Journal of Business Venturing 22 (2007) 545 – 565

Destructive and productive family relationships:

A stewardship theory perspective ☆
Kimberly A. Eddleston a,⁎, Franz W. Kellermanns b,1
a
College of Business Administration, Northeastern University, 319 Hayden Hall, Boston, MA 02115-5000, USA
b
College of Business and Industry, Mississippi State University, Box 9581, Mississippi State, MS 39762, USA
Received 1 June 2004; received in revised form 1 May 2006; accepted 1 June 2006

Abstract

This study utilizes stewardship theory to explain why some family firms flourish while others are
plagued by conflict. Our findings suggest that relationship conflict is negatively related and
participative strategy process is positively related to family firm performance. In addition, we examine
how altruism and control concentration affect relationship conflict and a participative strategy process.
Altruism was found to significantly reduce relationship conflict and enhance a participative strategy
process. However, control concentration was not significantly related to relationship conflict or a
participative strategy process. The implications of our findings are discussed.
© 2006 Elsevier Inc. All rights reserved.

Keywords: Family firms; Stewardship theory; Conflict

1. Executive summary

This paper links family relationships and interactions to family firm performance. While the
family can be a source of strength to a family business, it can also cause its demise. Relationship
conflict is argued to diminish family firm performance because a family firm laden with

☆
An earlier version of the paper was nominated for the Strategic Management Society Best Conference Paper
Award at the 2004 Strategic Management Society Meeting, San Juan, Puerto Rico.
⁎ Corresponding author. Tel.: +1 617 373 4014; fax: +1 617 373 8628.
E-mail addresses: K.eddleston@neu.edu (K.A. Eddleston), Fkellermanns@cobilan.msstate.edu
(F.W. Kellermanns).
1
Tel.: +1 662 325 2613; fax: +1 662 325 8651.

0883-9026/$ - see front matter © 2006 Elsevier Inc. All rights reserved.
doi:10.1016/j.jbusvent.2006.06.004
546 K.A. Eddleston, F.W. Kellermanns / Journal of Business Venturing 22 (2007) 545–565

negative affect may devote insufficient attention to business needs thereby harming the family
firm's performance. However, we also argue that positive family interactions can enhance a
family firm. Based on stewardship theory, we hypothesize that a participative strategy process
may contribute to family firm performance and that altruistic family relationships may diminish
relationship conflict while facilitating a participative strategy process. In line with stewardship
theory, we also argue that low concentrations of control will be negatively related to relationship
conflict and positively related to a participative strategy process. As such, this is one of the first
studies to empirically apply stewardship theory to the realm of family firms and to examine
how family involvement contributes to family firm performance.
Our study results indicate support for a mediated model, whereby altruism was found to
be negatively related to relationship conflict and positively related to a participative strategy
process. Relationship conflict was found to be negatively related to family firm perfor-
mance while a participative strategy process was found to have a positive effect on per-
formance. Control concentration was not significantly related to relationship conflict or a
participative strategy process in family firms.
Based on these results, family firm members are encouraged to focus more on family
relationships and the level of participation in the strategy-making process. How family
members interact can cause the downfall of family firms, as demonstrated by the negative
association between relationship conflict and performance. However, interpersonal
relationships among family members can also be a source of advantage, as indicated by
the positive effects of altruism and a participative strategy process. Thus, our findings show
the positive impact that family involvement can have on a business when properly managed
and cultivated.
Suggestions are also made for future research, and the study's limitations are noted.
Future research should continue to focus on how a family can be a source of strength and
competitive advantage for some family firms, while it is a source of weakness and
hindrance for others. Researchers are encouraged to expand on our findings by studying
how family firms can improve their participative strategy process while at the same time,
keeping relationship conflict from forming, particularly in the succession process. Further,
the inclusion of other variables that assess family relationships may provide fruitful avenues
for future studies that are aimed at helping family firms succeed through the generations by
utilizing the unique resources that effective family relationships can provide.

2. Introduction

Sam Steinberg grew a small grocery store founded by his mother into a multimillion-
dollar supermarket and real estate empire. However, his dictatorial leadership style
led to animosity and resentment among family members. The conflict among the
family members became so great that the Steinberg's eventually sold their enterprise.
(Gersick et al., 1997).

Similarly, Peter Pan Bus Lines suffered when third generation family members
began undercutting each other. The conflict among family members was so intense
that lower-level employees rated “company squabbles” as the greatest problem in a
 K.A. Eddleston, F.W. Kellermanns / Journal of Business Venturing 22 (2007) 545–565 547

company-wide survey. To combat the conflict, the company was split so that the
siblings could operate independently of each other. (Samuelson, 1996)

