Typologies Of Family Business: “A Conceptual Framework Based

On Trust And Strategic Management”

Gonzalo Gómez
INALDE ( Universidad de la Sabana)
Autopista Norte K.21 (Costado Occidental)
Chía – Colombia
Tel. 57-1-8614444
Fax. 57-1-8620006
e-mail: gonzalo.gomez@inalde.edu.co

SUMMARY
The main purpose of this paper is to elaborate a conceptual framework for family businesses (fb), in order
to reach better economic and family performances. This model permits the study of different typologies to
understand which are the most successful and why.

Case studies conclude that variables such as trust in outsiders, strategic management and family protocol
are related to economic performance in a positive manner. Family performance, is positively related to a
strong family culture and the presence of family trust.

Taking into account that trust and strategic management have the strongest impact on performances, the
existence of four different kinds of fb can be established: 1) ideal fb: a business characterized by factors
such as trust and strategic management; obtaining the best performances; 2) astute fb: an organization that
lacks trust but has the strategic management factor; 3) naive fb: a firm based on trust, but lacking strategic
management; and 4) critical fb: a business lacking both factors; making it the worst of the performances.

An empirical study was done in colombia in order to search for variables to measure the studied concepts
and to allow the process of statistical verification. As a main result, there were additional variables that
also had an influence within the performances. Financial leverage had a positive influence on the
economic performance and negative influence on family performance. Substitutes of the sector had a
negative influence on economic performance and positive influence on family performance. Therefore,
there is an indication of paradoxes in the fb area.

Finally, typologies and percentages are obtained with group analysis technique: 1) ideal fb: 18%; 2) astute
fb: 18%; 3) naive fb: 34%; and 4) critical fb: 30%. By comparing the last two results representing 64% of
fb, with the death of fb that reach 70% in the transition from the first to second generation, it could be
concluded that lack of strategic management and/or trust might explain the reasons for this death.
INTRODUCTION
Research in the FB area, at present, is more descriptive than prescriptive. A major part of the research has
been used to improve family relationships, rather than to increase economic performance. It is necessary
to increase understanding on how to obtain better performances in FB by comparing successful ones with
those that are not. To improve this knowledge, qualitative empirical research with the creation of models
(Eisenhardt, 1989) is required, and can determine analytical generalizations (Yin, 1994). Then, it is
necessary to initiate a quantitative empirical research that could improve the qualitative one, by using
statistical generalizations. Thus, experimental-logic (Christenson, 1976), will be used as the research
method in this paper, establishing in advance, a model, that will be validated through case studies, and
afterwards through empirical research.

LITERATURE REVIEW
Literature in the FB area refers to a group of businesses that have the characteristics of ownership and
management within the same group. According to the agency theory (Hill & Snell, 1989), these
characteristics imply that the principal and the agent’s interests are aligned, thus obtaining minor agency
costs. Therefore, FB should have a better economic performance than NFB. However, some studies
(Ward, 1988; Daily & Dollinger, 1992; Galve & Salas, 1993) do not prove that differences in performance
are statistically significant in favor of FB. Leach & Leahy (1991), concluded that FB had better ratios than
NFB, as did Forbes (05/22/1995), who mentioned that FB were by average 15% more profitable than
NFB.

Two reasons could explain the above paradox:

 An incomplete premise: Some studies have proposed that ownership and control are necessary and
sufficient conditions, to obtain better economic performance; however, the right to ownership does not
necessarily give family members the capacity to manage an organization (Gallo, 1995). Therefore, before
economic advantages can become a reality in FB, two additional factors could be included, as this paper
will try to demonstrate: a) Strategic management (Carlock & Ward, 2001), and b) Trust (Aronoff & Ward,
1991).
 Comparison mistakes: Different definitions as to what entitles an authentic FB have been used as a
base for comparison. (Shanker & Astrachan, 1996).

Even, if the above differences of opinions did not exist regarding the meaning of FB, it is also evident that
the most relevant variable, “ownership” has been researched under different parameters, possibly
allowing for comparison mistakes: 1)Ward (1988): Uses ownership to define a FB greater than 15%; 2)
Gallo & Garcia-Pont (1989): Use ownership, greater than 10%, when owned by 1 or 2 families, and the
sum of the participation of the following three owners, is less than one third of the first owners; 3)Daily &
Dollinger (1992): The definition of a FB is established by the information provided by the CEO, without
taking into account any percentage of ownership.

