Psychological Ownership in Heterogeneous Family Firms: A Promising Path and a Call for Further Investigation

5.1 Clarifying the Connection Between Legal, Economic Ownership, and Psychological Ownership in Family Firms

Corporate ownership has been mainly viewed from a legal and economic perspective in the light of mainstream theories such as Agency and Property Rights. Based on the literature review by Foss et al. (2021, p: 306), ownership can be defined as “a tool that, when deployed correctly, aligns incentives among parties and leads to high economic value creation”. Salient in its nature is the notion of control over resources that the ownership refers to (Foss et al. 2021). In the family business literature, ownership has been suggested in a wider perspective, such as varying along six dimensions which tend to interact with each other: (i) the number of families or family members involved in ownership; (ii) the proportion of family ownership; (iii) the dispersion of ownership among families or family members; (iv) the relationships that exist among owners; (v) the demographic characteristics of owners; and (vi) the nature of involvement of owners in governance bodies (Daspit et al. 2018). While inclusive of qualitative criteria that ascertain the level of influence of the owning family and therefore the value creation, this conceptualization does not address the psychological component that is an integral part of those who legally own the business shares and have the control over the business resources and those who do not but feel as if they own these shares while engaging in behavior and decisions that affect the business accordingly.

Given this fine line, family business researchers have managed to put forward different levels of affective commitments of non-owners from a legal perspective, such as non-family employees, depending on their degree of psychological ownership (Sieger, Bernhard, and Frey 2011; Bernhard and O’Driscoll 2011). At the same time, research has suggested that family owners can view their ownership differently, in terms of the financial versus the emotional value that it conveys to them, leading them make different decisions such as about dividends or and divestment (Labaki and Hirigoyen 2020; Labaki 2010). Hence, we encourage researchers to look into ownership of family and non-family members as inclusive of a psychological dimension, beyond and/or in addition to the legal and economic perspective, in order to complement our understanding of the heterogeneity of family firms behaviors.

Considering the levels of analysis: Individual versus Family or Collective Psychological Ownership.

Payne (2018) recently called for more theorizing in family business research to better understand and examine the “how” and “why” of family businesses. Particularly important are psychologically-based approaches to understanding family business behaviors and nuisances (Gagné, Sharma, and De Massis 2014). Accordingly, the concept of PO offers promising opportunities for family business scholars to deepen their understanding of the micro-foundational process within family business and their impact on decision making (De Massis and Foss 2018). However, to realize its full potential in the field of family business, two important issues need to be addressed. Firstly, majority of the studies in family business have treated PO as an individual orientation. Liu et al. (2012, p: 870) pointed out that PO is ‘plausibly a cross-level or meso-theoretical phenomenon in that the construct ties the individual to a larger external entity’. Particularly important for the field of family business in terms of understanding the sources of heterogeneity is the treatment of PO at the collective rather than the individual-level. Rantanen and Jussila (2011) proposed a family-centric specification to collective PO, grounded in the work by Pierce and Jussila (2010). Termed collective psychological ownership of family over business (F-CPO), F-CPO captures the fusion between family and business and reflects the realized family influence on and in interaction with the business. F-CPO not only focuses on the realized influence of the family on the business, but also on how territorial motives – a family’s need for home and stimulation – may serve as a motivational base for family business behaviors (Gómez-Mejía et al. 2007).

In their conceptualization of F-CPO, Rantanen and Jussila’s (2011) hinted at the importance of shared notions of responsibility and obligations in and towards the family business. This notion is consistent with recent research highlighting the importance of notions of felt and moral obligation as well as shared feelings of responsibility arising out of family ownership (Feliu and Botero 2016). Accordingly, incorporating the notions of shared responsibility may be particularly important in the conceptualization of PO at the collective and familial-levels. Similarly, Pierce and Jussila (2010) suggested that collective PO is an extension of PO at the individual-level. This implies the collective PO can only exist if and when an individual has PO. However, within in family businesses, it may be highly plausible for F-CPO to exist in the absence of individual PO. If the latter is true, this has important implications for how family business scholars conceptualize PO. The genesis of collective PO feelings is said to lie in the social identity motive (Tajfel 1981); that is individuals who need to see themselves and to be seen by other family and non-family members as a part of the family unit (Barnett and Kellermanns 2006; Vincent Ponroy and Pradies 2019). This suggests that in an absence of a social identity motive, the collective sense of ownership is unlikely to develop. Therefore, future refinement of the concept of F-CPO should take into account notions of in-group out-group perceptions as well as self-categorization, and in particular to consider the role of social identity motives in defining the existence of PO at various levels within a family firm.

