Author:

Keywords:

relational governance, contractual governance, behavioural theory

Abstract:

The family constitution is often mentioned as a specific governance mechanism to govern the family needs in relation to the family firm. However, little empirical research is available on the contents of the family constitution, how it is used, and on the characteristics of family firms that use a family constitution. In addition, it is neither clear how the use of family constitutions relates to other contractual governance mechanisms such as a supervisory boards nor how it relates to relational governance. Relational governance involves the relationships between family members characterized by relationship dynamics such as social interaction, trust and shared vision. Since relational and contractual governance mechanisms support decision making processes, one would expect that the existence of these mechanisms are related to the goals of the family firm. However, existing research has not studied this relationship yet. This study aims to identify why and how firms use the family constitution and how the use of the family constitution relates to the goals of the family firm. Relevant variables in this respect are the level of integration between the family and the firm and also the family complexity (e.g. the roles that family members have in the firm, ownership distribution and the number of owners, and the number of generations involved). The behavioral theory of the firm is used to understand the governance of the family firm and the use of the family constitution in specific. This study has employed the survey technique and a self-administered structured questionnaire was distributed to 2000 potential respondents throughout the Netherlands.