Despite the above, this paper will use the following definition in order to follow one line of thought: FB
consists of majority ownership(>50%) in the hands of one or two families; and where governance and/or
management is in the hands of some member of the owning families; and/or where the next generation is
involved as a sign of continuity of the FB.
In synthesis, despite these two possible errors, this paper indicates that even with an appropriate premise
and a shared definition of what FB is, it is necessary to make radical differences within this group, in order
to observe, competitive advantages that well-managed FB can have in comparison with NFB.

Revision of Typologies in the FB Area

There are a few studies in FB literature that describe classifications within this group:

 Gallo (1995), differentiates FB using two variables: a) The way in which the connection between the
business and the family is conceived, and b) The intention of strategic continuity. According to these
variables, FB are classified in the following categories: 1) Family-labor business; 2) Family-managed
business; 3) Investment family business; and 4) Provisional family business. These classifications describe
why different kinds of cultures exist in FB, since each one of these leaves room for a different
commitment.
 Corbetta (1998), describes four types of FB, according to the following variables: a) Phases of
ownership in the FB; b) Types of governing bodies in the FB; and c) Size of the FB. Resulting in:
1)Domestic FB, 2) Traditional FB, 3) Expanded FB, and 4) Open FB. These classifications describe the
development that FB can experience with time.
 Holland & Oliver (1992), create a framework based on two different variables: a) Size, and, b)Capital
structure, thus four types of FB result: 1) Pre-family, 2) Family, 3) Adaptive, and 4) Post-family. Then
three dynamic steps are observed: 1) Dream control, 2) Control shared by siblings, and 3) Professional
firms.

It is also relevant to mention that some studies have centered on other units of analysis:

 Family owner (Soonnenfeld & Spence, 1989): Resulting in the following classification: 1)Monarch, 2)
General, 3) Governor, and 4) Ambassador. The challenge is to plan the succession process with the
founder’s characteristics.
 The founder of the FB and his values (Garcia-Alvarez & López-Sintas, 2000): 1) Strategic, 2)Family
tradition, 3) Achievers, and 4) Inventor . Providing the area of knowledge with two different orientations
in FB, family first (1,2) and business first (3,4).
 Culture that exists within the firm (Dyer, 1988): Four types of FB cultures have been defined:
1)Paternalistic, 2) “Laissez faire”, 3) Participant, and 4) Professional.

In conclusion, prior classifications have as a theory base, the three systems presented in the FB area
(Davis & Tagiuri, 1982), and some elements of strategic management. They center around one unit of
analysis, be it the firm or the individual, but not together. This paper will take into account two different
units of analysis: 1) Tendency to trust (individual), and 2) Strategic management (Firm). Another way this
proposal differs from others, is that these two factors could further explain the performances of such
organizations. The above classifications are descriptive, but performance in none of the prior cases has
been explained.
RESEARCH QUESTIONS
1. How does the environment affect the FB culture, and both in turn, influence the CEO´s tendency to
trust and the degree of strategic management implementation?
2. How do environment and FB culture influence performance?
3. How does the factor of the CEO´s tendency to trust affect the degree of strategic management
implementation, and both in turn, influence performance?
4. What typologies of FB are obtained from the factors: CEO´s tendency to trust and strategic
management ?
5. What recommendations can be made in each type of FB found to improve their performance?

INITIAL CONCEPTUAL MODEL

A conceptual framework (figure.1) was designed, taking into account different general management areas:
a) Industrial organization (Porter, 1980): Performance critically depends on the industry in which the firm
competes; b) The resource-based view of the firm (Rumelt, 1991): Strategy has the greatest influence in
the firm’s results; c) Organizational behavior: Studying trust (Mayer et al, 1995) as a source of
competitive advantage, and d) Culture (Schein, 1985) as a factor that could influence the previous ones.