What distinguishes family firms from other types of organizations is the existence of a collective and significant ‘us’ that is called ‘family’. The family firm literature has shown that family businesses foster close relationship between family members, in part due to the existence of family-based social capital (Dyer 2003; Le Breton-Miller and Miller 2009; Miller et al. 2009). This feeling of being part of a significant ‘us’ enables them to call the family business ‘ours’ (Pierce and Jussila 2010; Rantanen and Jussila 2011). For collective PO to arise ‘it is deemed necessary that the group’s experiences are such that each group member comes to recognize his/her shared control over the target’ (Pierce and Jussila 2010, p: 818). In other words, it is the group that collectively has to gain control over the target of possession – in this case the family business. Because of the shared communalities, such as a common history, social status, familiarity, and enduring attachment of its members (e.g., Gómez-Mejía et al. 2007) that exists among the members of the aforementioned significant group of family members, it is more likely that this group calls the family firm ‘theirs’. In other words, this group is more likely to gain a feeling of ‘ours’ over the family business. We therefore call for the inclusion of the family or collective dimension of PO in future research.

5.2 Incorporating the Different Foci of Psychological Ownership

Pierce, and colleagues (2001; 2010) theoretically indicated that PO can be felt over numerous targets, such as the job, a task and the organization. In this essay, we focused on two targets and two orientations: an individual-oriented feeling of ‘mine-ness’ over the organization, a collectively-oriented individual feeling of ‘our-ness’ over the organization, and an individual-oriented feeling of ‘mine-ness’ over the job. This shows that the PO concept is complex in nature, and it depends on (1) the person who feels it; i.e., the employee or the CEO (2) the orientation, i.e., individual or shared, and (3) the target of these feelings, i.e., the job or the organization. It is theoretically viable that CEOs perceive their collective and individual PO in a different way than employees, especially when taking into regard the CEOs’ broader control options over the organization (e.g., stemming from their position or stemming from stock ownership in the family firm). In advancing our understanding of PO in family firms, we encourage a multi-stakeholder perspective. Stakeholder perspectives have been used by family business scholars to examine the goals family firms pursue and their performance with respect to internal and external stakeholders (Zellweger and Nason 2008; Déniz-Déniz, Cabrera-Suárez and Martín-Santana 2017) as well as the succession process (Daspit et al. 2016). We believe that such a perspective has important implications for understanding the emergence of PO among key non-family stakeholder groups as well.

Non-family employees and managers in family firms are not only key internal stakeholders but also active contributors to the life and development of the family firm (Tabor et al. 2018). Despite their outsider status, prior research has shown that non-family members can develop PO (Bernhard and O’Driscoll 2011; Ramos et al. 2014). However, only a limited number of studies have specifically sought to examine the differences in PO among family and non-family employees (Ramos et al. 2014) or across various other stakeholders within the family firm. Consequently, we have limited understanding to whether non-family employees or non-family managers may experience the same PO as family members. Hence, it may be worthwhile to adopt a multi-stakeholder view to explore how individual and collective-levels of PO can be differentiated among those individuals who are not part of the owning family unit or have kinship ties to it (Karra, Tracey, and Phillips 2006; Ramos et al. 2014).

