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Familiarity breeds trust as well as contempt...What about familiality? An examination of familial involvement and trust in family firms

Daphna F Raskas, 1998
Faculty Advisor: Murray Low
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Abstract

This dissertation explores the influence of family involvement on top management group (TMG) trust within family firms. Specifically, the relationships between three characteristics of the family's involvement in the family firm and TMG trust are examined: the duration of family ownership, the intensity of family involvement in the top management group, and the level of family discord. It is argued that TMG trust diminishes over time in the family firm and that the nature of this decrease is related to the level of family discord across generations of family ownership as well as to the intensity of family involvement in the top management group. Theoretical foundations for the hypotheses were drawn primarily from the sociological, psychological and organizational literatures on trust as well as from the field of family business research. The study examined three dimensions of TMG trust (fiduciary responsibility, goal interdependence and competence) among owners of 498 family firms participating in the MassMutual 1995 Survey of Family Businesses.

The results of the study indicate a significant decrease in TMG trust and a significant increase in family discord between the first and second generations of family ownership. The duration of familial involvement is shown to be positively related to family discord and the findings are consistent with the notion that family discord mediates the negative relationship between duration of familial involvement and the level of TMG trust. The results also support the idea that the intensity of familial involvement in the top management group moderates the relationship between family discord and TMG trust in first and second generation family firms such that high intensity TMGs show a higher level of interdependence between family discord and TMG trust than low intensity TMGs. Finally, the data suggest that the dynamics of trust relationships within TMGs comprised of three individuals may be more vulnerable to family influence than either larger or smaller TMGs.

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