Figure.1 Conceptual Framework

ENVIRONMENT CULTURE

TENDENCY STRATEGIC
TRUST MANAGEMENT

PERFORMANCE

Environment
According to the contingency theory (Lawrence & Lorch, 1967), the requirements of each organization
differ because of the environment. Even different business units face different external demands, needing
different structures. This paper will identify the rivalry within the environment in which the FB competes,
with the model of the five competitive forces (Porter, 1980), expecting an influence in all the studied
factors. Rivalry will be assessed with the following variables: 1) Industry competitors, 2) Substitutes, 3)
New entrants, 4) Buyers, and 5) Suppliers.

Culture
FB cultures differ from NFB, because more systems are present (Davis & Tagiuri, 1982). A search for
“values and beliefs” (Schein, 1985) must be studied from two perspectives: 1) Identifying unity and
commitment of the family within the firm; and 2) Identifying FB traps (Gallo, 1995): a) Confusion
between being an owner and having the capacity to manage; b) Confusion of economic influxes; c)
Confusion of emotional family ties, with contractual business ties; and d) Unnecessary delays of
succession. FB culture will be obtained through the observed unity and commitment, minus the perception
of the traps found within.

Tendency to Trust
Management has taken trust into account as a factor that could obtain competitive advantages for a firm,
because it can reduce transaction costs (Chiles & McMackin, 1996). However, the measure of this factor
is complicated, because of the many relationships within the family, and between it and the stakeholders.
Thus, this paper’s initial model has chosen a variable to represent trust in the CEO’s tendency to trust
others (Mayer et al, 1995). A person that has been trusted and has trusted before, has a greater probability
to trust others in advance (Portales et al, 1998) and this, could represent the values of the whole family.

Strategic Management
FB literature has prescribed strategic planning for FB (Ward, 1987) as a way to perform better. Also, the
necessity of proper strategy implementation is observed, including governing organisms, such as, board of
directors, family councils, administrative boards, and family protocols (Nelton, 1986; Gallo &
Luostarinem, 1991; Poza, 1988; Schwartz & Barnes, 1991). Strategic management (Carlock & Ward,
2001, pag.30-31) is practiced in a firm, when the managers experiment strategic thinking, that include:
Strategy formulation, strategy implementation, and strategic control. This paper centers on the
identification of each of the elements of strategic thinking that permit the affirmation that a FB has the
strategic management factor.

Performance
The definition of performance has been very controversial (Venkatraman & Ramanujan, 1986;
Chackravarty, 1986). FB have different objectives, because business and family necessities are associated
according to the family cycle (Gersick et al, 1997). Thus, this paper will present a wider vision than
simple financial ratios. The initial model will present performance as the merger of two variables: 1)
Economic performance: Financial ratios; and 2) Family performance: The perception of the family, in the
improvement of family unity and its commitment during the last two years.

Initial Typologies of FB
Taking into account that the tendency to trust and strategic management could have the strongest impact
on performance, the existence of four different kinds of FB can be established:
1) Ideal FB: A business characterized by both the CEO´s tendency to trust in others and strategic
management, and so obtaining the best performances (Economic and family).
2) Astute FB: An organization where the CEO lacks tendency to trust others, but enjoys the strategic
management factor, concluding in a positive economic performance with a negative family performance.
3) Naive FB: A firm based on the CEO´s tendency to trust others, but lacking the factor of strategic
management, concluding in a negative economic performance and a positive family performance.
4) Critical FB: A business lacking both factors concluding in negative performances.
RESEARCH METHODOLOGY
This paper will use the experimental-logic process (Christenson, 1976) as a guide. A basic model such as
the one above, could serve analogously as a “container” and with empirical data “filled with water later,”
which means that the validity of the container will be determined by the quantity of water collected. Given
that there are no previous works about the relationships between factors studied, at least in the FB area,
qualitative research has been chosen to increase knowledge for the initial model (Eisenhardt, 1989).
Qualitative research demands a meticulous design that will depend on the research questions afore
mentioned. Since the researcher will not control the studied events, and emphasis will be put on
contemporary facts and not historical ones, a case study will be used as the best initial strategy for this
research.

