The Diffusion of Ideas over Contested Terrain - Personal World Wide ...

#2144-ASQ V49 N4-December 2005—file: 49401-fiss
of family owners often do not share the founder’s longer
time horizon and concern for firm survival but are interested
instead in “cashing out” and using the family assets for their
own personal benefit. Kang (1998) has described declining
firm performance and less effective strategic decision making
by later-generation family owners as the “Buddenbrooks
Effect,” drawing on Thomas Mann’s novel of that name in
which “the first generation .|.|. builds, the second consolidates,
the third dissipates” (Salin, 1952: 371). The idea of
ascent and decline across three generations of family business
(e.g., “clogs to clogs” or “rags to rags”) has been
found across many societies (Ward, 2004), and there are various
explanations. Later generations may be less motivated or
able to run the family business, and larger families in succeeding
generations are often marked by conflict due to different
interests and values (e.g., Neubauer and Lank, 1998;
Ward, 2004). In those later generations, “the family may be
held together by nothing more than their common financial
interests, and if the returns on their investment are not better
than what they could earn elsewhere, some stockholders
may seek opportunities to sell their shares in the family corporation”
(Gersick et al., 1997: 219). This suggests that a
shareholder value orientation may be quite compatible with
the views of third- or later-generation family blockholders. We
suggest a contingent relationship in which later-family owners
support a shareholder value orientation while first and
second generation family owners are less inclined to do so:
Hypothesis 1d (H1d): The higher a firm’s ownership by German
families beyond the second generation, the more likely a firm will be
to espouse a shareholder value orientation.
Powerful Managers and Their Preferences
Normative belief structures are not likely to be adopted solely
according to corporate power and control considerations. The
sociopolitical perspective also highlights the fact that ideas
about the fundamental purpose of the corporation and possible
changes in those ideas are likely to have a cognitive
underpinning. This cognitive aspect of the possible adoption
of a shareholder value orientation may be reflected in the
characteristics of top executives, particularly in the demographic
differences that have been shown to influence decision
making and strategic change (e.g., Hambrick and Mason,
1984; Finkelstein and Hambrick, 1990; Wiersema and Bantel,
1992; Belliveau, O’Reilly, and Wade, 1996; Hambrick, Cho,
and Chen, 1996; Jensen and Zajac, 2004). Specifically, educational
background and age may influence the susceptibility of
corporate elites to a shareholder value orientation.
Educational background often shapes managers’ mental
models, and a firm’s likelihood of adopting a different governance
model should depend on how this model fits with
managers’ existing mental models. A considerable body of
research provides support for the important role of such
mental models or schemas in influencing how new information
and prior knowledge are integrated (Daft and Weick,
1984; Schwenk, 1988; Barr, Stimpert, and Huff, 1992; Reger
et al., 1994). Furthermore, mental models are usually difficult
to change once they become entrenched (Bartunek, 1984;
510/ASQ, December 2004