggestion to content-analyze other documents might
also be used to overcome another limitation of the study—
namely, our exclusive focus on large publicly traded companies. Many family firms are small and/or privately held, and
the entrepreneurial practices that such firms employ may
vary from those of large publicly traded firms. Examination
of EO using survey methods might be needed to capture the
dynamics of small or private family firms and perhaps triangulate the findings of the current study for use with different
types of family businesses. Nevertheless, we believe that our
findings regarding which EO dimensions are most likely to
be highlighted by family firms are consistent with prior
research and so provide a useful leaping-off point for future
research into the EO of family firms.
One limitation of our study is that our measure of EO is
not tied to firm behavior. Indeed, the management and
accounting literatures have found that some executives use
annual reports as a means of impression management to project a favorable image to stakeholders that is not consistent
with actual firm performance (e.g., Clatworth & Jones, 2006)
or even other internal organizational documents (Fiol, 1995).
Research in the accounting literature supports notions of
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Short et al. / Family Firms and Entrepreneurial Orientation in Publicly Traded Firms 21 impression management in annual reports, demonstrating that
firms with more concentrated ownership structures tend to be
less informative in reporting financial earnings than firms
with more diffused ownership structures (Dempsey, Hunt, &
Schroeder, 1993; Donnelly & Lynch, 2002). Given that family firms tend to have more concentrated ownership structures, they may employ impression management techniques
in their annual reports that misreport firm behavior. For
instance, family firms may use annual report rhetoric that
minimizes behaviors consistent with an EO (e.g., using
aggressive language related to dimensions of competitiveness
and proactiveness when their behavior would suggest otherwise) to achieve a favorable perception and thus sustain their
reputation among stakeholders (e.g., Dyer & Whetten,
2006).
We presented competing hypotheses regarding the role of
family firms for the espousal of EO dimensions in CEO letters for competitive aggressiveness and innovativeness. The
framing of our hypotheses in this manner was compelling
because extant literature provided differing arguments for
why each group might be higher in terms of these two
dimensions. Unfortunately, our findings did not provide
definitive evidence, because there were no significant differences found between family firms and nonfamily firms in
regard to either competitive aggressiveness or innovativeness. Future research could build on our initial examinations
by conducting more fine-grain tests within a single industry
context. An alternative strategy would be to examine firm
behaviors in regard to those that exhibit competitive aggressiveness or innovativeness. Finally, an examination of the
configurations of entrepreneurial firms that include a number of firm characteristics (such as family firm status) could
provide a valuable contribution to EO and family firm literatures (cf. Short, Payne, & Ketchen, 2008).
Contentions that annual reports are an impression management device are not definitive, however, because other
streams of research have revealed a positive relationship
between organizational actions and outcomes and rhetoric
projected in the annual report (Bowman, 1984; Michalisin,
2001). Bowman (1984), for example, discovered a relationship between annual report language asserting corporate
social responsibility and actual firm behavior, and Michalisin
(2001) found that assertions of innovativeness in the president’s letter to shareholders were significantly related with
the firm’s reputation for innovation and the number of trademarks applied for by the firm. Given that innovativeness is a
key element of EO, such findings support the usage of annual
report rhetoric as being potentially representative of actual
firm behavior. Future research could build on the present
findings by examining the linkages between espoused EO
(such as those captured in letters to shareholders) and actual
EO (as measured through firm behaviors).
In their book Managing for the Long Run, Miller and Le
Breton-Miller (2005) studied 41 high-performing large
family-controlled businesses and concluded “that the only
way to sustain good performance is to act in the long-run
interests of the company and all of its stakeholders”
(p. 232). A number of characteristics often associated with
family businesses—such as succession and transgenerational goals (e.g., Miller & Le Breton-Miller, 2005), longer
CEO tenures (e.g., Kellermanns et al., 2008; Zahra, 2005;
Zahra et al., 2004), family ownership (e.g., Anderson &
Reeb, 2003; James, 1999), and family firm managers’ proclivity to act as stewards rather than as agents (e.g.,
Eddleston & Kellermanns, 2007)—have all been associated
with applying longer time horizons. According to the family
business literature, although long-term orientation varies
among family firms, family firms are generally more longterm oriented than nonfamily firms (e.g., Anderson & Reeb,
2003; Gomez-Mejia et al., 2007; Kellermanns et al., 2008).
