Family Business Review

Volume 22 Number 1
March 2009 65-81
© 2009 Family Firm Institute, Inc.
10.1177/0894486508329115

Updating Systems Concepts in Family http://fbr.sagepub.com

Businesses
A Focus on Values, Resource Flows, and Adaptability
Brian Distelberg
Michigan State University
Ritch L. Sorenson
University of St. Thomas

This article extends and expands current systems views of family business and provides a framework for interpreting family busi-
ness holistically. The framework extends the definition of family-first and business-first systems and adds three categories that
typify the gradations of firms that represent balanced systems emphases. In addition, this article discusses the goals, resource
transfers, strengths, and limitations of each type of system and describes how firm adaptability and resource flows influence and
change these family business systems; it argues that to understand family business health, one must understand the values and goals
that guide the family, business, and ownership systems, as well as the overall family business system; and it presents an inclusive
definition of family and business based on systems membership.

Keywords:  family; business; adaptation; values; development; resources; goals; Systems Theory

Although the field recognizes that different types of
families exist, not much has been done to determine
which differences really matter. . . . Do not assume
that what was a problem for one family business will
be so in another.
Sharma, Chrisman, and Chua (1997, p. 18)
1997). However, a potential problem involves the assump-
tion that success can be measured by a relatively narrow set
of variables, such as generations of ownership in a com-
pany, business growth, and levels of conflict.
Although this research is beneficial, these a priori goals
may not meaningfully describe success for all family busi-
nesses. For example, even though succession has been a
primary indicator of success (Galvin, Astrachan & Green,

T heoretical strides were made during the early stages of
development in the field of family business research.
During the first developmental phase, Ward (1987) pointed
out that any understanding of family businesses must incor-
porate the balance between two separate but overlapping
systems: the family and the business. As such, there was a
surge of studies looking at factors associated with this bal-
ance (Dyer & Sanchez, 1998; Sharma, Chrisman, & Chua,
1997). This phase also led to a list of developmental tasks,
success goals, and strategies for maximizing the function-
ing of the family business system (FBS), (Sharma et al.,
Authors’ Note: Address correspondence to Brian Distelberg, 2490 Breton
SE, Grand Rapids, MI 49546; e-mail: bdistelberg@earthlink.net.
2007; Sharma, 2004), a few researchers have noted that suc-
cession is not a major concern for some family businesses
(Dean, 1992; Wong, McReynolds, & Wong, 1992).
The implication of these measures is that family busi-
nesses that do not measure up to economic goals are some-
how “deficient,” thereby resulting in suggestions that such
businesses as have a lack of self-control (Lubatkin, Ling &
Schulze, 2003) or “myopic altruism” (Gomez-Mejia, Nuñez-
Nickel, & Gutierrez, 2002). This perspective has led a few
theorists to conclude that healthy family systems and healthy
business systems are fundamentally at odds with each other
(Fleming, 2000; Levinson, 1971). Although this conclusion
may be appropriate for some family businesses, it may over-
look the role that systems and system dynamics in particular
play in healthy FBSs. As such, healthy FBSs—those that

65
Downloaded from fbr.sagepub.com at FFI-FAMILY FIRM INSTITUTE on November 4, 2011
66   Family Business Review
achieve system values and goals—may not fit existing defi-
nitions of family business success. The larger issue is how to
account for more of the variability in, and create a more
inclusive view of, the broad range of family businesses and
in this way expand our model of health for family businesses
beyond development tasks or economic performance. This
article draws on the existing systems-based research from
family therapy, family business, and organizational litera-
tures to develop a more inclusive view of health. It highlights
important concepts, such as the variance of families and fam-
ily businesses in regard to internal values, goals, resource
transfers, and adaptability.
Systems Theory in Family Business Studies
Since the early 1980s, the field of family business has
acknowledged the importance of using systems-based theo-
ries to understand the complex world of family businesses.
The first attempt to frame family businesses in systems the-
ory came from Taguiri and Davis (1982/1996). In their three-
circle model, family businesses are framed as three
interlocking systems: the family system, the business system,
and the ownership system. This theoretical lens ignited the
field’s theory construction development and focused the
research of family businesses. This framework continues to
be a strong foundation to the field (Sharma & Nordqvist,
2008). In addition, this systemic frame of family businesses
helped to unify the field. Theorists from family therapy, busi-
ness management, and organizational theory backgrounds
found common language in systems terminology.
One example of this unification is found in the work of
Gersick, Davis, Hampton, and Lansberg (1997). Their
developmental model of family businesses was one of the
first models for family businesses that made a real attempt
to look at family businesses as three independent yet inter-
dependent systems. The systems frame of the three-circle
model allowed these theorists to incorporate fundamental
knowledge from other fields, such as their inclusion of
Carter and McGoldrick’s family development over the life
span (1998). This process highlights the importance in the
family business literature of seeing the family business as
separate but overlapping systems or, in systems terms,
independent and interdependent subsystems, each with its
own goals, values, and development. Moreover, there are
important issues to consider from the individual system
level of analysis, as well as the entire FBS level of analysis.
To make sense of these levels, it will be helpful to differen-
tiate three levels of analysis: the individual level, the group
level, and the family business level. Each level of analysis
Downloaded from fbr.sagepub.com at FFI-FAMILY FIRM INSTITUTE on November 4, 2011
represents a different frame of the same interdependent
system (Bronfenbrenner, 1979). The individual level is not
independent of the group, and the group is not independent
of the whole (i.e., the FBS). Each level is a definable sys-
tem, with its own boundaries, goals, needs, and values, but
each is also influenced by (and so influences) other systems
through a shared environment. For example, the individual
can be considered a system with internal and external pro-
cesses (Bronfenbrenner, 1979). Individuals are also part of
a group. The family business field has historically recog-
nized three possible groups in family businesses: the family
system, the business system, and the ownership system
(Sharma & Nordqvist, 2008; Taguiri & Davis, 1982/1996).
What makes family businesses unique is the third level of
analysis—the FBS—which encompasses the individual,
the family, and the business systems.
Thinking of a family business as a system with nested
systems (Bronfenbrenner, 1979; Taguiri & Davis, 1982/1996)
has forced the field to avoid static typologies based on own-
ership or individual roles, because these systemic frames
emphasize systemic interdependent dynamics between the
parts and the whole of the entire FBS. In this case, the func-
tion of the whole and the individual parts are all important
and are intrinsically tied together. An individual can be a
member of both the family system and the ownership sys-
tem. Being a member of one system does not take away from
an individual’s being associated to another.
This systemic frame requires multiple levels of analysis
or a holistic view of the systems within the family busi-
ness. One cannot evaluate the individual without regard to
his or her group and FBS level (and vice versa). In other
words, one cannot understand the family system group
level without understanding the interdependence between
the family, business, and ownership systems. Recent
research and theory have illustrated the importance of hav-
ing multiple levels of analysis. For example, some research-
ers have concentrated on the reciprocal effect between the
family system and the business system; therefore, these
researchers are assessing group-level effects in relation-
ship to FBS-level effects (Stafford, Duncan, Danes, &
Winter, 1999). Studies that take this systemic view of the
entire FBS often support the idea that success in the family
and success in the business depend on the effective man-
agement of both the family and the business (P. D. Olson
et al., 2003). Furthermore, this interdependence between
the three systems is arguably the defining characteristic
that sets the world of family business apart from other
fields of study (Sharma, 2004). Family business considers
the unique overlap between the family and business sys-
tems (Sharma & Nordqvist, 2008).
 Distelberg, Sorenson / A Focus on Values and Resource Flows   67
The Family System
Regarding the family system (a group-level analysis),
the individual members of the family are the subjects of
interest. These individuals form the family system, along
with their interactions with one another within their imme-
diate environment (Bubolz & Sontag, 1993). These systems
share common goals and resources, and the interactions
within these systems revolve around shared goals and
resource management. For example, Carter and McGoldrick
(1998) have laid out a number of developmental goals, as
well as the resources needed to achieve such developmental
goals within family systems. This framework would also
apply to the family system within an FBS. However, within
an FBS, the family system goals and resources are more
valued than the business system goals and resources
(Sharma et al., 1997).
It is not the family system alone that characterizes an
FBS but the interactions among all its systems. In addition,
as generations are added, the FBS has multiple family sys-
tems to consider. Each family has its own values, goals, and
development, but they are interconnected as a larger family
system, as well as an FBS. As such, these overlaps create
unique systems in family businesses. Drawing boundaries
where the family system ends and another or larger system
begins has been a difficult task, as reflected in debates
regarding the definition of family (Boss, 1987; Vayda,
1983) and family business (Astrachan, Klein, & Smyrnios,
2002; Astrachan & Shanker, 2003). Through a systems
viewpoint—such as the one used in human ecology (Bubolz
& Sontag, 1993)—we can say that families are made “not
only of persons related by blood, marriage or adoption, but
also sets of interdependent but independent persons who
share some common goals, resources and a commitment to
each other over time” (p. 435).
With this systemic definition of family, all individuals
related by blood, marriage, or adoption are typically con-
sidered family. But individuals not related through blood,
marriage, or adoption but who share goals, resources, and a
commitment to the whole may also be considered family.
For example, a family business may hire a nonfamily mem-
ber. Over time, this individual may become incorporated
into the family in such a way that the family considers the
individual a family member, and the individual considers
himself or herself a member of the family as well. In this
case, the decision to include the individual into the defined
family group is a family decision. As a member of the fam-
ily, the individual has access to family resources. For
example, the individual receives an equitable share of the
family’s estate as if he or she is a biologically or legally
Downloaded from fbr.sagepub.com at FFI-FAMILY FIRM INSTITUTE on November 4, 2011
  