5.3 Exploring the Diversity of Targets of Psychological Ownership

Psychological Ownership can be felt for a wide variety of targets, such as one’s creations, work, physical-material objects, ideas, people, the organization, amongst others (Pierce, Kostova, and Dirks 2003). Adam Smith, for example, stated that everybody ‘has property in his own labor’, (Smith 1776–1976) which to his belief was the original foundation of all property. According to Pierce, Kostova, and Dirks (2003, p: 94) “attributes such as [joint] attractiveness, [joint] openness, and [joint] manipulability render the target more or less subject to PO. At a minimum, the target must be visible and attractive to the individual, it must be experienced by the individual, and it must capture the interest of attention of the individual”. The target must be manipulable, because only then will it be capable of potentially serving the need for efficacy. It needs to be attractive, socially esteemed, and self-revealing if the individual is going to use it to serve the self-identity motive. Finally, the target needs to be open (available, receptive, and hospitable) to the individual, because only then will it enable the individual to find a home within it. Furthermore, viable targets of ownership are those whose attributes can facilitate the acts of individuals controlling, coming to know, and investing the self into them (i.e., the routes to PO) (Pierce, Kostova, and Dirks 2001, p: 94).

The question then is how this applies to family businesses, in which family, business and ownership are closely intertwined. While the literature indicates that the family firm itself is very likely to become a strong target of possession – especially among family members and/or founders of the enterprise (e.g. Rantanen and Jussila 2011), not all family firms are alike. Labaki, Michael-Tsabari, and Zachary (2013) identified different archetypes of family businesses on a continuum of emotional interaction between the family and the business, ranging from enmeshed (highest level), to balanced, and to disengaged family businesses (lowest level). Therefore, PO in enmeshed family businesses can be predominantly geared towards the family as the target of possession whereas at the other extreme PO in disengaged family businesses can solely focus on the business as the target of possession. Even at the business level, there might be variations in PO targets as family firms tend to evolve into a cluster of businesses over time (Michael-Tsabari, Labaki, and Zachary 2014), each of which might represent a more or less relevant target to the family. We encourage researchers to further explore these nuances of PO, alluding to the multidimensionality and variations of its targets in the eyes of the owners and the managers across family firms, as well as the conditions that enable them to directly or indirectly benefit the family and/or the firm(s).

Similarly, we believe that future research needs to consider other unique characteristics of family firms as additional targets of ownership. For instance, Zellweger et al. (2012) suggested that a family firm brand allows them to leverage a valuable idiosyncratic resource: the family nature of the firm. Future research may wish to consider to what extent the family firms’ brand is a target of ownership in itself (Astrachan et al. 2018) and the conditions and routes through which both family and non-family employees may develop ownership feelings towards the family firms’ brand. Future research may also explore whether individual or collective/familial PO is a necessary condition to developing ownership feelings towards a family firms’ brand or vice-versa. Treating the family firms’ brand as a target of ownership can have important implications for our understanding of how family brands can influence the owning family and non-family members emotions, as well as why family and non-family employees may engage in particular decisions and behaviours to either protect or enhance the family firms’ brand.

Equally important may be to consider the outputs of family firms as potential targets of ownership. Product innovation is one important output (De Massis et al. 2015) for family firms’ abilities to renew themselves in dynamic environments as it involves the creation and expansion of organizational competences over time (Cucculelli, Le Breton-Miller, and Miller 2016). One of the pertinent issues in the family business innovation literature has been to understand how family firms manage innovation activities and why some family firms choose to engage in riskier types of innovation than others (Calabrò et al. 2019; De Massis et al. 2018). Particular interest in this area has been focused on the tensions and paradoxes that exist between traditions and innovation in family firms (Ingram et al. 2016). We believe treating innovation outcomes in family firms - such as new products - as targets of ownership, which are sometimes tied closely to the history and traditions of the family firm itself, can further illuminate how and why some family firms may invest more in innovation-related activities and not others (De Massis et al. 2015). For instance, prior research has shown ownership to cause some individuals to embrace the adoption of new suggestions while simultaneously shunning the adoption of other suggestions (Baer and Brown 2012). It could be argued that the family and non-family employees’ strong ownership feelings towards a particular innovation output may serve as either enabler or barrier to future innovations. This may have implications to how innovations and traditions are perceived and even reconciled in the family firm. Accordingly, we suggest that future research investigates such lines of reasoning, considering how incremental and/or radical innovations in family firms (Hu and Hughes 2020), or those that cause a break from family traditions themselves may influence ownership feelings within the family firm.

