Our paper studied how family businesses can use strategic alliances as an “offensive” complement to the “defensive” strategies they might usually prefer. Family-run firms might act more conservatively to protect their reputations and social standing, but partnering through alliances can be an effective way to pursue profits while still protecting the family name. Family firms may even outperform when managing alliance relationships because they tend to be reputable and take a long-term perspective. Our study highlights that even though we might assume family-run companies act more “defensively”, they still need to generate profits to grow and remain competitive. Alliances offer an alternative strategy for family firms to protect their social resources and increase firm performance.

What we found

We looked at data from S&P 500 firms from 1996 to 2015, comparing how family and nonfamily run companies form alliances, and how those alliances performed. We found that in general, family firms form more alliances and reap greater benefits from these alliances compared to nonfamily firms. Additionally, family firms forge fewer alliances within their own industry and across national borders, preferring to partner with firms in different industries within the same country. Family controlled firms still experienced superior performance when they did choose to engage in these alliances.

Why it matters

These findings matter for managers and executives. Family managers should realize that alliances may be a great complementary strategy to leverage their social capital to pursue financial gains. Nonfamily firms may also consider that family firms can make superior partners when planning their own alliances. These managers should particularly note that family firms tend to prefer partnering within their home country and across different industries.

Take-aways

Readers should take away that family firms tend to operate distinctly because they are concerned about social resources like reputation and trustworthiness, in addition to financial resources. These concerns are not always purely “defensive”, and can motivate alternative strategies to seek financial gains. We suggest that family firms are particularly well-suited to forming and managing strategic relationships to increase company performance while preserving their reputation.

For more information on the specific social resources family firms are concerned with, and details on how we measured alliance performance, you can read our full article “Is the best defense a good offense? Family firms, SEW resources, and strategic alliances”, published in the Journal of Business Venturing Insights.

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Author bio

Christopher R. Penney is an Associate Professor of Management at the University of North Texas. His research examines alliance portfolios, family business, and firm diversification.

Marcus Wolfe is the G. Brint Ryan Professor of Entrepreneurship at the University of North Texas. His research examines entrepreneurial cognition and decision making, clinical and biological factors influencing entrepreneurs’ health and well-being, as well as emotions and entrepreneurial failure.

Stephen E. Lanivich is an Associate Professor of Management and Entrepreneurship at the University of Memphis. His research focuses on the entrepreneurial mindset and cognition, perceptions of resources, and opportunity recognition.

Kyle Stockdall is a doctoral candidate at the University of Memphis. His research explores entrepreneurial cognition and well-being, and family firms.