related family member. Key to this definition is shared
commitment over time. Other groups may share goals and
values, but families share specific goals and values unique
to the growth and health of the family system. In addition,
these shared goals and commitment are typically held
throughout life. They are not shared during a specific
period and then changed as individuals enter other groups.
Finally, an inclusive definition of family should include
Boss’s idea (1987) that we must be sensitive to the way
families define themselves; that is, there is a great deal of
boundary ambiguity, which can be navigated only via the
family’s personal definition of family.
We should note at this point that although individual
systems (e.g., family, ownership, and business) have com-
mon goals and values and share a commitment to the sys-
tem over time, individuals or systems within the whole may
vary in the extent to which they share goals, values, and
commitment. For example, some family members may be
unified, whereas others may not be, because of individual
differences and the internal system dynamics.
The Business System
Given that an FBS contains a business system, we need a
definition for the group-level business system. Based on the
tenets from the definition of family, this definition could be
stated as such: individuals who are employed by the business
or who share common goals, values, and commitment to the
whole. The interdependence and interactions of these indi-
viduals within their business environment create the business
system. This definition also includes Boss’s idea (1987) that
there could be some ambiguity regarding who is defined as a
member of the business system. There may be outside con-
sultants, board members, or individuals on leave of absence
who may be considered members of the business system if
both the business and the individual agree that the individual
is included in the group. A key to this type of inclusion is that
the business as a group determines who is a member; as such,
a litmus test for this type of inclusion is whether the indi-
vidual has relevant access to the group resources. Again, the
importance here is that the individuals within the group share
common goals and resources that relate to the health and
survival of the business system.
The Owner System
The ownership system boundaries are similar to the
business and family system boundaries in that the owner-
ship system shares common goals and values, as well as a
commitment to the system over time. The nature of this
68   Family Business Review
system is that it tends to have a great deal of overlap with
the family and business systems, especially during the early
developmental stages (Gersick et al., 1997).
From a systems perspective, the goal of any system is to
support the growth and development of the system. But the
ownership system cannot do so on its own, because its pri-
mary function is to manage the overlap between the family
and business systems (Gersick et al., 1997; P. D. Olson
et al., 2003; Sharma & Nordqvist, 2008) and to help keep
the other systems—primarily, the business system—healthy
and functioning. Much of the research in this area tends to
highlight the role of the ownership system in mediating
governance and strategic planning. The owner system may
encourage the family and business systems to clarify the
values and goals of (a) the family system, through family
meetings or family councils, and (b) the business system,
through reports and discussions at board meetings (Arnoff
& Ward, 2002; Habbershon & Astrachan, 1997; Tower,
Gudmundson, Schierstedt, & Hartman, 2007). The owner-
ship system brings to light the importance of shareholders,
board of directors and advisors, and governance meetings;
these play a crucial role in not only uniting values, manag-
ing resources, and crafting goals for the ownership system
but choreographing the balance between the family and
business systems. In cases where a board includes external
advisors, it helps the FBS adapt to the environment.
The FBS
The FBS can be defined as the family, ownership, and
business systems and the interactions among them.
Important to this definition is that this level of analysis be
located on the FBS level. This is an important premise
because not all individuals within the FBS share the same
group-level system. For example, there may be family
members who do not work for the family business, and
there may be individuals who work for the family business
but who have another family group-level system outside of
the FBS. But all these individuals are connected to the
larger FBS group through their membership in one of the
interconnected group-level systems, and because they are a
part of the larger system to varying degrees, they have an
effect on the larger system (Bronfenbrenner, 1979).
FBS Development
According to systems theory, a healthy system goes
through periods of transition, from one developmental
stage to the next (von Bertalanffy, 1969). The FBS is not a
static system; it has a developmental cycle. In addition,
Downloaded from fbr.sagepub.com at FFI-FAMILY FIRM INSTITUTE on November 4, 2011
each group-level system has its own developmental pro-
cesses. One example of this development process can be
found in the work of Gersick et al. (1997). Their model
proposes that FBSs change from single owners to sibling
partnerships to cousin consortiums. The difficulty with
studying the development of the FBS is that each group-
level system can have variations in development. For
example, even though family systems change from couple
formation (e.g., marriage) to death, the processes between
these stages can vary greatly (Carter & McGoldrick, 1998).
For example, individuals may marry and have children,
only to separate and continue to have children in successive
marriages. Thus, developmental trajectories can be quite
different. Taken together with the idea that group-level
systems in the FBS do not develop independently of the
other groups, trying to plot out the “success” stages of
development across an FBS is complex.
Rather than focus on the complexity, it is more effective
to determine a system’s ability to retain enough stability to
maintain system integrity and yet adapt to environmental
changes. For example, family systems theory and organiza-
tional theorists often view development as the ability of a
family or business system to organize a structure that is
functional to the health and survival of that system and also
to adapt when that structure no longer serves the values and
goals of the system (Daff, 2003; Forrester & Drexler, 1999;
Minuchin, 1974). Therefore, the systems frame moves
away from defining success by predetermined teleological
developmental stages and so focuses on a system’s stability
and its adaptability and functionality.
Healthy FBSs
Similar to the difficulty in defining a developmental tra-
jectory is the difficulty in defining success for an FBS. Since
the beginning of this field, research has focused on under-
standing how FBSs obtain success or achieve satisfaction.
There are two problems with the way in which this research
has addressed this issue. First, it often defines success for
these systems through such measures as return on assets,
growth in sales, annual sales, profits, number of employees,
and survival rate (Dess & Robinson, 1984; Kalleberg &
Leicht, 1991; Miner, 1997). Family business success is mea-
sured by the extent to which the business achieves one or
more of these measures, which typically focus only on the
business system. The problem is that we have yet to under-
stand what the entire FBS perceives as success (Castillo &
Wakefield, 2007; Sharma et al., 1997). Some studies have
attempted to assess the larger FBS by measuring levels of
 Distelberg, Sorenson / A Focus on Values and Resource Flows   69
perceived success (Danes, Rueter, Kwon, & Doherty, 2002;
Danes, Zuiker, Kean, & Arbuthnot, 1999; Zody, Sprenkle,
MacDermid, & Schrank, 2006). To fully understand FBSs,
measures should be developed that assess the overall FBS
and that reflect the systems within it.
The second challenge in predicting success is that suc-
cess or satisfaction is a perception that is highly tied to
systemic influence (Bronfenbrenner, 1987; Bubolz &
Sontag, 1993). For example, family systems theorists have
determined that an individual’s perception of satisfaction or
success is informed by a belief system and by the individu-
al’s assessment of the availability and use of the resources
needed to achieve one’s system goals (Bubolz & Sontag,
1993). In other words, there is a belief system behind tan-
gible, or objective, success indicators; therefore, the objec-
tive measures of success and the belief system work
together to create a perception of success. This is more than
likely the reason why subjective and a priori objective mea-
sures of success rarely correlate within the same study
(Hienerth & Kessler, 2006; P. D. Olson et al., 2003). To
understand success, we need to understand the values that
direct goal formation; then, we can look at the FBS’s access
to and transfers of resources in meeting its goals.
Values
Because FBSs contain nested group-level systems, each
system will have its own values (Bubolz & Sontag, 1993;
Davis & Stern, 1996; Gersick et al., 1997). For example,
the family system typically values the continued growth
and development of the family system, and the business
system typically values the growth and survival of the busi-
ness system. The challenge for the FBS level lies in incor-
porating the values of the business system, the family
system, and the ownership system so that the FBS has its
own values, ones reflecting a balance of the family system,
ownership system, and business system values. These FBS
values must take into consideration not only the values of
the family and the business but also the health and survival
of all three systems. Fortunately, unifying the values across
these systems seems to be something to which FBSs may
excel (at least in the first and second generations), given
that 82.9% of family businesses report a high degree of
unity in values (Galvin et al., 2007).
Two lines of research have given us some idea regarding
the values within FBSs. The first is that of agency theory
research. The primary concern of such research lies in find-
ing mechanisms where individual and collective values can
be united so that individuals are more inclined to subjugate
Downloaded from fbr.sagepub.com at FFI-FAMILY FIRM INSTITUTE on November 4, 2011
  
