Fast or slow? Decision-making styles in small family and nonfamily firms

Abstract

Purpose

The purpose of this paper is to explore differences in the decision-making styles between family and nonfamily firms, while assessing how family participation relates to the use of decision-making styles within family firms.

Design/methodology/approach

The empirical evidence is provided by a sample of 155 firms, located in the Azores, Portugal, 82 family controlled and 73 nonfamily controlled firms. All firms included in the sample are small-sized privately owned enterprises. Business owners and managers responded to a decision-making styles questionnaire, followed, in the case of family firms, by the report of the number of family members actively involved in the business.

Findings

Results show that there are no differences in the use of rational decision making between family and nonfamily firms. However, nonfamily firms show higher levels of experiential decision making than family firms. Results also show that family participation plays a key role in guiding the decisional process, by promoting the use experiential decisions and inhibiting the adoption of a rational decision-making styles in family firms.

Research limitations/implications

From a theoretical perspective, this study opens the door to new research on an under investigated topic in the family business literature. It contributes with initial notions that may help profile the decisional style within small family firms, while revealing how family participation affects it. Thus, creating a fertile ground of discussion that can be an impulse for more research in this area.

Practical implications

From an applied perspective, assessing the influence of family participation in the adoption of a decisional style is potentially valuable for practitioners as well as for owners and managers. Providing them with clues that may help them better understand the basis of their decisions which can benefit their relations with other family members, as with customers, partners and suppliers that play a key role in the firm’s growth, profitability and adaptability.

Social implications

From a social point of view, showing that family firms tend to be rational in their decisions may help create a more reputable and credible image surrounding these firms that are sometimes perceived as less professional than nonfamily firms. Thus, a more solid reputability can help improve their relationship with important partner institutions (e.g. financial, governmental), becoming more attractive to private and public investment, which can translate into win-win situations.

Originality/value

This study responds to a gap in the literature, by exploring the use of experiential vs rational decision-making styles in small family and nonfamily firms. This study also contributes to the understanding of the decision making within family firms, by assessing the role of family participation in the adoption of a decisional style.

Citation

Pimentel, D., Scholten, M. and Couto, J.P. (2018), "Fast or slow? Decision-making styles in small family and nonfamily firms", Journal of Family Business Management, Vol. 8 No. 2, pp. 113-125. https://doi.org/10.1108/JFBM-02-2017-0007