5.4 The Dynamic Nature of Psychological Ownership in Family Firms

Current treatment of PO in the family business literature has been overwhelmingly static in nature, thus largely overlooking its dynamic nature. Pierce, Kostova, and Dirks (2001) assumed that ownership feelings may fluctuate over time as a result of various situational and personal circumstances. Consequently, a dynamic and longitudinal approach to PO has important implications for understanding the nature of particular decisions and behaviors in family firms, as well as how PO is cultivated, maintained or even enhanced in the family firm context. Particularly lacking currently is future research connecting and examining PO with respect to both the chrono and exo-contexts in relation to family firms. Scholars have recently called for greater scrutiny on the chrono and exo-contexts (Debellis et al. 2020). The chrono-context includes succession, business, family, individual life cycles, turnaround/turmoil, the COVID-19 (coronavirus disease 2019) pandemic, and economic crises, while the exo-context includes political, economic, social, and technological factors, as well as industry dynamics. Both these contexts have the ability to impinge on individual personality traits and feelings or family backgrounds.

Regarding the chrono-context, we encourage future research to build on the work of Rau, Werner, and Schell (2019) and to further consider the temporal nature of PO. Recently, Kotlar and Chrisman (2019) pointed out that many family firms are faced with a trade-off between continuity and organizational change. As such, decisions concerning organizational restructuring in a family firm (King et al. 2022; Ramos et al. 2021) can lead to substantial changes in individual status, roles, control, and accountability over the enterprise as well as in ownership status. In such situations both family and non-family employees are likely to experience heightened frustration and stress as the three fundamental motives of PO, self-identity, efficacy, and sense of belonging (Pierce, Kostova, and Dirks 2001), are altered (Pierce and Jussilla 2010). Hence, longitudinal approaches which take into account how PO at both the individual and collective-levels change as family firms respond to crisis such as Covid-19 (De Massis and Rondi 2020; Kraus et al. 2020) or digital change (Correani et al. 2020) are highly warranted.

A further promising avenue of research is investigating the development and transference of PO among family members across generations as well as among new and longer-tenured non-family employees. Exploring how the pre and post-succession experiences of next-generation family members shape their PO may give further insights into the commitment and ultimately effectiveness of next-generation family firm leaders (Sharm and Irving 2005). Equally worthwhile may be investigations into how critical events during the succession process (Cabrera-Suárez, De Saá-Pérez, and García-Almeida 2001) may either enhance or diminish next-generation family members PO. Besides the norms of primogeniture, the choice of successor is becoming increasingly driven by their integrity and commitment to the business (Schell et al. 2020). Such shifts in attitudes towards the selection of successor may have important implications for the development of next-generation family members PO. From a signalling theory perspective, the event of non-selection of a successor (Schell et al. 2020) might send a negative signal to next-generation family members regarding their potential as future leaders, thereby influencing their PO. Therefore, we encourage future research to consider more deeply the role of PO during the entirety of the succession process. The transference of PO may not only be of importance to family members but also non-family employees and managers. Querbach, Waldkirch, and Kammerlander (2020) found that job benefits relating to status lead to more employee satisfaction in family firms compared to non-family firms. This suggests that non-economic incentives offered by family firms to their non-family employees may have substantial implications for their commitment and positive attitudes towards the family firm. Similarly, Mustafa et al. (2018) suggested that long-tenured family-employees and those in managerial roles had higher levels of PO compared to others. In line with such arguments we encourage future research to also investigate whether longer-tenured non-family managers and employees can transfer their PO to new hires. Similarly, it could be quite plausible that non-family members are more likely to develop collective PO rather than individual-level PO. Nevertheless, such issues warrant further investigations.

Business exit is arguably the most drastic, irreversible, and fundamental strategic action that a firm can enact (De Tienne 2010). Recent developments in technologies and even changes to industry conditions has resulted in some family firms experiencing either poor performance or organizational decline (Cater and Schwab 2008; Laffranchini, Hadjimarcou, and Kim 2020). The owning family’s emotional attachment to the family firm has been found to be an important factor in their decision to endure with increased financial distress rather than exit the firm (Chirico et al. 2020). Consistent with research showing that entrepreneurs with PO are more likely to persist with their ventures when they experience conditions of high adversity (Zhu et al. 2018), we encourage future scholars to more deeply consider how the performance and/or non-performance of a family firm influences family and non-family members PO. Equally worthwhile may be to explore how both the individual and collective-levels of PO influence interpretations and responses to industry dynamics and conditions. In conducting research to ascertain how PO fluctuates over time in family firm and in line with best practice, we recommend future researchers to consider a variety of novel research methods such as longitudinal data across multiple time points, Interpretative Phenomenological Analysis (IPA), longitudinal or historical case studies.

