TMT Characteristics That Position Family Firms For Success: Examining The Effects Of Human Capital, Non-familiness, Entrepreneurial Orientation, And Transactive Memory Systems

Abstract

Entrepreneurship is critical to family firm growth, profitability, and survival (Zahra 2005); however, entrepreneurship remains understudied in the family business context (Zahra and Sharma, 2004). Limited extant research suggests family firms act less entrepreneurially than their non-family counterparts but performance enhancements result from entrepreneurial actions (Litz and Klesen, 2001). Consequently, I explored the effects of human capital and non-familiness in the top management team on the group's transactive memory system (Wegner, 1987) and the organization's entrepreneurial orientation. In my sample, human capital in the top management team was positively related to the team's transactive memory system. Similarly, human capital was positively related to the firm's entrepreneurial orientation. Contrary to my expectations, non-family managers' participation in the top management team, referred to henceforth as TMT non-familiness, was not significantly related to the firm's entrepreneurial orientation. As expected, TMT non-familiness detracted from the group's transactive memory system. Additionally, family firms have been described by stagnancy (Daily & Dollinger, 1992), limited growth prospects (Gumpert& Boyd, 1984), and nepotism (Vinton, 1998). However, I argued that the organization's transactive memory system and entrepreneurial orientation serve as mechanisms to leverage the talents of employees and bolster organizational performance. I found that a firm's entrepreneurial orientation is an important mediator of the relationship between human capital and performance. I also explored the relationship between entrepreneurial orientation and business sustainability, which has largely been ignored (Hall, Daneke, and Lenox, 2010). I found mixed results for the aforementioned relationships. Transactive memory systems are not significantly associated with organizational performance. However, entrepreneurial orientation relates positively to financial performance, social performance, and environmental performance.