Stories such as these are all too common in the family business literature. Family firms are
“fertile fields for conflict” (Harvey and Evans, 1994, p. 331). They are prone to psy-
chodynamic effects like sibling rivalry, children's desire to differentiate themselves from their
parents, marital discord, identity conflict and ownership dispersion among family members
(Dyer, 1994; Schulze et al., 2003a, 2001) that non-family businesses do not suffer from. As
such, the existence of the family makes conflict a prominent characteristic of family businesses
(Sorenson, 1999). Accordingly, researchers agree that managing conflict is important to the
success of the family firm (Dyer, 1986; Sorenson, 1999; Ward, 1987). Indeed, there is much
anecdotal evidence that suggests that relationship conflict, defined as conflict involving
negative emotions like anger, resentment and worry (Johnson and Ford, 2000), is associated
with poor performance in family firms (Beckhard and Dyer, 1983; Danes et al., 1999; Dyer,
1986; Gersick et al., 1997; Levinson, 1971).
However, not all firms are plagued with this negative form of conflict and many family
members work harmoniously with each other. Some family firms are characterized as
involving members who significantly contribute to the business, collaborate on strategic
issues and have cohesive and positive relationships (Sorenson, 1999). Family firms that are
able to successfully manage conflict are more likely to see their firms get passed through the
generations (Ibrahim et al., 2001). For example, when relationships among family members
are trust-based and affable, transitions through the generations are more successful (Morris
et al., 1997). Our study utilizes stewardship theory (Davis et al., 1997) to investigate how
relationship conflict inhibits and a participative strategy process facilitates family firm
performance. Specifically, because stewardship theory suggests that mutually trusting
relationships, involvement-oriented environments and empowering organizational struc-
tures will increase pro-organizational behaviors and firm performance (Corbetta and
Salvato, 2004; Davis et al., 1997), altruism, participative strategy process and control
concentration are included as important family-based resources that may help minimize
relationship conflict and contribute to family firm success.
Our paper contributes to the family firm literature in at least four ways. First, although others
have identified stewardship theory as being particularly applicable to the realm of family firms
(e.g., Corbetta and Salvato, 2004; Greenwood, 2003), this is one of the first studies to empirically
test hypotheses derived from this theoretical approach. Second, while previous research has
tended to view altruism from an economic and agency perspective (i.e., Schulze et al., 2002,
2003a,b), in line with the stewardship framework of the family firm (Corbetta and Salvato,
2004), we view altruism as a family-based resource that encourages family members' to place
the firm's objectives ahead of their own (Zahra, 2003). Furthermore, we believe that this is the
first study to directly measure and examine the effects of altruism in family firms. Third, we are
the first to empirically test the widely held assumption that relationship conflict in family firms is
detrimental to firm performance (Gersick, 1988; Levinson, 1971). Given the call for research on
the complex interactions among family members in family firms (i.e. Kellermanns and
Eddleston, 2004; Morris et al., 1997), it is important to understand how family relationships
impact family firm performance. Lastly, because it has been argued that some consensus among
key family members must exist in order for empirical results to be interpreted as representing
548 K.A. Eddleston, F.W. Kellermanns / Journal of Business Venturing 22 (2007) 545–565

family firms (Chrisman, 1999; Sharma et al., 2003), we sought data from multiple family firm
stakeholders.
We begin by discussing stewardship theory and how productive family interactions
contribute to family firm success. We then discuss the destructive effect of relationship conflict
on family firm performance. As such, we focus on how the unique family interactions that occur
in family firms can act as a resource or a constraint to family firm performance. Therefore, while
much of the literature focuses on how to improve family relationships rather than business
performance (Sharma et al., 1997), our paper uniquely links family relationships to a family
firm's performance. Fig. 1 outlines our proposed model and hypotheses.

3. A stewardship theory perspective

Although most research focuses on how family relationships can negatively affect a
family firm (Kellermanns and Eddleston, 2004), recently, it has been suggested that
productive family relationships can be a source of competitive advantage for family firms
(Cabrera-Suarez et al., 2001; Habbershon et al., 2003; Sirmon and Hitt, 2003). In particular,
according to stewardship theory of the family firm (Corbetta and Salvato, 2004), altruism
may explain why in some family firms members are able to successfully work together and
run a business, while in others, family members are laden with animosity that deteriorates
performance (Kellermanns and Eddleston, 2004). In addition, a participative strategy
process is expected to increase family firm performance and also decrease relationship
conflict given that stewardship theory predicts that involvement-oriented environments tend
to encourage pro-organizational behaviors that are aimed at maximizing firm performance
(Corbetta and Salvato, 2004). Lastly, we include control concentration in our framework
given that management's level of control is a key factor in the stewardship perspective
(Davis et al., 1997). Specifically, we expect a low control concentration to facilitate
productive family processes since the sharing of power is argued to improve motivation and
lead to greater family member empowerment and involvement (Corbetta and Salvato, 2004).
Therefore, drawing from stewardship theory, we examine how altruism, participative
strategy process, relationship conflict and control concentration affect family relationships
and family firm performance.

Fig. 1. Conceptual model.

 K.A. Eddleston, F.W. Kellermanns / Journal of Business Venturing 22 (2007) 545–565 549

3.1. Stewardship theory and the family firm

Recently, there has been a call for research that considers the positive aspects and
advantages the family can contribute to family firms (Corbetta and Salvato, 2004; Nordqvist,
2005). Because the family shapes a family firm's culture, family members can be encouraged
to behave as either “the self-serving, economically rational man postulated by agency theory,
or the self-actualizing, collective serving man suggested by stewardship theory” (Corbetta and
Salvato, 2004, p. 357). Corbetta and Salvato explain that while “agency theory is a particularly
suitable framework to explain…the organizational arrangements aimed at minimizing costs
related to dysfunctional behaviors. What is missing is a conceptual lens to explain behaviors
aimed at maximizing potential performance within organizations in which a pro-
organizational attitude coexists with self-serving motives” (2004, p. 356). Stewardship theory
appears to be a suitable perspective in viewing the family as a resource because it depicts
organizational members as collectivists, pro-organizational and trustworthy (Davis et al.,
1997). When family members are stewards of their organizations, they are motivated to fulfill
organizational goals and to maximize firm performance (Davis et al., 1997).
Family firms are often depicted as relying on mutual trust, intra-familial concern, devotion to
others and clan-based collegiality (Corbetta and Salvato, 2004; Greenwood, 2003). Stewardship
theory proposes that stewards maximize their own utility by acting in their organization's best
interest to attain the objectives of the organization, such as sales growth and profitability (Davis
et al., 1997). Indeed, a stewardship philosophy has been argued to be common among successful
family businesses (Corbetta and Salvato, 2004). It has been proposed that the heightened
involvement encouraged by the stewardship philosophy creates a sense of psychological
ownership that motivates the family to behave in the best interest of the firm (Corbetta and
Salvato, 2004; Zahra, 2003). For example, psychological ownership is related to feelings of
responsibility and a sense of burden sharing for the organization (Pierce et al., 2001).

