Balance of power in family firms and strategic responses post Covid-19

Fattoum, Asma | $14,351

Quebec Concordia University 2021 SSHRC

The global economy-wide shock resulting from the Covid-19 pandemic (hereafter referred to as the shock) offers an intriguing context for studying firm strategic change. On the one hand, the shock suddenly and dramatically moved firms out of equilibrium, transforming their set of threats and opportunities and exerting intense pressure to initiate strategic responses (Amis & Greenwood, 2021). On the other hand, the shock involved a sharp decline in resource availability (e.g., credit, capital, cash), high levels of environmental turbulence, and uncertainty about the shock duration (Hitt, Arregle, and Holmes, 2020). These conditions make strategic responses hazardous and can endanger firm survivability. In sum, the shock left firms in an intriguing situation: it increased their incentive to initiate strategic change but, at the same time, reduced their ability to do so rapidly and successfully (Ahltsrom & Wand, 2021).

In this research project, I propose to examine Canadian and U.S. family firms’ response to this central yet underexplored issue. Specifically, I address the following key questions: What role do non-family blockholders and non-family directors play in facilitating strategic change in family firms following the Covid-19 pandemic shock? Does the distribution of voting power among family and non-family blockholders and directors affect strategic responses magnitude and timing after the shock? If yes, what is the optimal balance of voting power?

Investigating the above research questions may provide several contributions to strategic management, corporate governance, family business, and entrepreneurship literature and may benefit both non-academic and academic audiences. Family firms represent a substantial economic force involving an estimated 85% of the world’s companies (Baron & Lachenauer, 2021). Therefore, for regulators and policymakers, understanding how the balance of power between family and non-family blockholders and directors affects the way family firms navigate and respond to economy-wide shocks helps build a resilient economy.

For managers, this research project may advance understanding of the emergence of strategic change initiatives in a relatively understudied context: economy-wide pandemic shocks. This differs from firm-specific (e.g., performance decline) or industry-specific (e.g., technology or regulatory discontinuities) shocks in having broader effects and more severe consequences (Singh, Mahmood, and Natarajan, 2017).

For academics, this research project will contribute to the literature on hybrid governance structures, in which power is shared between family and non-family stakeholders, by illustrating how the latter can influence the degree to which family firms can mitigate resource constraints exerted by the Covid-19 pandemic shock (Fattoum, Guedri and Delmar, 2018; Maury & Pajuste, 2005; Villalonga & Amit, 2006).

Finally, this project will provide an exciting learning opportunity for the doctoral and master students who will collaborate on it. Depending on the project phase in which they are recruited, they will each participate in different stages of the project: literature review, data collection, data analysis, and diffusion of results.

With funding from the Government of Canada

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