Case Study Design

Commonly, case studies are divided into four categories according to the quantity of cases studied, and the
characteristics of the analysis unit. This paper will use as a reference type IV (Yin, 1994), that includes: 1)
Multiple cases: Two cases per typology; 2) Analysis unit: a) The individual: CEO’s tendency to trust, b)
The firm: Strategic management and, 3) Type: FB typology as defined. To assure the quality of the
research design, the paper emphasizes: a) Validity of factors, using different sources of information and
considering the chain of events; b) External validity: By researching multiple cases of each type; c)
Internal validity, searching pattern matches between multiple cases, and finally, d)Reliability, using a
research protocol and maintaining the data base.

Eight firms, four Spanish and four Colombian, of different generations, size, industries and cultures were
selected, with the collaboration of a group of specialists in the field. They had pointed out a priori, that a
specific case could be fitted in with a specific typology which had to be proven by the time the research
was completed. Cases have been named: Nitrogen (N), Oxygen (O), Hydrogen (H), Potassium (P), Iron
(Fe), Sulfur (S), Calcium Carbonate (CaCO 3), and Sodium Chloride (NaCl), to preserve the anonymity
and confidentiality of the information.

The information to answer research questions has been gathered from three different sources: Direct
observation, interviews, and documents. The personal semi-structured interviews were applied to the
principal family members, whether or not they worked inside the FB, as they were to outside advisers,
consultants and the most representative external managers. At least 59 interviews took place between June
of 1998 and November of 1999. The format of semi-structured interviews were used in most of the cases
(47), although some families preferred the group interview format (12), and 22 interviews were taped.

Information analysis is without doubt, the most important critical aspect of qualitative research, since the
mechanisms of examining, categorizing, and combining the evidence are not generally very advanced
(Yin, 1994). However, it is possible to codify events in numerical form and to use them with statistical
techniques; to build up the conclusions, in order to draw up exploratory hypothesis of the factors and not
to generalize them. When the codification of various events are not possible, “pattern matching,” the
dominating technique in qualitative research, has to be used.

CASE ASSESMENT
While the cases were being developed, it was necessary to re-evaluate the factor of the CEO’s tendency to
trust, because no differences were found. Instead, the initial model was changed to study the factor “trust”,
but focusing on two main variables: Trust by family members in outsiders, and family trust. A
relationship was found between trust in outsiders and the studies of the advanced societies that use a
culture of trusting others to be successful (Fukuyama, 1995). Thus, it was decided to put greater weight on
the variable of trust in outsiders.

The strategic management factor also had to be changed. It was necessary to separate the factor into two
main variables: 1) Strategic management, by itself: Made up of strategic thinking elements; and 2)Family
protocol: The reason for this separation was that the interviewers did not see this variable as a part of the
strategic management factor. Likewise, It was decided to give greater weight to the strategic management
variable based on studies by Rumelt, 1991.

Performance, although it was believed to be one factor with two variables, case study analysis made it
clear that economic and family performances seem to be independent factors.

Finally, Table.1 presents a summary of the factors in each case. The assessments were done, by consensus,
with specialists in the FB field, using the Likert scale [(-3) very low, until (3) very high].

Table No.1 Summary of Factor Assessment

FACTOR N O H P Fe
CaCo NaC S
3 l
Environment +++ ++ - ++ + ++ ++ +++
Culture + -- --- - ++ 0 0 --
Strategic management +++ - ++ --- ++ -- +++ --
Family protocol ++ -- - -- + -- -- ---
Family trust ++ -- --- ++ +++ ++ --- +
Trust in outsiders ++ ++ -- --- + - ++ --
Economic +++ + ++ -- +++ 0 +++ --
performance
Family performance + -- --- 0 ++ 0 -- 0

Exploratory Hypothesis
Based on the case studies above, exploratory hypothesis were constructed to answer the first three
research questions. Starting from the values found in each factor (Table.1), various linear decline analyses
took place to determine the correlation (&) and statistical meaning (p), as follows:

Figure.2 Summary of Relationships

&=0.62
ENVIRONMENT p<0.10 CULTURE
&=0.63 &=0.66 &=0.78
p<0.10 p<0.10 p<0.05
TO FT &:0.95 &:0.94 SM FP
p<0.001 p<0.001
&=0.70
&=0.76
p<0.05
p<0.05

EP FP

TO: Trust in outsiders; FT: Family trust; SM: Strategic management; FP: Family protocol; EP:
Economic performance; FP: Family performance.
H1: Environment does not have a direct relationship with the studied factors.