3.2. Altruism in family firms

A key component of the stewardship perspective of the family firm is altruism (Zahra,
2003). Family firms that are characterized as altruistic may have an advantage because
members' interests are more aligned with the success of the family firm. In such altruistic
family firms, members are highly dedicated to the business and members believe that they
have a common family responsibility to see the business prosper (Cabrera-Suarez et al.,
2001). For example, family firm members have been found to be more committed to their
organizations and to experience greater expectations for performance than members in non-
family businesses (Beehr et al., 1997). Accordingly, altruistic family firm members can be
seen as stewards of the firm. Although others have focused on how altruism affects the
parent–child relationship and compels parents to be overly generous toward their children
thereby encouraging children to free ride and remain dependent upon their parents (Schulze
et al., 2002, 2003a), instead we focus on the reciprocal aspect of altruism that can embody
the family unit. In line with stewardship theory (Davis et al., 1997), altruistic families are
characterized as possessing collectivistic orientations that encourage family members to
exercise self-restraint and to consider the effect of their actions on the firm (Corbetta and
Salvato, 2004; Kellermanns and Eddleston, 2004). Therefore, altruism appears to promote
550 K.A. Eddleston, F.W. Kellermanns / Journal of Business Venturing 22 (2007) 545–565

the family bond by fostering loyalty, interdependence and commitment to the family's long-
term prosperity (Ward, 1987).
However, the degree of altruism varies greatly among families; that is, families differ in
their level of cohesion and strength of bonding among family members (Lansberg and
Astrachan, 1994). In family firms with much altruism, communication and cooperation can be
expected to be high (Daily and Dollinger, 1992; Simon, 1993). In line with the stewardship
perspective of family firms, altruism is expected to reinforce family members' interdepen-
dence and to encourage them to place the firm's objectives ahead of their own (Zahra, 2003).
This sense of commitment to the family as well as to the firm may help family members to get
along and cooperate. Indeed, “a high degree of altruism influences individual conduct in
family firms and helps strengthen family bonds” (Corbetta and Salvato, 2004, p. 356). As
such, altruism may reduce relationship conflict in family firms (Kellermanns and Eddleston,
2004). Relationship conflict is a dysfunctional form of conflict that includes affective
components like annoyance, frustration, personal animosity, incompatibility and irritation of
others (Jehn and Mannix, 2001; Simons and Peterson, 2000). It is emotionally charged and
includes interpersonal clashes characterized as anger, resentment and worry (Johnson and
Ford, 2000). Indeed, research has shown that cohesive top management teams experience the
least amount of relationship conflict (Ensley and Pearce, 2001) because cohesive teams are
more trusting, less suspicious and have cooperative group norms (Ensley et al., 2002).
In contrast, when altruism is low, self-interest takes precedent over the interests of the firm
and the likelihood of opportunistic behavior rises (Ling et al., 2002) making relationship
conflict more likely. Such self-interested behavior is detrimental to the family system (Daily
and Dollinger, 1992) and, therefore, a lack of altruism may increase relationship conflict
among family members. Hence, we argue that altruism among family members is negatively
related to relationship conflict.

Hypothesis 1. Altruism is negatively related to relationship conflict in family firms.

The stewardship perspective also suggests that altruism enhances family involvement
and participation in the family firm (Zahra, 2003). Specifically, altruism is expected to
influence the degree to which family members participate in their firm's strategy-making
process. A participative strategy process in an organization refers to how information is
collected and disseminated when making strategic decisions (Duncan, 1974). In other
words, it captures the degree of interaction and participation that takes place in the strategy-
making process. A participative strategy process can therefore be viewed as a type of
participative decision-making that focuses specifically on the strategy process.
As suggested by stewardship theory, a highly altruistic family firm is likely to have an
involvement-oriented organizational culture (Corbetta and Salvato, 2004) that can also be
described as collectivistic (Kellermanns and Eddleston, 2004). This collectivistic culture
(Davis et al., 1997) should in turn lead to cooperation and collaboration in the firm's
decision-making processes (Zahra et al., 2004). In collectivistic cultures, “the belief is that
only through joint effort can the best solutions be identified and tested” (Zahra et al., 2004,
p. 365). That is, the strong bonds, trust and sense of loyalty and responsibility associated
with altruism (Kepner, 1991) should encourage a participative strategy process. Indeed,
Zahra (2003, p. 500) argued that altruism encourages family members to “work closely
 K.A. Eddleston, F.W. Kellermanns / Journal of Business Venturing 22 (2007) 545–565 551

together to define the firm's mission, craft its strategy and develop effective ways to achieve
its objectives”.
In comparison, a lack of altruism can lead to the pursuit of individual goals with little regard
for the collective utility (Gersick et al., 1997). When altruism is low, family members may lack
commitment and psychological ownership to the firm (Zahra, 2003), thereby leading to
withdrawal and disinterest in the firm's strategy-making process. Indeed, research suggests that a
lack of altruism may endanger the family bond and hamper decision-making and com-
munication within the family firm (Gersick et al., 1997; Lubatkin et al., 2005). Accordingly, we
hypothesize:

Hypothesis 2. Altruism is positively related to a participative strategy process in family

firms.