their individual values for the betterment of the collective
(Gomez-Mejia et al., 2002; Schulze, Lubatkin, Dino, &
Buchholtz, 2001). A second line of research—namely,
resource-based theories—have indirectly led us to a broad
understanding of the values inherent in FBSs. Although
resource-based research does not specifically address val-
ues, systems theories tells us that the decisions regarding the
transfer of resources are driven by the internal system values
(Bubolz & Sontag, 1993). The conclusions from these lines
of research show that resource flows in these systems are
rarely equitable. They usually favor either the family system
or the business system (Gomez-Mejia et al., 2002; Haynes,
Onochie, & Muske, 2007; Schulze et al., 2001). Some
researchers have titled this phenomenon the “duality of eco-
nomic and family ties” (Blanco-Mazagato, de Quevedo-
Puente, & Castrillo, 2007, p. 200). An appropriate assessment
from these studies is that there is a variance at the FBS level
based on the values regarding the health of the family
system, the health of the business system, and the health of
the FBS, which would hold the health of both the business
system and the family system as being important.
The limitation of these previous studies and others is
that the value orientation of an FBS involves more than an
overt self-report of values by one or more individuals
within the FBS. It is even more complex than a sum of the
values from all individuals within the FBS. Identifying the
value orientation involves assessing the weighted sum of
the values within the FBS and assessing the access to and
transfer of resources to meet the FBS goals. This is a
weighted sum because some individuals may have a greater
influence on the total value orientation (e.g., founders,
managers). Also, values are intertwined with the goals and
the resource use and availability within the FBS.
Proposition 1: Values at the FBS level will vary across
family businesses, with some emphasizing the family
system’s health and development, some emphasizing
the business system’s health and development, and
others emphasizing a balanced orientation with simi-
lar value given to the family and business systems.
In addition, values are influenced by (and so influence)
systems in a multidimensional fashion (Bronfenbrenner,
1979). For example, individuals within a particular country
will share certain values because they share the same
country-level system. In regard to family businesses, a
study by Lussier and Sonfield (2006) illustrates this
environmental effect on FBSs: In this work, the researchers
compared U.S. and French family firms. They found that
U.S. family firms have a smaller percentage of female
70   Family Business Review
family member employees working in larger companies (in
comparison to that of larger French companies); they spend
more time in strategic management activities; and they use
more sophisticated methods of financing. These differences
might be considered a country-level influence on the FBS
values, which in turn influence the goals and investment of
resources within the FBS. A recent study by Jorissen,
Laveren, Martens, and Reheul (2005) suggests that contra­
dictory findings within the field of family business may be
due to a failure to view family businesses as FBSs and so
account for multiple levels of influence.
Proposition 2: FBS values are influenced by their envi-
ronment—country, community, industry, state, and
regional values.
Proposition 3: FBS values are influenced by the values
of the family, business, and ownership systems.
There are many ways for future research to explore these
propositions. One example involves the use of multilevel
analysis techniques, such as hierarchical linear modeling.
To date, few studies in family business have taken advan-
tage of the ability to estimate hierarchical levels, or nesting
variance in terms of system levels, which is a primary func-
tion of hierarchical linear modeling (Raudenbush & Bryk,
2002). One structure for analysis would involve modeling
individuals at Level 1, group-level systems at Level 2, and
the FBS at Level 3. Another possibility would be to place
the individual outcomes at Level 1, the FBS at Level 2, the
industry at Level 3, and the country at Level 4. Social net-
work analysis is another useful tool for determining influ-
ence or measuring the existence of network influence within
the FBS (Frank & Fahrback, 1999; Marsden & Friedkin,
1994; Wasserman & Faust, 1994).
Goals
Like other systems, the FBS has major goals related to
the survival and betterment of the individuals and the FBS
as a whole. According to systems theory, goals within sys-
tems are directly related to values. Therefore, if an FBS is
driven by a family-first value orientation, then the goals
within the FBS will focus on the health and development of
the family system and may at times limit the health and
development of the business system. For example, transfer
of ownership (Ward, 1987), succession (Lansberg &
Astrachan, 1994), and profitability (Burkart, Panunzi, &
Shailfer, 2003) are often used as measurements of success
in family business literature. But in an FBS driven by a
family-first value orientation, business growth and even
Downloaded from fbr.sagepub.com at FFI-FAMILY FIRM INSTITUTE on November 4, 2011
succession may not be a priority (Castillo & Wakefield,
2007; Ward, 1987), as is evident in studies of immigrant
Chinese and African American FBSs (Dean, 1992; Wong
et al., 1992) in which the business was seen as little more
than a resource base to support the goals of family system.
In these cases, the FBSs defined success as having money for
the purpose of sending their children to college so that they
could have professional careers. Once the goal was reached,
the need for the business as a resource diminished.
This variance in FBS values can be considered as a con-
tinuum, with family-first values on one end and business-
first value orientation on the other. Despite having two poles,
this continuum is not necessarily a dichotomy, as is evident
when we look at the associated goals within an FBS, given
that not all FBSs with the same value orientation have the
same goals. For example, some family-first FBSs have the
goal of providing a constant resource base for their children
and grandchildren (Castillo & Wakefield, 2007), others are
driven to fulfill the vision of the founder (Ward, 1987), and
still others value the business as a temporary resource base to
be disposed of once the current family generation reaches its
family system goals (Dean, 1992; Wong et al., 1992). In
general, family-first FBSs favor the family system’s goals
over the business system’s goals and so move resources from
the business system to the family system to support the fam-
ily system’s goals. It should be noted that these moves do not
always deplete the business. Some moves are temporary
transfers that help the family system achieve a goal without
damaging or limiting the business system.
Because the ownership system functions as a mediator to
the family and business systems, the ownership in these
family-first FBSs look different from that of the FBSs that
might be considered business-first value oriented. For exam-
ple, the ownership system of family-first FBSs would likely
favor the development of the family system more so than the
development of the business system. This does not mean that
the business development is not valued, just that the family
development is weighted more than the business develop-
ment. In these cases, the ownership system may provide
resource flows to the family system that support family
growth and health. For example, they may encourage family
employment over nonfamily employment, and the owner-
ship system may primarily comprise family members.
Conversely, business-first ownership systems support the
growth and development of the business system. The owner-
ship system on this end of the continuum will more likely
incorporate individuals from outside the family system.
Proposition 4: The FBS chooses which goals are valu-
able on the basis of its overall value orientation.
 Distelberg, Sorenson / A Focus on Values and Resource Flows   71  