H2a: Culture is positively related to family trust. (&=0.62; p<0.10)

Good family culture: where unity and commitment are present and family traps are lacking, an
improvement of family trust is observed.

H2b: Culture is positively related to family protocol. (&=0.66; p<0.10)

A good culture promotes the development of family protocols.

H2c: Culture is positively related to family performance. (&=0.78; p<0.05).

Although it seems obvious, good family culture allows for good family performance.

H3a: Trust in outsiders is positively related to the firm’s strategic management.(&=0.63; p<0.10)
For the development of better mechanisms to lead businesses, trust in outsiders is necessary. FB using
flatter and autonomous structures with governing bodies, including outside members, could allow the
firms to have better strategic thinking; avoiding the inbreeding that these firms usually have.

H3b: Trust in outsiders is positively related to economic performance.(&=0.76; p<0.05)

One of this research’s greatest findings is that trust in outsiders directly influences economic performance.
Trust has an expansive radius which goes beyond the firm’s limits, allowing the stakeholders to facilitate
the firm’s advance: “Trust increases the possibility for people to abandon past practices in favor of new
models. Trust is a resource, a form of capital, that can be used as a competitive advantage.”(Shaw, 1997).

H3c: Family trust is positively related to family performance. (&=0.95; p<0.001)

Although it seems obvious, the importance of real trust between family members has to be highlighted.
Usually this is confused with “family complicity”, where members seem to trust each other, but as it is
known, they do not even talk amongst themselves in order to preserve the family unity.

H4a: Strategic management is positively related to economic performance.(&=0.94; p<0.001)

H4b: Family protocol is positively related to economic performance.(&=0.70; p<0.05)

Typologies And Prescriptions

To answer the last two research questions and according to the above, the main factors that affect
performances (Trust and strategic management), also build up the following typologies with their
respective exploratory hypothesis (Table.2):

Table 2. Exploratory Hypothesis for Typologies

IDEAL ASTUTE NAIVE CRITICAL

FB FB FB FB
Culture factor + (H5a) - (H5b) - (H5c) - (H5d)
Trust in outsiders +(H6a) - (H6b) + (H6c) - (H6d)
Family trust + (H7a) - (H7b) - (H7c) + (H7d)
Trust factor + (H8a) - (H8b) + (H8c) - (H8d)
Strategic management + (H9a) + (H9b) - (H9c) - (H9d)
Family protocol + (H10a) - (H10b) - (H10c) - (H10d)
Strategic management + (H11a) + (H11b) - (H11c) - (H11d)
factor
Economic performance + (H12a) + (H12b) 0 (H12c) - (H12d)
Family performance + (H13a) - (H13b) - (H13c) 0 (H13d)

The following prescriptions can be considered for each type:

Ideal FB
These firms are expected to continue strengthening their strategic management and their trust through the
application of a family protocol. This group has implicit norms, but might not have a written family
protocol and is the only one which could begin to consider a written protocol in order to preserve the FB,
based on its trust.

Astute FB
These firms can follow two options. 1) To cease being a FB, due to the difficulty of obtaining trust; 2)To
build trust: It could be considered a two-way street: a) FB must begin with communication and wanting
reconciliation. Treatment with a family specialist, including a psychologist and/or a psychiatrist, is
suggested. b) Trust in outsiders: Must be built on a day-to-day basis, beginning with its founder (leader),
who must take the first step. For astute FB, writing a family protocol is not recommended, until family
culture improves by gaining a minimum of unity and commitment through strategic planning. Once the
culture has improved, it is possible to start the family protocol process.

Naive FB
These firms must follow the path to an ideal FB, by implementing strategic management first in a
business-like way. After taking advantage of its trust in outsiders and with their advice, this trust allows
the family to move towards a family culture without traps. It is also suggested to consider the advise of a
family specialist, including a psychologist and/or a psychiatrist, to improve family trust. Finally, an
agreement through a family protocol must be signed, once culture and trust are established.