3.3. Control concentration in family firms

According to stewardship theory, control concentration can be considered an important

factor that influences the effects of family relationships in family firms. Indeed, this variable
helps explain the motivation for members to act as stewards of the firm versus their
propensity to act antagonistically (Corbetta and Salvato, 2004). Control concentration is
defined as the level of power held by family firm members (Gersick et al., 1997). The
degree of control concentration greatly varies among family firms. Some family firms have
only one controlling owner, while others have several siblings controlling the firms, while
still others have a great number of family members of various relations in control of the
firms (Gersick et al., 1997). Low levels of control concentration indicate that many
individuals share power in the family firm, whereas higher levels indicate that the power in
the organization is limited to a select few or one individual.
The dominant coalition refers to the powerful actors in a firm who control their
organization's development and future (Cyert and March, 1963; Hambrick and Mason, 1984).
This coalition can consist of a wide variety of family members who share a common vision or
it can consist of a single individual, most often the founder or later-generation controlling
owner (Chua et al., 1999). In the case of low concentration of control, organizational members
are much more likely to participate in the development of organizational strategies (Ruekert
and Walker, 1987). When control is shared, no one person is likely to dominate the decision-
making process (Davis and Harveston, 2001). Although control is often highly centralized in
family firms (Gersick et al., 1997), a lower level of control concentration is extremely
desirable, since the sharing of control and power is expected to improve creative goal
achievement (Schwarz, 1990) and to be associated with greater family member involvement in
the decision-making process (Kellermanns and Eddleston, 2004). This is in line with
stewardship theory which espouses the importance of an empowering and involvement-
oriented management philosophy (Davis et al., 1997). Therefore, in firms with a low
concentration of control, greater participation in the strategy-making process is expected.
On the other hand, a high concentration of control has been shown to lead to a less
participative atmosphere in family firms (Ronstadt, 1984). For example, past research has
suggested that the dominant leaders of a family firm are often reluctant to let members from
newer generations join in the strategy-making process of a business (Handler, 1989; Lansberg,
552 K.A. Eddleston, F.W. Kellermanns / Journal of Business Venturing 22 (2007) 545–565

1999; Stavrou, 1999). These dominant individuals often make themselves indispensable to the
business in an effort to retain decision-making authority (Handler, 1989; Lansberg, 1988).
Family firms with high control concentrations tend to be characterized as having owners who
control their organization's structure and strategy without the input of other family members
(Westhead et al., 2002). Furthermore, stewardship theory suggests that individuals working in
very controlling environments often demonstrate withdrawal behaviors (Davis et al., 1997).
Therefore, a high level of control concentration is predicted to be associated with a less
participative strategy process in family firms.
Hypothesis 3. Control concentration is negatively related to a participative strategy
process in family firms.

Control concentration is also expected to influence relationship conflict in family firms

given that stewardship theory suggests that high levels of control can lead to antagonistic
behaviors (Davis et al., 1997). Indeed, when a founder or a small group of dominant
individuals in a family firm insist on overarching control, conflict and inefficiencies are likely
to ensue (Daily and Dollinger, 1992). Power differences associated with high levels of control
can create tension (Cliff, 1987; Peffer, 1981) and increase the likelihood of personal conflicts
in an organization (De Dreu and Van Kleef, 2004). For instance, Eisenhardt and Bourgeois
(1988) observed that higher levels of control by a CEO led to more politics and animosity.
They also suggest that high control concentration increases frustration and negative affect,
which are typically associated with relationship conflict. Furthermore, in a study of senior
level executives, Menon and Bharadwaj (1996) demonstrated that higher levels of control
concentration increased relationship conflict. In contrast, when control is shared among family
members, the stewardship perspective suggest that individuals will develop self-control and
open communication (Davis et al., 1997). This leads to the following hypothesis.
Hypothesis 4. Control concentration is positively related to relationship conflict in family
firms.

3.4. Participative strategy process in family firms

A participative strategy process is expected to be associated with stronger family firm

performance. According to stewardship theory, a participative, involvement-oriented orga-
nizational environment leads to greater firm performance because the empowerment and
responsibility given to organizational members encourages greater organizational commitment
and motivation (Davis et al., 1997). The stewardship perspective suggests that involvement
enhances family members' psychological ownership, thereby promoting an “appreciation of the
challenges facing the firm as well as the company's strengths and weaknesses, and resources and
capabilities” (Zahra, 2003, p. 500). In this way, a participative strategy process can be seen as an
integrative device that allows individuals to better understand where their organization is headed
and can reduce individual biases (Ketokivi and Castaner, 2004), thus motivating individuals to
maximize firm performance (Corbetta and Salvato, 2004; Davis et al., 1997). Indeed, fast-
growing, high performing family firms have been found to encourage participation in
developing long-term goals and strategies, and they tend to share their goals and strategies with
employees on a regular basis (Upton et al., 2001). Encouraging family members to participate in
 K.A. Eddleston, F.W. Kellermanns / Journal of Business Venturing 22 (2007) 545–565 553

the strategy-making process may be particularly important for family firms because in order for
family firms to remain successful, new strategies should be generated for every generation that
joins the business (Post, 1993) and participation in strategy-making has been suggested to
increase commitment to a course of action and to improve the decision-making quality of family
firms (Kellermanns and Eddleston, 2004). Thus, by employing a participative strategy process,
family firms should benefit from increasing strategic options, by preventing premature
consensus, and by increasing the involvement and motivation of family members.
On the other hand, when family firms do not encourage a participative strategy process, their
performance may suffer. Without a participative strategy process, family firms may fail to
develop new strategies and to transfer key knowledge and capabilities to the newest generations,
which could ultimately hurt their performance (Cabrera-Suarez et al., 2001). Indeed, founders of
family firms often do not share business information with others, thus restricting their firms'
growth and performance (Mintzberg, 1994) and thereby leaving the input and knowledge of
others underutilized. When the incumbent generation does not allow the new generation to
partake in decision-making, poor decisions often result (Daily and Thompson, 1994). Therefore,
Hypothesis 5. A participative strategy process is positively related to family firm
performance.