5.5 Addressing the Bright and Dark Side of Psychological Ownership: A Leadership and Governance Perspective

Despite the numerous benefits that feelings of ownership bring to organizations and individuals, scholars have also acknowledged that there is a ‘dark side’ to PO (Cocieru et al. 2019). The dark side of PO may lead to a tendency to feel territorial over a particular target. Dirks, Cummings, and Pierce (1996) argued that people feeling PO toward a target may not consider revolutionary changes as necessary due to self-serving biases, and that they will likely resist subtractive changes because they will adversely impact their self-continuity and sense of self-esteem. This suggests that family and non-family employees may resist change in the family firm or the adoption of more radical strategies (Kotlar and Chrisman 2019). Hence, further research should ideally examine how PO among family and non-family members may lead to resistance behaviors.

From a leadership perspective, family firms are said to differ from other firms, due to their leaders’ emotional considerations, high levels of influence on the firm (Carney 2005), and comparatively long tenures (Bernhard and O’Driscoll 2011; Gómez-Mejía, Cruz, Berrone and De Castro, 2011; Fries, Kammerlander, and Leitterstorf 2021). While debate continues as to whether family leadership is beneficial to family firms or not (Miller, Minichilli, and Corbetta 2013), research has recognized that transformational and benevolent leadership styles have positive effects on non-family employee’s PO in family firms (Bernhard and O’Driscoll 2011; Zhu et al. 2013). However, we contend that not all leadership styles may have such positive effects of PO. In fact, nepotistic leadership styles may not only lessen the PO of both family and non-family members, but also transform positive ownership feelings into destructive ownership feelings. This may ultimately lead to counter-productive and un-steward-like attitudes and behaviors (Fries, Kammerlander, and Leitterstorf 2021). Equally important may be to consider how the family leaders’ own PO may influence their leadership styles and behaviors. For instance, is there an optimal level of PO after which positive leadership styles become destructive ones?

From a governance perspective, Sieger, Zellweger, and Aquino (2013) state that “conventional wisdom tells us that no one cares about a company as much as its owners. Making non-owning agents think and act like owning principals is therefore a perennial challenge for many organizations.” (Jensen and Meckling 1979). Research shows that PO has the ability to align the interests of agents and principals (Sieger, Zellweger, and Aquino 2013), leading individuals to perform well and to be committed to the firm’s goals irrespective of agency controls. Their tendency of shirking or opportunism is likely to be overshadowed by their PO towards the firm. Individuals with high levels of PO are less affected by monitoring or incentive alignment, in contrast to individuals who feel less like an owner. These agency controls may even have a reverse effect on their pro-organizational behavior, although Sieger, Zellweger, and Aquino (2013) nuance this stance. These authors find that under low levels of monitoring, the positive relationship between agent’s psychological ownership and their individual-level entrepreneurial behavior is stronger, while it is lower when monitoring is high. The question arises whether these findings remain intact in the context of family firms, which are often high-trust environments.

Psychological ownership’s roots are based on self-interest which provide for a better utility function than shirking. Contradictory to what might be expected, psychological owners do not lack self-interest (such as the fulfillment of their needs for efficacy and effectance, self-identity, social identity, and place). This suggests that non-owning family managers may feel responsibility to perform well not only for the greater good of the family business, but also for themselves (Fong and Tosi 2007). Their utility may be better served when they act as psychological owners than when they default to shirking and free riding behavior. It follows that agency controls such as pay incentives and monitoring may be less effective on these agents as their individual and collective psychological ownership grows.