Critical FB
These firms can follow three paths: 1) To cease being a FB, due to the difficulty of generating trust; 2)To
elaborate a strategic management plan that demands more training from their members; 3) To build up
trust: It could be considered a two-way street: a) FB must begin with communication and wanting
reconciliation. Treatment with a family specialist, including a psychologist and/or a psychiatrist, is
suggested; b) Trust in outsiders: Must be built on a day-to-day basis beginning with its founder (leader),
who must take the first step. Writing a family protocol, at this moment, is not recommended until family
culture improves, by gaining a minimum of unity and commitment through strategic planning. Once
culture has improved, it is possible to begin with the family protocol.

EMPIRICAL STUDY
This study was done with two main objectives; 1) Search for variables: Allowing the measuring of the
conceptual model, and 2) Statistical proofs for the exploratory hypothesis. The empirical study was done
with a questionnaire, filled out by the participants of two FB conferences, offered in Bogotá and Medellín
(Colombia) in June of 1998. All in all, 88 questionnaires were filled out, representing 43 FB. Some other
sample’s characteristics are: a) Industries: Services (20,4%), Food (13.6%), Construction (12.5%),
Commerce (10,2%), Textile (7.0%), Wholesalers (4.5%), Others (31,8%) (Gallo y Estapé, 1992); b) First
generation (63.6%), second generation (23,9%) and third generation (12.5%); and c)Small and medium
sized between USD 1 and 20 million (79.5%).

Twenty five independent factors were identified (Table.3), by means of factorial analysis, as follows:

Table.3 Summary of Factorial Analysis

Environment: 4 Factors found, explaining 77.2% of the variance

Concentration of the sector Cs
Sector substitutes Ss
Trust in the actors of the sector Tas
Low entry level of new competitors Lelnc
Culture: 6 factors found, explaining 69% of the variance.
Unity and commitment culture Ucc
Confusion of emotional family ties, with contractual business ties T3
Nepotism Nep
Succession Succ
Culture in family dynamics Cfd
Absence of a variable compensation system amongst management Avcsm
Trust: 3 factors found, explaining 79.6% of the variance.
Family trust Ft
Trust in outsiders To
Tendency to trust Tt
Strategic Management: 5 factors found, explaining 69.8% of the variance.
Strategy formulation and implementation. Sfi
Family protocol Fp
Remuneration systems and organizational structure RsOs
Lack of geographical scope Lgs
Governing bodies Gov
Family Performance: 2 factors found, explaining 68% of the variance.
Family performance in unity and commitment Fpuc
Family performance in its dynamics Fpd
Economic performance: 1 variable found (Ep), explaining 63.5% of the variance.
Other independent factors found:general y endeudamiento
Longevity Lon
Size Siz
Owner general manager Ogm
Financial leverage Deb

Two main multiple linear regressions were used to prove the exploratory hypothesis, as follows:
1. Multiple linear regression between all factors with economic performance: Data: 81; Dependent
variable: Ep; Number of independent: 5; R2= 0.50; the results are:
 Financial leverage is positively related to economic performance (&=0.31; p<0.001): Although this
variable was not studied, it could be a family culture belief not to have any debt; however, this belief
could diminish the economic performance (Vilaseca,1996).
 Family performance in its dynamics is positively related to economic performance (&=0.31;
p<0.001): Factorial analysis separates family performance into two variables (Table.3). Family
performance in its dynamics, means better results in family work requirements, reputation, and future
generations’ opportunities.
 Trust in outsiders is positively related to economic performance (&=0.09; p<0.01): This proves that
trust in outsiders has a direct and significant influence (H3b)
 The absence of a geographical scope is negatively related to economic performance (&= -0.25;
p<0.001): If it were positively formulated, a larger geographical scope could be obtained and related
positively to economic performance. This variable is a strategic management tool, proving (H4a).
 Sector substitutes negatively affect economic performance (&=-0.30; p<0.001): This result contradicts
(H1).

