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Section 2
Chapter and Lecture Notes
Chapter 1 The Nature, Importance, and Uniqueness of
Family Business
Learning Objectives
1. To introduce the concept of family business and its theoretical roots.
Chapter 1 Essence
Part 1 of the book (Chapter 1) encompasses a definition of the form of enterprise
referred to a
family-owned, and publicly traded but family-controlled companies. A theoretical
perspective of family businesses is offered. Family dynamics and ownership of the family
business are addressed in Chapters 2 and 3.
Part 2 (Chapters 4 and 5) address the succession process. Part 2 also discusses
Chapter 1 shows the importance of family businesses to the free economies of the
world. Family businesses represent the primary engine of economic growth and job and
wealth creation. This chapter also discusses how, being unique in their attributes, family
businesses are unique in their challenges and opportunities.
Four theoretical perspectives that dominate the study of family business are
discussed: systems theory, agency theory, resource-based theory, and stewardship theory.
In the systems theory approach, the family enterprise is modeled as comprising three
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that competitive advantages derive from core competencies that are the result of the
unique overlap between owners and managers, between family and business. Speed to
market, long-term investment horizons, product differentiation through high–
quality/service strategies, and reduced administrative costs are some of the often-seen
Discussion Questions
1. What is a family business?
Family business constitutes the whole gamut of enterprises where an entrepreneur or
2. What makes a family business unique?
Family businesses are unique because of:
The presence of the family.
3. What are four primary theoretical perspectives on family business?
4. What does each theory contribute to the understanding of family business?
In the systems theory approach, the family enterprise is modeled as comprising three
Section 2 Chapter and Lecture Notes 9
5. What is the economic impact of family businesses? How important are they to
economic activity, wealth creation, and job creation?
Family businesses:
Constitute 80 98% of all businesses in the United States and the rest of the free
economies.
Relevant Case Resources
The Binghams and the Louisville Courier-Journal Companies case is an excellent
example of the vulnerabilities that are unique to family-controlled corporations on the
basis of blurred boundaries between family, management, and ownership. Quite the
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The Ferré Media Group case is longer and along with The Vega Food Company case, can