Resources In other words, how resources are transferred and what

resources are transferred is different between the FBS and
According to systems theories, resources constitute any
the nonfamily business because the FBS contains numerous
matter, energy, and information that can be converted into
familial relationship ties within and across the family, busi-
forms for attaining goals (Emerson, 1972a, 1972b). They are
ness, and owner systems (Pearson, Carr, & Shaw, 2008),
the ways by which systems meet needs and adapt to chang-
which can be used to transfer resources across systems
ing environments and stressors (Bubolz & Sontag, 1993).
more effectively than if those ties did not exist. In addition,
Many types of resources are available to the FBS, such as
this familiness quality of FBSs makes it extremely difficult
personal resources (skills, health, knowledge, and intelli-
to categorize resources, because the transfer of resources
gence), interpersonal resources (commitment, cohesion, and
varies greatly between individual FBSs.
social integrity), nonhuman resources (housing, clothing,
What we do know is that FBSs tend to favor moving
gasoline, money), and environmental resources (social sup-
resources from the family to the business when times are
ports and services). The family business literature has also
difficult for the business (Haynes, Walker, Rowe, & Hong,
identified a number of resources important to FBSs in par-
1999; Kaye, 1991; P. D. Olson et al., 2003; Stafford et al.,
ticular, such as tacit embedded knowledge (Cabrera-Suárez,
1999) and from the business to the family when the busi-
De Saa-Pérez, & García-Almeida, 2001), networks and
ness is doing well (Haynes et al., 2007). Therefore, to
social capital (Hoffman, Hoelscher, & Sorenson, 2006;
determine whether a business is a family-first FBS or a
Steier, 2001), passion (Andersson, Carlsen, & Getz, 2002),
business-first FBS, one needs to know the tendency of the
innovative spirit (Litz & Kleysen, 2001), and integrity and
business, to favor either the family or the business over
commitment to the business (Chrisman, Chua & Sharma,
time, not exclusively on resource flows during stressful
1998; Ibrahim, Soufani, Poutziouris, & Lam, 2004; Sharma
periods or times when the business is doing well.
& Rao, 2000; Sonfield & Lussier, 2005).
We also have to consider the effectiveness of this flow
Resources have differing degrees of value based on the
of resources. For example P. D. Olson et al. (2003) found
internal value orientation of the FBS (Bubolz & Sontag,
that FBSs that transferred family income to support cash
1993). For example, expecting family members to work for
flow problems in the FBS had businesses with lower finan-
no pay or low pay often occurs in family businesses
cial success. But FBS owners who transferred personal
(McConaughy, 2000). This transaction involves two
sleep into “time in the business” had higher revenues and
resources: family time and business performance or finance.
higher levels of perceived success. Therefore, resources
An FBS closer to the family-first orientation would value
have to be chosen on the basis of their perceived return on
the family time over the business performance and may
investment. It is difficult to say whether an FBS’s resource
view sacrifices of the family for the business as being unde-
flows are good or bad unless the underlying value orienta-
sirable, especially if the situation is seen as an investment
tion of the FBS is identified, as well as the effectiveness of
that will not provide family resources in the future.
the transfer in meeting the FBS goals. For example, if it is
However, an FBS of the business-first orientation would
a family-first FBS, then moving resources from the family
value the business performance over family time and may
to the business is acceptable only if that resource transfer is
prefer to avoid hiring a nonfamily member for more pay.
seen as a way to help the family. If that resource flow is
This example highlights the importance of understanding
seen as supporting the business at the cost of the family, the
the values behind the behaviors, given that the same behav-
FBS will likely view that transfer as a deficit. Understanding
ior can produce differing reports of success, depending on
this issue requires that our level of analysis stay at the FBS
the value orientation of the FBS.
level because the focus here is on the perception of the suc-
Proposition 5: FBS value orientations influence choice cess and health of the whole (i.e., individuals within the
and use of resources within the FBS. FBS may have varying perceptions of success).