2. Multiple linear regression between all factors with family performance in its dynamics: Data: 76;
Dependent variable: Fpd; Number of independent: 6; R 2= 0.627; The results are:
 Financial leverage is negatively related to family performance in its dynamics (&= -0.21; p<0.01):
This result shows a paradox, because debt is favorable to economic results and negative to family
performance in its dynamics. This is an indication, that there must be an optimum level of financial
leverage in a family firm different from that of a NFB.
 Economic performance is positively related to family performance in its dynamics (&= 0.40;
p<0.001): The cause can not be known, but it seems logical that when a firm generates economic
performances, this tends to improves reputation and family work requirements.
 Strategy formulation and implementation is negatively related to family performance in its dynamics
(&= -0.10; p<0.001): This result does not seem logical, because in theory any improvement in
decision-making mechanisms, such as strategy, should be useful to improve reputation and work
requirements.
 Nepotism is negatively related to family performance in its dynamics (&= -0.43; p<0.001): It is clear
that nepotism does not increase reputation, and work requirements, proving (H2c)
 Culture in family dynamics is positively related to family performance in its dynamics (&=0.37;
p<0.001), proving (H2c)
 Sector substitutes is positively related to family performance in its dynamics (&= 0.30; p<0.001):
Another paradox found, is that substitutes negatively affect economic performance and positively
affect family performance in its dynamics. This indicates that there must be an optimum level of
substitutes to allow the family to come up with new ideas.

Group analysis
Group analysis technique (Table.4) was applied to the questionnaires’ database. It took into account 17
variables that represented the main factors of the model.

Table 4. Group Analysis

Amount of data: 88
Amount of variables: 17
K-mean method
Mean for each group
Variable Total Critic FB Naive FB Astute FB Ideal FB
1 Ep 0,00 -0,54 0,09 0,55 0,16
2 Fpuc 0,00 0,21 0,77 -0,87 -0,91
3 Fpd 0,00 -0,68 0,50 0,68 -0,52
4 Sfi 0,00 -0,28 0,20 0,43 -0,35
 5 Fp 0,00 -0,27 0,11 0,41 -0,17
6 RsOs 0,00 -0,17 0,29 -0,63 0,36
7 Lgs 0,00 -0,42 0,51 -0,14 -0,13
8 Gov 0,00 0,03 -0,17 -0,03 0,29
9 Ft 0,00 0,37 -0,38 -0,24 0,35
10 To 0,00 -0,47 0,11 -0,33 0,90
11 Tt 0,00 -0,57 0,07 0,12 0,68
12 Ucc 0,00 0,13 0,56 -0,73 -0,54
13 T3 0,00 -0,25 0,03 0,24 0,10
14 Nep 0,00 0,65 -0,19 -0,74 0,04
15 Succ 0,00 -0,23 -0,08 0,80 -0,28
16 Cfd 0,00 -0,57 0,69 0,26 -0,63
17 Avcsm 0,00 0,27 -0,18 0,64 -0,75
Group variance 298,91 361,25 234,63 298,65
Individ. per group 88 26 30 16 16
Porcent. per group 100,00 29,55 34,09 18,18 18,18

Table.5, below, explains which hypothesis were proved by group analysis, for example, (H5a) that had
been expected to be positive (Table.2), was rejected (No); on the contrary (H6a) was accepted (Yes).

Table 5. Summary of Proofs of Exploratory Hypothesis

IDEAL FB ASTUTE FB NAIVE FB CRITICAL

FB
Culture factor + (H5a) No - (H5b) No - (H5c) No - (H5d) Yes
Trust in outsiders + (H6a) Yes - (H6b) Yes + (H6c) Yes - (H6d) Yes
Family trust + (H7a) Yes - (H7b) Yes - (H7c) Yes + (H7d) Yes
Trust factor + (H8a) Yes - (H8b) Yes + (H8c) Yes - (H8d) Yes
Strategic management + (H9a) Yes + (H9b) Yes - (H9c) Yes - (H9d) Yes
Family protocol + (H10a) No - (H10b) No - (H10c) No - (H10d) Yes
Strategic management + (H11a) Yes + (H11b) Yes - (H11c) Yes - (H11d) Yes
factor
Economic performance + (H12a) Yes + (H12b) Yes 0 (H12c) Yes - (H12d) Yes
Family performance + (H13a) No - (H13b) No - (H13c) No 0 (H13d) No