A long-term orientation has been identified as a crucial
source of uniqueness and competitive advantage for family
firms (e.g., Gomez-Mejia et al., 2007; James, 1999; Miller
& Le Breton-Miller, 2005).
Key characteristics of family businesses that may promote a long-term orientation may also tend to make them
conservative (Sharma et al., 1997) and adverse to change
(Hall, Melin, & Nordqvist, 2001). It may be that the unique
identities and characteristics of some family firms, while
tending to suppress certain dimensions of EO, may enhance
other dimensions that relate to long-term orientation. Thus,
future research could benefit from examining whether
long-term orientation and an EO are fundamentally opposed
to one another or if they are generally compatible. Our finding that family firms displayed significant levels for all EO
dimensions provides initial support for the notion that the
long-term orientation exhibited by many family firms is
complementary to a firm’s EO.
In summary, EO is a cornerstone of entrepreneurship
research; however, research in family firms has been slow to
incorporate this important construct in a thorough manner,
thus limiting knowledge development. For both scholars and
practitioners, our study underscores the multidimensional
nature of entrepreneurial behavior and demonstrates its
importance for understanding how entrepreneurship functions within a family business.
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Jeremy C. Short is the Jerry S. Rawls Professor of Management at Texas
Tech University. His research focuses on multilevel determinants of firm
performance, strategic decision processes, entrepreneurship, and research
methods. He is an associate editor for the Journal of Management, and
he serves on the review board for Organizational Research Methods. His
research has appeared in a number of journals, including the Strategic
Entrepreneurship Journal, Strategic Management Journal, Organization
Science, Organizational Research Methods, Organizational Behavior
and Human Decision Processes, Journal of Management, Personnel
Psychology, Academy of Management Learning and Education, Journal
of Management Education, Journal of Vocational Behavior, and Health
Care Management Review, among others.
G. Tyge Payne is an assistant professor of strategic management in the
Rawls College of Business at Texas Tech University. His primary research
interests include organization–environment fit/misfit, firm-level entrepreneurship, and interorganizational relationships. He has authored and coauthored numerous publications, appearing in such outlets as the Academy of
Management Review, Entrepreneurship Theory and Practice, Journal of
Business Ethics, Journal of Management, and Organization Science. He
also currently serves on the editorial review board of the Journal of Small
Business Management and Journal of Management.
Keith H. Brigham is an assistant professor of entrepreneurship in the
Rawls College of Business at Texas Tech University. His primary research
interests include entrepreneurship, entrepreneurial cognition and decision making, family business, and technology transfer. His research has
been published in a number of journals, such as the Journal of Business
Venturing, Entrepreneurship Theory and Practice, Family Business
Review, and The Leadership Quarterly. He currently serves on the editorial review board of Family Business Review.
G. T. Lumpkin is the Kent Hance Regents Chair and professor of entrepreneurship at Texas Tech University. His primary research interests include
entrepreneurial orientation, family orientation, opportunity recognition,
new venture strategies, and strategy-making processes. He is currently a
member of several editorial boards, including those of Family Business
Review, Journal of Business Venturing, and Entrepreneurship Theory
and Practice. He is a widely recognized scholar whose research has been
published in Family Business Review, Academy of Management Review,
Academy of Management Journal, Entrepreneurship Theory and Practice,
Journal of Business Venturing, Journal of Management, and Strategic
Management Journal. He recently coauthored the fourth edition of a
textbook titled Strategic Management: Creating Competitive Advantages
(with Greg Dess and Alan Eisner).
J. Christian Broberg is an assistant professor of entrepreneurship at
Wichita State University. His research interests focus on investigating
multilevel models of entrepreneurship, including country-level factors
that influence individual entrepreneurial activity, as well as strategic
leadership behaviors and rhetoric that spur firm performance. He is also
interested in research methods that facilitate theoretical and empirical
development in these areas, such as content analysis and hierarchical
linear modeling.
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