Proposition 6: Resource transfers from one system to

Resource Transfers
A discussion of resource flows in the FBS is closely
aligned with the concept of “familiness” (Habbershon &
Williams, 1999), “the idiosyncratic firm level bundle of
resources and capabilities resulting from the systems inter-
actions” (Habbershon, Williams, & MacMillan, 2003, p. 451).
another system are seen as being effective when they
are in line with the value orientation of the FBS.
The types of resources valued, who has access to resources,
and how resources are transformed are all litmus tests for
the underlying values of the FBS. This is especially helpful

Downloaded from fbr.sagepub.com at FFI-FAMILY FIRM INSTITUTE on November 4, 2011

72   Family Business Review
to understand when the FBS has contradictory overt and
covert value systems. For example, a founder may say that
the FBS is a family-first business, but he or she may
frequently stretch the family resources to support the
business needs; therefore, an overt statement of value by an
owner cannot be taken at face value. It must be measured
alongside of resource movements, and it should be measured
against other individuals in each of the three systems.
Therefore, an FBS’s perception of success is based on the
following: the FBS’s value orientation, which then informs
the goal formation of the FBS and gives differing degrees
of value to resources. Once the values, goals, and resources
have been identified, the task for the FBS is to choose the
right resources to meet the FBS’s goals. For example, a
business-first FBS may favor transferring family resources
into the business, but it may want to transfer family labor
resources at certain times and family financial resources at
others. This decision is based on the values of the resource
and the return on the investment. If the resource has little
value but receives a large return, it is a better choice than a
highly valued resource that yields less in terms of the FBS’s
values and goals.
Proposition 7: FBSs that choose resource transfers
based on values and goals are more likely to report
being successful, even if they have not reached pre-
determined developmental stages.
Continuum of Value Orientations
Based on the previous discussion of goals, resources, and
values, it is possible to incorporate the value continuum,
resource transfers, and goal creation into a single visual
model for the variations of FBSs—see Figure 1. Across the
top of the chart is the value continuum, with the family-first
value orientation on the left and the business-first on the
right, with a balanced system in the middle. This figure also
shows potential goals, resource transfers, strengths, and
limitations of each orientation. Furthermore, there are five
types of FBSs: one that is balanced, two that favor the family
system, and two that favor the business system.
The closer an FBS is to a balanced orientation, the more
differentiation and collaboration help to manage interac-
tion within systems and adaptability across systems.
Differentiation means that individuals within a system have
the capacity to think and reflect, to not automatically
respond to emotional pressures—internal or external (Kerr
& Bowen, 1988). In systems characterized by differentiated
orientations, each system recognizes the benefit and cost of
Downloaded from fbr.sagepub.com at FFI-FAMILY FIRM INSTITUTE on November 4, 2011
the relationship with the other systems, each maintains the
relationship because it values the relationship, and more
important, each party recognizes that it is more successful
through its partnership than on its own.
FBSs that are characterized by undifferentiated systems
tend to exhibit multiple kinds of problematic relational
dynamics, such as fusion, disconnects, emotional triangles,
and projection of blame (Kerr & Bowen, 1988). They are
also likely to see rigidity in roles and rules (Davis & Stern,
1981; Minuchin, 1974). FBSs that are considered to have
reached a functional level of differentiation (Nichols &
Schwartz, 2004) are not driven by emotions and so can
adapt to change. They tend to tolerate and manage differ-
ences between individuals, subgroups (i.e., dyads, triads),
and systems.
Although it is possible to have some individuals within
the FBS that do not exhibit this level of differentiation, the
more balanced FBS requires differentiation at the FBS
level. The FBS as a whole must have the capacity to think
and reflect in managing the overall system. For example, a
more balanced and differentiated FBS will have compas-
sion for problems within the family system, but it will not
attempt to resolve those problems at the cost of the business
system or the entire FBS. A more balanced and differenti-
ated FBS is also aware of what the family brings, what the
business brings, and what sources outside the FBS bring to
the health and well-being of the whole.
Collaboration is a problem-solving and conflict manage-
ment process that finds solutions to help all those involved
achieve their goals (e.g., Rahim, 1983). FBSs that have a
collaborative orientation recognize the values of the family,
business, and owner systems and work toward achieving the
goals of each system. They do not necessarily achieve all
systems’ goals in every decision. But over time and over
multiple decisions, FBSs with a collaborative orientation
help achieve the goals among all systems (Sorenson, Folker,
& Brigham, 2008). Research demonstrates that family busi-
nesses that have a collaborative orientation are able to
achieve family goals and business success (Sorenson, 1999).
Thus, the goals of both the family and the business system
are achieved. The research also indicates that collaboration
is positively associated with formal decision making and
negatively associated with informal decision practices
(Sorenson, 1999). Formal decision processes may enable
individuals and systems to identify and express their values
and goals and then collaborately integrate them over time in
various decisions. Thus, FBSs characterized by differentia-
tion identify and accept differences, and FBSs characterized
by collaboration are able to integrate the values and goals of
each system. Furthermore, formalization is a mechanism
 Figure 1
Continuum of Value Emphases in Family Business Systems

Business Depleting Family Emphasis Balanced Emphasis Business Emphasis Family Depleting

Goals Family health Family health Family and business health Business health Business health

One-generation focus
Family development Aligned family and business Business growth Business growth
development
Multiple-generation focus and Maintained level of resources
potential succession Multiple-generation focus and for the family
succession
Maintained business Multiple-generation focus and
resource base succession

Resource Business and family
transfers resources supporting
family goals
Investing family and financial
resources in the family
Family to business flows
seen as family investments
to be used at a later time
Flow relatively equitable for
family and business
Collaborations and policies
guiding resource flows
Business to family flows
limited or seen as “loans”
that can ultimately help the
business
Business and family
resources supporting the
business
Investing (reinvesting) family
and financial resources in
the business

Strengths Family development Family development Family and business Business development Business development

Downloaded from fbr.sagepub.com at FFI-FAMILY FIRM INSTITUTE on November 4, 2011

development
Access to business Access to family resources
resources over time over time

Limitations Decline in business Less growth in business Resources spent to maintain Lack of growth in family Decline of family resources
resources system family and business resources
balance