Ideal FB (18%): Some differences with characteristics of the type (Table.2) were found after the case
assessment study. Although strategic management is positive in its results, family protocol is negative
(because these Colombian companies do not realize that some norms they use, can create a written a
family protocol). Trust is positive in both variables. Although, its economic performance is positive,
family performance is not and neither is its culture. These last two results are related, because in Colombia
at present, there is no clear conscience on how to avoid family traps; a family first vision has been found.

Astute FB (18%): Has the same characteristics as the type found after the case assessment study, mainly in
its negative trust and positive strategic management. However, a positive family protocol was found
contrary to the conceptual framework. It is believed, that these FB confuse a family protocol with an
agreement of coexistence, which favors the total removal of the family from the management. The culture
found was neutral, because without family inside the business, the firm is far removed from the family
traps; however, the family is not committed to the firm (Business first vision). A positive family
performance contrary to the framework was found. The main reason being that when an economic
performance is present, the family will not go against the management; on the contrary, without the
commitment the FB could be in trouble.

Naïve FB (34%): Shows a positive trust in both variables and its strategic management is negative.
Although, a positive family protocol is found, the main reason could be that it has as an objective the use
of the firm to develop the family. As had been expected, economic performance is neutral, although family
performance is positive just as its culture (Family first vision).

Critical FB (30%): Has the same characteristics of the type found after the case assessment study,
although family performance is negative as was expected before the case study.

DISCUSSION
From the qualitative point of view, these results cannot be generalized for the entire FB population. The
model must be revised and redefined before its conclusions can be generalized. Outside validity, can be
improved by introducing another four cases of each type, to be able to make a greater contrast; this time
with Anglo Saxon, or Asiatic FB, because there is a possibility that this model will not apply to others
cultures. Likewise, the research must study in depth all the intergenerational processes. Internal validity
must improve by estimating in advance which trust relationships should be studied.

From the quantitative point of view, limitations are based on the sample studied, because FB were not
chosen randomly. They participated in a conference where 65% of the group pertained to the first
generation and their specific problems had to do more with succession issues. The model was studied with
multiple linear regressions and could be studied with the LISREL technique. This Colombian
environment generates a lot of noise with the factors studied; however, it helps to understand the
conceptual framework, validating some of the exploratory hypothesis, and generating new ideas to
complement the research. The main implications of this paper are:

a. The first conceptual framework permits the understanding of how economic performance can be
reached by highlighting: Trust in outsiders, strategic management, and family protocol factors. The
empirical study, demonstrates the inclusion of the financial leverage factor in a positive way and
substitutes of the sector in a negative way. Family performance is positively related to a strong family
culture and the presence of family trust.
b. Paradoxes that have been found, open a new scope of research. The financial leverage in theory, for
example, should have an optimum point of debt below that of NFB; because at the same time financial
leverage is positively related to economic performance and negatively with family performance in its
dynamics.
c. For the first time an approximate number of FB are found in different typologies and are closely
related to economic and family performances: 1) Critical FB: 30%; 2) Naive FB: 34%; 3) Astute FB:
18%; and 4) Ideal FB: 18%. By comparing the first two results representing 64% of FB, with the death
of FB that reach 70% in the transition from the first to second generation, it can be concluded that lack
of trust and/or strategic management could explain the reasons for this death. Only 36% of the sample
represent those groups of FB where efficiency can be truly verified over NFB (Ward, 1988; Dailey &
Dollinger, 1992) because of strategic management. Only an 18% (Ideal FB), really possess the
combination for success, that is strategic management and trust, that really generate a competitive
advantage for the FB (Aronoff & Ward, 1991)
d. Various paths to follow have been prescribed in order to overcome these FB problems. Although it is
not yet necessary to go in depth about which should be the first steps to take, it has carefully been
decided to consider that family protocol be used as the last tool.
e. The knowledge of new factors, has been expanded, so that they can be used in future research.

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