A participative strategy process may also reduce relationship conflict in family

firms. In line with stewardship theory, when individuals are involved in the decision-
making processes of an organization, they are more likely to behave in ways that
benefit the business (Davis et al., 1997). For example, a strategy-making process with
much participation and interaction gives individuals a sense of involvement and
reduces political behavior (Eisenhardt, 1989; Thomas and McDaniel, 1990). Family
firms that encourage family members to communicate their points of view, particularly
in face-to-face settings, tend to experience less tension among family members
(Ibrahim et al., 2001). Therefore, an effective participative strategy process should
reduce relationship conflict in family firms since individual family members are able to
voice their opinions on strategic interests and the process of interaction and
participation should contribute to each member's feeling of worth and importance to
the business.
In contrast, relationship conflict may increase in firms that do not have much of a
participative strategy process because when organizational members are not able to
adequately process information about a strategic issue, high levels of nonproductive stress
and anxiety are likely to ensue (Thomas and McDaniel, 1990). Indeed, a less participative
management environment tends to spur conflict in family firms (Ronstadt, 1984). When
family members are not allowed to participate in the strategy-making process of a business,
they tend to feel unwanted and underappreciated (Ibrahim et al., 2001). Stewardship theory
predicts that when individuals are not involved or trusted to be responsible for some
decision-making in their organizations, they are more likely to engage in antiorganizational
behaviors (Argyris, 1964) and to act antagonistically (Davis et al., 1997). Therefore, the
following hypothesis is made.
Hypothesis 6. A participative strategy process is negatively related to relationship conflict
in family firms.
554 K.A. Eddleston, F.W. Kellermanns / Journal of Business Venturing 22 (2007) 545–565

3.5. Relationship conflict in family firms

Relationship conflict is expected to be detrimental to family firm performance. The

combination of conflict coming from within the business and conflict initiated within the
family compounds the effects of conflict in family businesses (Harvey and Evans, 1994).
Furthermore, conflict causes disequilibria in organizations and if not addressed, can cause
the demise of the family business (Harvey and Evans, 1994). The negative effects of
conflict are most often rooted in relationship conflict (Jehn, 1995, 1997).
While it should be noted that some forms of conflict can be beneficial such as when they
increase opinions, prevent premature consensus or increase member involvement (Amason,
1996; Tjosvold, 1991), this paper focuses on dysfunctional conflict, otherwise known as
relationship conflict. Relationship conflict often interferes with work efforts, by redirecting
efforts related to work toward the reduction of threats, politics and coalition building (Jehn,
1997). Accordingly, relationship conflict may be particularly harmful to family firms
because conflicts among family members tend to be sustained over time by the repetitive
interactions occurring within the family, both at work and away from the business (Kaslow,
1993; Morris et al., 1997).
Relationship conflict decreases goodwill and mutual understanding among individuals (Jehn,
1997) and has been associated with animosity, stress, hostile behaviors and the perception that
others have antagonistic motives (Simons and Peterson, 2000). As such, relationship conflict
appears to destroy the pro-organizational behaviors associated with stewardship. Indeed, the
high levels of commitment and cooperation that are in line with a stewardship perspective (Davis
et al., 1997) are undermined when relationship conflict is present (Weingart and Jehn, 2000).
Furthermore, squabbles and in-fighting within a family firm may result in insufficient attention
being focused upon business needs and performance (Kets de Vries, 1993). Indeed, conflict
within the family firm may contribute to the high mortality rate of family businesses (Beckhard
and Dyer, 1983). Accordingly, a family business laden with relationship conflict may devote
insufficient attention to business needs thereby harming the family firm's performance.

Hypothesis 7. Relationship conflict is negatively related to family firm performance.

4. Methods

4.1. Samples

Data for the study were collected using a questionnaire survey, which is consistent with the
majority of studies investigating conflict (e.g., Davis and Harveston, 2001). A mailing list of
180 family businesses was obtained from the family business centers and associated contacts
at two universities in the northeast of the US. For the purposes of this study, family business
were defined as those in which ownership lies within the family and at least two family
members are employed by the business. In order to employ a top management team approach
to the study, each family firm was mailed a packet consisting of five questionnaires to
distribute to key family members working in the business. We sought multiple respondents
from each family firm because consensus among several stakeholders in the family firm would
aid in the representativeness of our results to family businesses (Chua et al., 1999; Sharma et
 K.A. Eddleston, F.W. Kellermanns / Journal of Business Venturing 22 (2007) 545–565 555

al., 2003). Self-addressed envelopes were included with each survey to ensure anonymity. The
questionnaires were numbered and later matched per family firm so that the data could be
aggregated to the group level. There were 107 questionnaires returned, resulting in 60 family
firms and a 33% response rate. The employment size of these firms ranged from 2 to 589 with
an average size of 99 and a median of 51. The responding family firms were almost equally
managed by the first (33%), second (34%) and third generation (31%), whereas only one
company had a non-family member CEO.
Whereas 30 firms had multiple family members who responded to the survey, in 30 family
firms only one person responded, most often the CEO. Although in top management team
research the CEO is considered a reliable key informant who minimizes the informational and
motivational biases which are associated with multiple organizational levels (Glick et al.,
1990), this might not be the case in family firms. In order to address these concerns, we first
aggregated the responses from families with multiple responses to the group level. This
“aggregation is designed to reduce the impact of individual differences in perception within
each company, thereby forming a more objective estimate” (Simons and Peterson, 2000,
p. 105) of the family firm's attributes and performance. In order to justify the aggregation, we
then calculated the rwg according to James et al. (1984), which showed acceptable values. In
order to further show that the individual level responses and the aggregated responses did not
introduce a bias into the analysis, we conducted a one-way ANOVA of the individual scales
between family firms with one and multiple respondents and found no significant differences
between them, thus mitigating our single respondent concerns.
Lastly, we tested for common method bias as suggested by Podsakoff and Organ (1986).
The unrotated factor analysis extracted a five-factor solution. The five factors accounted for
71% of the variance. The first factor accounted for 37% of the variance, while the remaining
factors accounted for 34% of the variance. Since no common method factor emerged and the
factors separated cleanly, we concluded that common method variance did not pose a problem.