73
Distelberg, Sorenson / A Focus on Values and Resource Flows   73  
74   Family Business Review
that may promote differentiation and collaboration. Creating
collaborative documents (e.g., succession plans) provides a
mechanism to formally capture FBS system goals and strat-
egies based on the input of multiple parties.
Thus, an important step in the development of FBSs is
the formalization within and across the FBS subsystems
(Gersick et al., 1997). Formal processes help to identify
values and goals and to transform resources for achieving
goals through coordination within the FBS (Bubolz &
Sontag, 1993). Within the business system, beyond estab-
lishing formal decision practices, formal organization would
include specifying job positions, creating job descriptions,
and creating hiring policies. Within the ownership system,
formalization would include holding regular shareholder
meetings and regular board meetings. It would also include
defining the roles of shareholders and board members, as
well as creating formal agreements among each group.
Within the family system, the family could establish formal
order by using family meetings and councils to develop col-
laborative documents, such as a family constitution.
Formalization could also provide a mechanism for coor-
dinating goals across systems. Collaborative agreements
that take into account the goals of relevant systems could
help those systems maintain system health. For example, a
policy created by the family, in consultation with the busi-
ness, about family members’ requirements to enter the busi-
ness could help to achieve the goals of both the family and
business systems.
Formal differentiating processes and collaborative docu-
ments could also promote transitions within the FBS sys-
tem. For example, a collaboratively created succession plan
could help to first define the needs and goals of each gen-
eration in the family and then combine them with the needs
and goals of business. Such a process would be very “plan-
ful” and so involve multiple parties. It would require dif-
ferentiation. Founders will need to accept differences in the
next generation and be willing to relinquish control
(Anderson, Mansi, & Reeb, 2003; Feltham, Feltham, &
Barnett, 2005; Zahra, 2005). If founders participate in cre-
ating a collaborative succession plan that addresses their
concerns and goals as well as the concerns and goals of the
next generation, such owners may feel comfortable in
dedicating their resources to train the next generation of
leaders (Marshall et al., 2006; Morris, Williams, Allen, &
Avila, 1997; Steier, 2001).
FBSs characterized by differentiation and collaboration
will likely consult family, owners, and key managers in
choosing next-generation leaders. For example, from an
overall FBS perspective, next-generation leaders must have
a knowledge of and passion for the entire FBS (Andersson
Downloaded from fbr.sagepub.com at FFI-FAMILY FIRM INSTITUTE on November 4, 2011
2002; Cabrera-Suárez et al., 2001), a capacity to work
across family systems (Steier, 2001), and the characteristics
that will attract the support and trust across all subsystems,
such as commitment to the business, integrity, and skill sets
relevant to the position and the industry (Chrisman et al.,
1998; Ibrahim et al., 2004; Sharma & Rao, 2000; Sonfield
& Lussier, 2005). FBSs characterized by undifferentiation
and lack of collaboration may have more of a tendency to
choose successors out of duty or avoidance of emotional
conflict.
Family-First Emphasis
On the left side of the continuum in Figure 1, there exists
two forms of family-first value-oriented FBSs. Both relation-
ships move resources from the business to the family, but
some do it at the cost of the business (business depleting),
whereas others do it without too much or even no immediate
damage to the business (business withdrawing). The
­business-depleting family-first FBS represents those busi-
nesses that not only favor the family development but also
have little or no desire to build the business. The businesses
addressed by Dean (1992) and Wong et al. (1992) could be
considered business-depleting FBSs because these FBSs
exist to be a resource base for the family system. These FBSs
have no need for succession planning, but they require
ways to optimize the business in the current generation.
We have to be careful not to pathologize these busi-
nesses. They are healthy systems as long as they recognize
their internal values and obtain and use resources accord-
ingly. Conversely, a business-depleting family-emphasis
FBS that wishes to build the business and expand market
share is not a healthy business and will more than likely
encounter conflict in diverting resources from the family
system to build the business system. These businesses will
never reach a Fortune 500 status, which is fine, as long as
the FBS recognizes this and creates goals accordingly. It is
also highly probable that such a business will not make it
beyond the founder. It is difficult for a business-depleting
family business to move from the first generation to succes-
sive generations, because the goal for these types of FBSs
is to use the business system as a resource base while
minimizing the value of business growth. This creates a
situation where the business system cannot grow large
enough (i.e., collect enough resources) to support additions
to the family system (Gersick et al., 1997).
Proposition 8: Succession rates will be much lower in
FBSs that resemble the business-depleting family end
of the value continuum.
 Distelberg, Sorenson / A Focus on Values and Resource Flows   75
Family-emphasis FBSs that withdraw business resources
without depleting the business system look similar to their
business-depleting counterparts, but they differ in their
need to keep the business healthy and growing. The rea-
son is that business-withdrawing FBSs usually value the
business as a long-term resource base to be used by the
family, potentially for multiple generations. The chal-
lenge for the business-withdrawing FBS is to monitor the
resources within the FBS and create secondary goals for
the business system that allow it to grow in line with the
family system.
In these systems, the ownership system is extremely
important. The ownership system must moderate between
the business and family systems. The ownership system
must maintain a family emphasis without letting the with-
drawing behaviors turn into depleting behaviors. The diffi-
culty in the ownership system lies in its maintaining a
balance that favors the family system without depleting the
business system. To do this, the ownership system has to
closely monitor the health of the business.
One of the largest challenges for the business-withdrawing
FBS is the issue of succession planning. Succession plan-
ning for these types of systems must take into consideration
the goals of not only the FBS but also the unique goals of
the family system, the business system, and the owner sys-
tem. As these FBSs enter into successive generations and as
more families enter the business, the ties between the fami-
lies weaken (Gersick et al., 1997), and FBSs based in the
family-first value orientation will tend to expand the value
of the business to accommodate the growing family com-
munity system (Bronfenbrenner, 1979; Bubolz & Sontag,
1993). Take, for example, a Midwestern dairy company
who is a business-withdrawing type. This FBS is in the
process of transferring ownership between the second and
third generations. In this case, there are multiple nuclear
families within the owning family, and the ownership sys-
tem overlaps each nuclear family system. With this type of
FBS, the difficulty will lie in balancing the goals of each
family system, the continuity of the business, and the
increased needs of a growing family (Gersick et al., 1997).
Business-First Emphasis
Similar to the family-first orientation, the business-first
orientation can resemble two different resource flow typol-
ogies: the family-depleting and the family-withdrawing
types. Both move resources from the family to the business,
but some do it at the cost of the family, whereas others do
it with little or no damage to the family. If the business is
highly successful, it may provide significant financial
Downloaded from fbr.sagepub.com at FFI-FAMILY FIRM INSTITUTE on November 4, 2011
  