The insight that family firm managers experience higher levels of individual and collective PO towards the family firm, may shed new light on the question whether family owners should apply monitoring or pay incentives to their family and non-family managers; in other words, whether non-owning family managers can be trusted to act in the best interest of the family business. With high levels of individual and collective PO in place, those family managers may be less likely to act opportunistically, because PO provides for the conditions of an alignment of interest between the principal and the agent. This is possible because family managers with high individual and collective psychological ownership show greater effort, extra role-behavior (Van Dyne et al., 1995), and higher organizational commitment towards the business (e.g., Druskat and Pescosolido 2002; Vandewalle, Van Dyne, and Kostova 1995; Van Dyne and Pierce 2004). Moreover, because they feel and act as owners, even if they are not in a legal sense, their interests can be more in line with the interests of the legal owner.

The heightened sense of responsibility and accountability that originates from IPO and CPO (Avey et al. 2009; Pierce, Kostova, and Dirks 2001) and which we often find in family businesses (Henssen et al. 2014), also creates an atmosphere of trust and ‘our-ness’ (cf. Pierce and Jussila 2009) between the principal and the agent, which may lead to a natural alignment of interests. Monitoring or offering pay incentives by the principal may question this atmosphere of trust and ‘our-ness’. Thus, imposing agency controls on non-owning family managers that feel and act as psychological owners may be counter-productive and may unnecessarily heighten agency costs in family businesses.

As family firms are emotional arenas, future research may wish to also examine how emotional experiences between family business members shape the development or the decline of individual and familial PO. In the same vein, the formal governance mechanisms might not be the only ones that ought to be considered in the alignment of interests between agents and principals. Different levels of identification to the family business can be associated with different levels of expressed emotions, such as regret (Labaki and Hirigoyen 2020), guilt (Bernhard and Labaki 2021), and the joy of work (Henssen and Koiranen 2021), therefore to different behaviors in the family firm. As these emotions can be individual and collective, it would be of interest to explore the connection between collective/individual emotions and the collective/individual PO. Additionally, Labaki and D’Allura (2021) suggested ‘emotion governance’ mechanisms to influence the intra- and inter-personal emotion management of family members with various levels of identification with the family business. Future research may consider analyzing the moderating role of both traditional formal governance and emotion governance on the relationship between the owners and managers’ PO and (positive or negative) behavior. This can lead to practical implications on how to balance PO in a way to leverage its positive impact and to reduce its dark consequences on the family business.

5.6 Measuring Psychological Ownership in Family Businesses

Evert et al. (2016) suggested that one of the major challenges facing the field of family business is to increase reliability and validity of variables and constructs used. One particular challenge related to F-CPO is the development of a clear measurement instrument for it (Rantanen and Jussila 2011). Broadly, F-CPO can be differentiated from individual-level PO in that it is cast as a collectively held cognitive state (we, and I, collectively agree that this is OUR business); whereas individual PO has been presented as a state that reflects a personal sense of ownership (this business is ‘mine’). Pierce and Jussila (2010) further stipulated that collective PO may not reside in the mind of each individual member of the collective, instead it resides in the group and at the intersection of their shared mental model. Accordingly, F-CPO may be fundamentally different for two or more family members or even family members across generations (Rau, Werner, and Schell 2019). Given that the collective forms the unit of analysis and not the individual, aggregating individual PO in formulating F-CPO may be insufficient to properly account for the emergence of collective cognition (i.e., a family’s mind of its own), as is it missing from the simple aggregation of personal feelings of ownership. Currently, the family business field lacks a clear operationalization of the F-CPO scale. Some progress has been made, however. For instance, by developing a collective PO scale, Henssen and Koiranen (2021) recently showed that family firm CEOs made a clear distinction between their individual and their collective PO. Nevertheless, the development of this scale largely involved adaptation of existing items at the individual-level of PO to that of the collective -level. Consequently, as a first step in the development of an F-CPO scale, we encourage future family business scholars to build on Pierce, Jussila and Li’s (2017) and Henssen and Koiranen’s (2021) work to develop a bespoke scale for the family firm context. An F-CPO measurement may therefore provide an avenue to further differentiate this concept from similar concepts in the family business literature such as family identification (Matherne et al. 2017). Additionally, the use of qualitative methods such as diary-based studies may be helpful in exploring the nature of ownership feelings among both non-family and family members in family businesses (Spowart and Nairn 2014).