4.2. Measures

Our constructs were adapted from previously validated scales; however, modifications
were made to the scales to account for the setting in family firms. All items, the individual
respondents' and firm level alphas and the rwg are listed in Appendix A. All items were
measured on a seven-point Likert-scale, unless otherwise indicated.
Participative strategy process was measured by adapting five items from an information
processing structure scale originally developed by Thomas and McDaniel (1990) and based
on the work of Duncan (1973, 1974) to assess the level of participation in an organization's
strategy-making process.
Altruism was measured by adapting a scale developed by Becker and Vance (1993).
Seven items were adapted to focus on altruism in the family firm context.
Control concentration was measured with a single item question adapted by Menon and
Bharadway (1996) that asked respondents to indicate on a seven-point Likert-scale if the
management in the company was concentrated in the hands of one or several family members.
Relationship conflict was assessed by adapting a three-item scale developed by Jehn
(1995, 2001). We directed respondents to refer to family members working in the family
business when considering their responses to the survey items.
556 K.A. Eddleston, F.W. Kellermanns / Journal of Business Venturing 22 (2007) 545–565

Table 1
Descriptive statistics and correlations
Variables Mean S.D. 1 2 3 4 5
1. Control concentration 2.49 1.29
2. Altruism 35.14 7.07 .07
3. Participative strategy process 23.00 5.22 .10 .41⁎⁎⁎
4. Relationship conflict 9.81 4.72 − .18 − .48⁎⁎⁎ − .30⁎⁎
5. Performance 17.58 3.38 .20 .42⁎⁎ .46⁎⁎⁎ − .46⁎⁎⁎
6. Size (employees) 99.84 125.40 .22a − .10 − .17 .04 − .16
N = 60, p b .10, ⁎p b .05, ⁎⁎p b .01, ⁎⁎⁎p b .001.
a

Performance was assessed through eight performance related questions regarding growth
in sales, growth in market share, growth in employees, growth in profitability, return in equity,
return on total assets, profit margin on sales and the ability to fund growth from profit. The
subjective measurement of performance became necessary since the firms in our sample were
all closely held and the willingness to report objective data could not be expected (Love et al.,
2002). Respondents were asked to indicate if their current performance was much worse,
about the same or higher than their competitors in terms of each of the indicators. The
individual scores were then added to form an overall performance score (Dess and Robinson,
1984), where higher values connote better performance. This comparison to similar firms
controls for industry effects and has been shown to correlate with objective performance data
(Dess and Robinson, 1984; Love et al., 2002; Venkatraman and Ramanujam, 1987).
Controls. We controlled for firm size, i.e. the number of employees in the family firm,
because a firm's employment size may affect the occurrence of relationship conflict in family
firms. That is, larger firms may have less immediate interaction among family members and
therefore the occurrence of relationship conflict may be less pronounced than in smaller firms.

4.3. Methodology

Our hypothesized model, presented in Fig. 1, was tested using structural equation modeling
(SEM). In order to test structural equation models that are complex or faced with smaller sample
sizes, prior research has suggested that single indicators should be utilized for each latent
variable (e.g., Carlson and Kacmar, 2000). Since we used the single indicator approach, it was
necessary to correct for random measurement error (Frone et al., 1992). As recommended in
earlier research (e.g., Carlson and Kacmar, 2000; Wayne and Liden, 1995; Williams and Hazer,
1986), we fixed the error variance to the variance of the scale multiplied by 1.0 minus the
reliability (Bollen, 1989; Williams and Hazer, 1986). To adjust for measurement error in the
scale values, the path between the indicator and the latent variable was fixed to the square root of
the scales' reliability (e.g., Carlson and Kacmar, 2000; Wayne and Liden, 1995). Since control
concentration was measured via a single item, we estimated the reliability at .95 (e.g., Hayduck,
1987), and we treated the number of employees as an observed variable.

4.4. Results

The correlations, means and standard deviations are displayed in Table 1.

 K.A. Eddleston, F.W. Kellermanns / Journal of Business Venturing 22 (2007) 545–565 557

Fig. 2. Standardized path loadings for hypothesized model.

In order to assess the fit of our model, we used the chi-square statistic (χ2), goodness of
fit index (GFI), comparative fit index (CFI), incremental index of fit (IFI) and Tucker-Lewis
index (TLI).2 Larger values of GFI, CFI, IFI and TLI (.90 or above) denote an acceptable fit
of a model to the data. Additionally, the root mean square error of approximation (RMSEA)
for the models was investigated. A RMSEA lower than .08 is suggested to indicate good fit
(Hu and Bentler, 1995; Kline, 1998; Mulaik et al., 1989).
We tested a series of nested models to establish full or partial mediation. Our findings
support our hypothesized model. That is, the fit indices suggest support for a fully mediated
model: χ2(7) = 7.850, CFI = .982, GFI = .960, IFI = .984, TLI = .961 and RMSEA = .045 (Hu
and Bentler, 1995; Kline, 1998; Mulaik et al., 1989). We then compared the fit of our
hypothesized model with three partially mediated models. The difference in chi-squares was
used to compare models. First, we tested partial mediation by adding paths between altruism
and performance, and control concentration and performance. This partially mediated model
exhibited the following fit indices: χ2(5) = 5.806, CFI = .983, GFI = .971, IFI = .986, TLI = .948
and RMSEA = .052. The added paths between altruism and performance, and control
concentration and performance were not significant, and the χ2 difference test showed that the
partially mediated model did not lead to an improved fit: χdifference 2
(7–5) = 7.850–
5.806 = 2.044 n.s., although the fit indices were also acceptable. We then proceeded to test
a second partially mediated model by examining a partially mediated relationship between
altruism and performance and a fully meditated relationship between control concentration
and performance. This model exhibited the following fit indices: χ2(5) = 7.275, CFI = .973,
GFI = .963, IFI = .977, TLI = .932 and RMSEA = .060. The direct path between altruism and
performance was not significant. Lastly, we tested a third partially mediated model by
examining a fully mediated relationship between altruism and performance, and a partially
mediated relationship between control concentration and performance. This model exhibited
the following fit indices: χ2(5) = 6.563, CFI = .988, GFI = .967, IFI = .990, TLI = .970 and