resources for the family. The cost to the family may be the
family members’ time away from the family to make the
business successful.
The key difference between the family-first FBSs and
the business-first FBSs is that the latter believe that the
business system cannot survive without the resources that
the family system possesses. For example, McConaughy
(2000) found that FBSs pay their family CEOs significantly
less than they do their nonfamily CEOs. This situation is
partially explained by the business-first orientation. In this
case, the business may be able to pay a nonfamily employee
salary, but family employees will work for less; therefore,
more of the revenue can be used to build the business.
FBSs that lie closer to the family-depleting side of this
continuum deplete the family system resources quickly,
especially if the business system grows faster than the fam-
ily system can generate resources to support it. This has
implications for succession. Extreme family-depleting ver-
sions of this type of FBS can either destroy the family
system or cause a great deal of conflict as the family system
struggles to see the value in maintaining the relationship
with the business system. When it is time to plan a succes-
sion, there may be no family members willing to lead the
company or assume the responsibilities of active owners.
Thus, the business could be sold.
Although this orientation favors the growth of the busi-
ness system, some power in the relationship should be located
in the family system. A review of social exchange theories
reminds us that, in relationships, those who have resources
have power over those that require the resources (Blau,
1964; Emerson, 1972a, 1972b; Levinger, 1982; Sabetelli &
Shehan, 1993; Thibaut & Kelley, 1959; Turner, 1986). This
is important to this type of FBS. If the family system does
not have resources of value to the business system, it is
unlikely that the family system will maintain influence and
ownership over time.
In later generations of ownership (third generation or
beyond), if the FBS has a family–business relationship, it is
likely due to specific resources available within the family
system. For example, in later stages of development, finan-
cial resources from the family system may not be as impor-
tant as social resources, such as tacit embedded knowledge
(Cabrera-Suárez et al., 2001), networks and social capital
(Steier, 2001), passion (Andersson et al., 2002), innovative
spirit (Litz & Kleysen, 2001), and commitment to the busi-
ness (Chrisman et al., 1998; Ibrahim et al., 2004; Sharma &
Rao, 2000; Sonfield & Lussier, 2005). At these later stages
of development, the family system must sustain these social
resources because access to these resources is the primary
component keeping the FBS together.
76   Family Business Review
For these types of FBSs, the ownership system plays an
important but difficult role. It must create and maintain
boundaries between the family and business systems (Davis
& Stern, 1981, 1996). These boundaries function as a way of
limiting business-to-family resource transfers, but they can-
not be too rigid and so keep the family completely out of the
business (Zody et al., 2006). When the boundary between
family and business systems are too rigid, the family system
may become conflicted and may cease to find value in main-
taining a relationship with the business system.
Similarly, the ownership system must encourage owner-
ship development among family members. Oftentimes, these
types of systems become too dependent on one key family
member in the ownership system. As such, the challenge for
business-emphasis FBSs is to not let the entire system rest on
one key family member. These types of FBSs have been
studied in the family business literature. For example,
Anderson and Reeb (2003) found that there are many posi-
tive family effects for FBSs in the “controlling owner” stage
(Gersick et al., 1997), but this family effect is curvilinear: An
FBS with a controlling owner—that is, one who holds too
large of a controlling share of the business—actually limits
the positive effect of family ownership (Anderson et al.,
2003). In addition, FBS founders who stay in the ownership
position for too long decrease the risk-taking behavior and
profitability of the business. Both of these situations—a large
ownership stake and a lengthy tenure of one individual—can
be considered the observable behaviors of enmeshed FBSs;
such systems are characterized by little differentiation and
weak boundaries between individuals and between systems.
It is important to note here that these behaviors alone are not
a determinant of the value orientation of the FBS. These
behaviors can exist at both ends of the continuum. Therefore,
before typologizing these FBSs, we have to consider the
goals and values behind these resource transfers.
Adaptation
So far, we have discussed the different value orientations
of FBSs presuming that they are static or that once an FBS
has been identified as a certain typology, it will maintain
those characteristics indefinitely. Instead, it is entirely pos-
sible for an FBS to move along this continuum throughout
the history of family ownership and even during the owner-
ship of one generation—this is due to the systems concept
of adaptation. Adaptation can be defined as the “behavior
of living systems that changes the state or structure of the
system, the environment, or both. . . . Adaptation is a neces-
sary process for the growth and progressive integration of
living systems” (Bubolz & Sontag, 1993, p. 433).
Downloaded from fbr.sagepub.com at FFI-FAMILY FIRM INSTITUTE on November 4, 2011
For an organization to be adaptable, it must be what gen-
eral systems theorists call an open system (von Bertalanffy,
1969). Open systems allow for change within the system on
the basis of the new information. Conversely, a closed sys-
tem does not allow new information into the system; there-
fore, it fails to change. As such, the structure around a
system—or the characteristics of a system that allow or do
not allow information to enter a system—is determinant of
the system’s ability to change or adapt. In organizational
theory, adaptation is often referred to as an organization’s
flexibility. A flexible organization has a structure that allows
the organization to succeed under environmental pressure
and unpredictability (Ackoff, 1977; Eppink, 1978). It has
permeable boundaries, decentralized decision making, col-
laborative partnerships, and the ability to make changes
quickly (Bahrami, 1992; Krijnen, 1979; Overholt, 1997).
For example, Zody et al. (2006) found that when compared
with rigid boundaries, permeable boundaries between the
family and business increased satisfaction.
The issue of centralization has also been studied in fam-
ily businesses. There are many positive benefits to the
centrality of owners, as well as many limitations (Anderson
et al., 2003; Anderson & Reeb, 2003; McConaughy, 2000;
Zahra, 2005). Some have argued that formalization and
centrality within organizations decrease adaptability (Aiken
& Hage, 1971; Corwin, 1972; Damapour, 1991), but the
key to the FBS seems to be a balance in centrality, where
the ownership system is central to the FBS but enables oth-
ers throughout the FBS to use and transfer resources
(Burke, 2007; Hatum & Pettigrew, 2004).
Proposition 9: Ownership centrality has a curvilinear
relationship with adaptability: Overly connected
(controlling) owners limit FBSs adaptability; loosely
connected owners may allow too much flexibility.
Owners who lie between no connection and being
overly connected create the best opportunities for
healthy FBS adaptability.
Similar to the idea of individual centralization is the sys-
tems concept of cohesion. Specifically, cohesion is the close-
ness or distance between individuals within a system (Davis
& Stern, 1981; Minuchin, 1974; D. H. Olson, Sprenkle, &
Rusell, 1979a, 1979b). It could also be regarded as the den-
sity of a system. Most systems theorists describe cohesion
as a continuum, with disengaged or disconnected systems on
one end and overly connected or enmeshed systems on the
other end (Minuchin, 1974; D. H. Olson et al., 1979a, 1979b).
Either extreme is problematic for adaptation. Disengaged
systems cannot mobilize the entire system to make a structural
 Distelberg, Sorenson / A Focus on Values and Resource Flows   77
change. Conversely, enmeshed systems are so tightly packed
that the system losses differentiation between individuals and
systems. Therefore, an enmeshed system would not be able
to make a move left or right on the value continuum, because
participants would be unable to see the FBS as three interde-
pendent systems; therefore, they would be unable to see the
need to add support to one system verses the other.
For the FBS, adaptation is successful when it achieves
an FBS goal. As such, if a movement left or right on the
continuum achieves an FBS goal, it is functional; but the
level of analysis is important here. If the adaptation fulfills
a group-level goal at the cost of another group or even the
larger FBS, it is not functional but rather problematic. Thus,
collaboration among all FBS subsystems helps to promote
positive adaptation and change.
A certain level of adaptation must exist within each FBS.
Without the ability to adapt, FBSs are left with no way to
handle environmental pressures, and they will not be able
to prepare for or survive a succession. For example, an ill-
ness of a family member may require that the FBS slide
toward the family side of the continuum, at least until a
more permanent solution can be found. Also, an economic
recession may require a business-depleting family-first
FBS to move toward the family-withdrawing business-first
side until the economy picks up.
Family systems theory and family developmental theory
tell us that without a great deal of stress applied to the family
system throughout the developmental process, family sys-
tems tend to carry over the same values (Bubolz & Sontag,
1993), goals (Carter & McGoldrick, 1998), and relational
dynamics (D. H. Olson et al., 1979a, 1979b) from one gen-
eration to the next. But family systems theory also tells us
that when there is stress or conflict, there can be dramatic
shifts from one generation to the next (D. H. Olson, 2000).
Therefore, it is possible to see FBSs with a healthy level of
adaptation vacillating from being business withdrawing to
balanced to family withdrawing and back again over the his-
tory of the business.
It is also possible to see these moves within one genera-
tion of ownership. For example, Dyer (1989) introduced the
idea of family businesses’ being categorized by the level of
professionalism within the management level, with profes-
sionalism being the degree to which nonfamily experienced
leaders are incorporated into the family business. He sug-
gested that one reason for bringing nonfamily managers
into the company involves the lack of management talent
within the family, or in other words, the lack of family
resources necessary for the business system. If we think
about this situation through the system’s values and adapta-
tion, it makes sense that an FBS that desires to move from
Downloaded from fbr.sagepub.com at FFI-FAMILY FIRM INSTITUTE on November 4, 2011
  