2
CFI, GFI, IFI and TLI are less sensitive to the influence of sample size than other fit indices and were thus
chosen to judge the fit of our models (Fan et al., 1999; Kline, 1998).
558 K.A. Eddleston, F.W. Kellermanns / Journal of Business Venturing 22 (2007) 545–565

Table 2
Summary of hypothesis
Hypothesis Standardized path coefficients for final model
H1: Altruism→relationship conflict −.50⁎⁎⁎
H2: Altruism→participative strategy process .50⁎⁎⁎
H3: Control concentration→participative strategy process Not supported
H4: Control concentration→relationship conflict Not supported
H5: Participative strategy process→family firm performance .42⁎⁎
H6: Participative strategy process→relationship conflict Not supported
H7: Relationship conflict→family firm performance −.37⁎⁎

RMSEA = .04. The direct path between control concentration and performance was not
significant. The χ2 difference tests of the second and third partially mediated models
2
(χdifference(7–6) = 7.850–7.275 = 0.575 n.s., and χdifference
2
(7–6) = 7.850–6.563 = 1.287 n.s.)
also failed to lead to an improved fit over the hypothesized model. Taken together, our results
indicate that the best fitting model is the more parsimonious full mediation model.
Accordingly, we report our findings pertaining to the fully mediated model. The standardized
path loadings, estimated via maximum likelihood estimation, are presented in Fig. 2.3
As expected, altruism was found to be significantly, negatively related to relationship conflict
(β =−.50, pb .001), lending support to Hypothesis 1. In addition, altruism was found to be
significantly, positively related to a participative strategy process (β = .50, p b .001), supporting
Hypothesis 2. Concerning control concentration, Hypotheses 3 and 4 were not supported.
Control concentration was not found to be significantly related to a participative strategy process
(β =.10, n.s.) or relationship conflict (β = −.15, n.s.). We found support for Hypothesis 5. A
participative strategy process was found to be significantly, positively related to performance
(β =.42, pb .01). However, Hypothesis 6 was not supported. That is, a participative strategy
process was not found to be significantly related to relationship conflict (β = −.07, n.s.).4 In
addition, relationship conflict was found to be significantly, negatively related to performance
(β =−.37, p b .01), lending support to Hypothesis 7. An overview of our findings is portrayed in
Table 2. Overall, the squared multiple correlation of family performance, which equals R2 in
structural equation modeling (e.g., Straub et al., 1995), equaled .418, suggesting that 41.8% of
the variance of performance was explained in our model. The implications of our results are
discussed below.

5. Discussion

Our findings lend empirical support to the applicability of stewardship theory to family
firms. Specifically, we found that altruism can diminish the occurrence of relationship conflict

3
Since SEM estimates all paths simultaneously, we confirmed our results via ordinary least squares (OLS) by a
procedure suggested by Pedhazur (1997). Indeed, the results yielded similar estimates and significances, and thus
mitigate concerns pertaining to utilizing SEM estimation with our sample size.
4
We need to note that we did not test for a reciprocal relationship between relationship conflict and
participative strategy process, since both latent variables share the same antecedents and the model could not be
identified. However, we did run the reversed relationship between relationship conflict and participative strategy
process and also found a non-significant relationship (β = −.08, n.s.).
 K.A. Eddleston, F.W. Kellermanns / Journal of Business Venturing 22 (2007) 545–565 559

and can also contribute to a participative strategy process in family firms. As such, altruism
may explain why in some family firms members are able to successfully work together and run
a business, while in others, family members are laden with animosity that deteriorates
performance. Therefore, altruism within a family firm may constitute as an important resource
and source of competitive advantage. It is associated with emotional bonds and a sense of
loyalty and responsibility (Kepner, 1991) that lessens the occurrence of relationship conflict
and keeps family members focused on the well-being of the business.
In addition, our study showed that relationship conflict significantly harms a family firm's
performance and thus adds an empirical foundation to the abundant anecdotal evidence
concerning the devastating effects of conflict to family firms (e.g., Beckhard and Dyer, 1983;
Levinson, 1971). Our study further confirmed that a participative strategy process is positively
related to firm performance. In a participative strategy process, information is more
completely sought and utilized and thus leads to higher quality decisions (Kellermanns and
Eddleston, 2004). Indeed, the unwillingness of family firm leaders to share business
information with others restricts a family firm's growth and performance (Mintzberg, 1994).
In contrast, family firms that encourage knowledge sharing about firm specific processes tend
to be more innovative and efficient (Davenport and Prusak, 1998). Thus, our study clearly
demonstrates the positive benefit of a participative strategy process in family firms.
We did not find control concentration to influence either relationship conflict or a
participative strategy process. One potential explanation is that control concentration, as
measured, may have limited explanatory power in explaining family relationships and
interactions. Instead, a multi-item measure may be necessary to better capture the complex
nature of control and power in family firms. For example, it may be necessary to also consider
factors associated with ownership dispersion (Gersick et al., 1997) given that management
control and ownership are not always in synch in family firms. Indeed, the management
control of a family firm can be concentrated within one individual while ownership is equally
shared among siblings (Gersick et al., 1997). Future research should aim to better capture the
degree to which control is shared in family firms and then empirically examine how control
concentration influences family firm performance. Such research would greatly contribute to
the family firm literature given the vast amount of discussions and anecdotal evidence (i.e.,
Gersick et al., 1997; Kellermanns and Eddleston, 2004; Tagiuri and Davis, 1992) that purports
the important influence of ownership and management control to family firm performance and
survival.

6. Limitations and implication for theory and practice

Before discussing the implications of our findings, a few limitations of our study should
be noted. First, this study was cross-sectional, yet cause-and-effect relationships were
inferred. One must be sure to note that causal inferences made from cross-sectional designs
are never more than inferences (Tabachnick and Fidell, 1995). Our analysis cannot prove
causation but can merely support a set of hypothesized paths (Kenny, 1979; Kline, 1998).
For example, we need to acknowledge that while our results indicate that relationship
conflict is negatively related to performance and a participative strategy process is
positively related to performance, the opposite relationships may also be possible. That is,
poor performance might cause tension that increases relationship conflict and restricts a
560 K.A. Eddleston, F.W. Kellermanns / Journal of Business Venturing 22 (2007) 545–565

family firm's participative strategy process. Thus, longitudinal designs in future studies
would help to confirm assumptions underlying our study.
Second, we relied on self-report data to assess firm performance. Objective performance
measures would have been desirable, but because the family firms in our sample were not
publicly traded that data was not available. However, our performance measure has often been
employed in the literature (e.g., Dess and Robinson, 1984; Love et al., 2002). The absence of
an objective performance measure also poses the risk of common method bias. As outlined in
the data analysis section, we utilized a post-hoc test for common method bias (Podsakoff and
Organ, 1986). Our analysis did not suggest any significant concerns; however, a dependent
variable from a secondary source would create a more powerful design for future studies.
Turning to the implications of this paper, our study contributes to the conflict literature by
empirically demonstrating that relationship conflict is not only detrimental to work groups
(e.g., Jehn and Mannix, 2001), but also to family firms' performance. Specifically, this study
showed that the performance of family firms cannot be fully understood without taking into
account the psychodynamic effects of family relationships. How family members interact can
cause the demise of the family firm, as demonstrated by the negative relationship between
relationship conflict and performance; however, interpersonal relationships among family
members can also be a source of advantage, as indicated by the positive effects of altruism.
Identifying altruism as an inhibitor of relationship conflict and a facilitator of a participative
strategy process shows the positive impact that family involvement can have on a business.
Thus, our study provides initial support for stewardship theory-based predictions in family
firms and identifies a specific family effect that can help family firms to succeed.
Our finding that a participative strategy process positively influences performance also
indicates the applicability of the strategy-making literature to the family firm realm
(Amason, 1996; Schweiger and Sandberg, 1989). This is an important finding given that
leaders of family firms have been criticized for being reluctant to include members from the
newer generations in the strategy-making process (Stavrou, 1999). The importance of
exchanging information to enhance the strategy-making process needs to be stressed in
family firms (Kellermanns and Eddleston, 2004). Encouraging family members to
participate in the strategy-making process, particularly among newer generations which
will someday be at the helm of the business, may help family firms overcome common
problems associated with modernizing strategies (Cabrera-Suarez et al., 2001; Handler,
1992), seeking avenues for growth (Mintzberg, 1994; Ward, 1987) and improving
innovation (Davenport and Prusak, 1998). Future research should expand on our findings by
studying how family firms can improve their participative strategy process, while at the same
time, keeping relationship conflict from forming.

7. Conclusion

In conclusion, this study draws from stewardship theory to understand how the psy-
chodynamic effects of family relationships impact a family firm's performance. Our findings
confirm the anecdotal evidence that family firms plagued by conflict suffer from performance
problems (i.e., Daily and Dollinger, 1992; Lee and Rogoff, 1996) and highlights the positive
effects of a participative strategy process on performance in family firms. In addition, we
found altruism to be an important inhibitor of relationship conflict and a facilitator of a
 K.A. Eddleston, F.W. Kellermanns / Journal of Business Venturing 22 (2007) 545–565 561

participative strategy process. This suggests that the family can be a source of strength and
competitive advantage or a source of weakness and hindrance for a family firm. Furthermore,
our findings suggest from a stewardship theory perspective that the inclusion of other variables
that assess family relationships may provide fruitful avenues for future studies that are aimed at
helping family firms succeed through the generations by utilizing the unique resources that
effective family relationships can provide.

Acknowledgement

The authors gratefully acknowledge the helpful comments of Allison Pearson and the
journal's anonymous reviewers. The contents of this publication are solely the responsibility
of the authors.

Appendix A. Scale items and reliabilities

Construct Items Individual Firm r1wg
α α1
Dependent variable
Performance How would you rate your firm's current performance as compared to .88 .88 .90
your competitors?
Growth in sales
Growth in market share
Growth in number of employees
Growth in profitability
Return on equity
Return on total assets
Profit margin on sales
Ability to fund growth from profits

Independent variables
Participative Decision-making in our family firm is participative. .79 .79 .78
strategy process
The top decision-makers in our family firm interact with all
employees on an informal basis.
All employees in our family firm participate in strategic decision-
making on a regular basis.
Decision-making in our family firm is interactive.
There is free and open exchange of ideas among family members
about any strategic issue.
Altruism Family members often help other family members with their work .87 .85 .89
when they are absent.
Family members often volunteer to do things for the firm that is not
required by them.
Family members often help other family members who have heavy
workloads.
Family members often assist other family members with their work.
Family members often make innovative suggestions to improve our
business.
(continued on next page)
562 K.A. Eddleston, F.W. Kellermanns / Journal of Business Venturing 22 (2007) 545–565

Appendix A (continued)
Construct Items Individual Firm r1wg
α α1
Family members often attend functions that are not required, but that
help the company image.
Family members often get lunches for coworkers.
Relationship There is much relationship conflict in our family firm. .92 .93 .82
conflict
People often get angry while working in our family firm.
There is much emotional conflict in our family firm.
1
Reported in cases of two or more respondents.

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