a business-withdrawing FBS to a balanced or even family-
withdrawing FBS might consider “professionalizing.” Dyer
also noted that professionalizing is a way to change the
norms and values of the firm. FBSs cannot make this type of
move unless family members are willing to change the value
orientation from being family-first to balanced or business-
first. In other words, the FBS has to be adaptable.
It would not work to have the ownership system move
toward professionalizing without the collaboration of the
business and family systems. And the first step in this pro-
cess toward collaborative change would be that of open
discussion, which could result in a buy-in to make a value
shift. This will be extremely difficult for disengaged or
enmeshed FBSs because they both have structures in place
that prevent this type of new information from entering into
the system (von Bertalanffy, 1969; Minuchin, 1974). An
enmeshed family-first FBS will have a difficult time pro-
fessionalizing because it will be unable to differentiate
business system goals from family system goals; therefore,
it may not see the relevance of collaborating to add busi-
ness system resources. In addition, these types of systems
may see the professionalism as the creation of a boundary
between the family system and the business system, which
would not be in line with the current equilibrium of a per-
meable boundary. This is not to say that an enmeshed, dis-
engaged system cannot adapt but rather that some work has
to be done on the front end to get buy-in and prepare the
two systems for the new structure.
Proposition 10: Movements along the value continuum
are positively related to the FBS’s level of adaptability.
Proposition 11: Perceived satisfaction within the FBS is
positively related to its level of adaptation or its abil-
ity to move along a value continuum.
The ownership system plays a vital role in the FBS’s level
of adaptability. The ownership system should be an open
system. It has to take in information from the family and
business systems; then, it has to assess the value orientation
and goals of the entire FBS. From there, it can provide
guidance to the family and business systems. For example,
if the FBS is a business-depleting system and the business
wants to maintain continued family ownership over multiple
generations, then the ownership system is responsible for
identifying this contradiction. It is also responsible for
introducing new information into the FBS that will create
the desired change. The information introduced depends on
the FBS characteristics. For example, a family-depleting
FBS that is in danger of losing the family will have to
implement structures that prevent further family-to-business
78   Family Business Review
resource transfers. Conversely, a business-withdrawing
system may require a shift to a balanced orientation if the
business is not growing appropriately. To do this, the
ownership system is responsible for collaborating with the
family system and obtaining agreement and buy-in from
the family system to make this type of move. Family meetings
and family councils can help facilitate these moves.
Proposition 12: Adaptability is positively related to the
ownership system’s ability to implement and manage the
boundaries between the family and business systems.
Discussion
A focus on values, resource transfers, goals, and adapta-
tion in systems theory has many advantages. First, this lens
allows for a broad definition of FBS while minimizing the
confusion that happens in typologies based solely on roles
and ownership structure (Astrachan et al., 2002; Astrachan
& Shanker, 2003; Boss, 1987; Vayda, 1983). This systems’
definitions of family adds to other definitions based on the
interactions of individuals (Astrachan et al., 2002) by
accounting for interactions between group-level systems
and the surrounding environment. Finally, it allows the FBS
to define itself.
Second, this lens provides direction to practitioners who
regularly administer the tools available within the field. For
example, family constitutions are used as a way of unifying
FBSs; they provide a foundation for strategic and succession
planning (Montemerlo & Ward, 2005). This lens can help
facilitate this exercise, as well as avoid pitfalls. Identifying
the FBS type can help identify important issues to be
addressed in developing family constitutions. For example, a
family-first FBS may want to focus more on the longevity
and health of the family system, but a business-first FBS may
focus on identifying boundaries between the family system
and the business system and planning for the future health of
the business system. Either way, a family constitution needs
to consider the importance of adaptation within the FBS;
therefore, a family constitution should be an active document
that does not create rigid boundaries. In other words, family
constitutions need to consider possible moves on the value
continuum as a potentially healthy aspect of an FBS.
Without an understanding of the FBS orientation, tools
such as the family constitution could be used to solidify
problematic relational dynamics inherent in the two ends of
the continuum and therefore manage adaptation. For exam-
ple, a family-first FBS may use the family constitution to
limit the growth of the business, or a business-first FBS
Downloaded from fbr.sagepub.com at FFI-FAMILY FIRM INSTITUTE on November 4, 2011
may use this tool as a “legal” document to limit the role of
the family. Either way, tools such as the family constitution
have the potential to manage FBS adaptability.
Finally, this lens can help practitioners craft a plan of
action for creating changes in FBSs. For example, if a
­family-depleting FBS is having difficulty managing conflict
within the owning family, the solution would not be to intro-
duce stronger boundaries between the business system and
the family system, because this would reduce the adaptability
of the FBS; rather, it would create an environment of open
communication where the family system’s desired value,
resource transfers, and goals are explored. Otherwise, the
FBS cannot adapt because it is closed to new information.
This cannot happen until the ownership system restructures
the boundary between the business and family systems. This
might be done by incorporating family meetings that discuss
goals and resources in the FBS. In this case, the family sys-
tem would have a medium for introducing new information
into the business system as long as the members of the own-
ership and/or business systems were present.
Through an understanding of FBSs as nested systems, we
can identify the driving value orientation of family busi-
nesses. This lens helps us to understand why certain resources
are valued more than others and why certain FBSs value
some goals more than others, and it helps us to anticipate the
strengths and limitations of each type of FBS. Overall, FBSs
vary a great deal in regard to their values, goals, and resource
management. Understanding this variance is necessary
before attempting to change or help an FBS.
References
Ackoff, R. L. (1977). Towards flexible organizations: A multidimensional
design. OMEGA, 5, 649-662.
Aiken, M., & Hage, J. (1971). The organic organization and innovation.
Sociology, 5, 63-93
Anderson, R. C., Mansi, S. A., & Reeb, D. M. (2003). Founding family
ownership and the agency cost of debt. Journal of Financial Economics,
68, 263-285.
Anderson, R. C., & Reeb, D. M. (2003). Founding-family ownership and
firm performance: Evidence from the S&P 500. Journal of Finance,
58, 1301-1328.
Andersson, T., Carlsen, J., & Getz, D. (2002). Family business goals in the
tourism and hospitality sector: Case studies and cross-case analysis from
Australia, Canada, and Sweden. Family Business Review, 15, 89-108.
Aronoff, C. E., & Ward, J. L. (2002). Family meetings: How to build a stron-
ger family and a stronger business. Marietta, GA: Family Enterprise.
Astrachan, J. H., Klein, S. B., & Smyrnios, K. X. (2002). The F-PEC Scale
of Family Influence: A proposal for solving the family business
­definition problem. Family Business Review, (1), 45-58.
Astrachan, J. H., & Shanker, M. C. (2003). Family businesses’ contribu-
tion to the U.S. economy: A closer look. Family Business Review, 16,
211-219.
 Distelberg, Sorenson / A Focus on Values and Resource Flows   79
Bahrami, H. (1992). The emerging flexible organization: Perspectives
from Silicon Valley. California Management Review, 34(4), pp. 33.
Blanco-Mazagato, V., de Quevedo-Puente, E., & Castrillo, L. A. (2007).
The trade-off between financial resources and agency costs in the
family business: An exploratory study. Family Business Review, 20,
199-213.
Blau, P. M. (1964). Exchange and power in social life. New York: John
Wiley.
Boss, P. (1987). Family stress. In M. B. Sussman & S. K. Steinmetz (Eds.),
Handbook of marriage and family (pp. 695-723). New York: Plenum.
Bronfenbrenner, U. (1979). The ecology of human development: Experiments
by nature and design. Cambridge, MA: Harvard University Press.
Bubolz, M. M., & Sontag, M. S. (1993). Human ecology theory. In P. G.
Boss, W. J. Doherty, R. LaRossa, W. R. Schumm, & S. K. Steinmetz
(Eds.), Sourcebook of family theories and methods: A contextual
approach (pp. 419-448). New York: Plenum Press.
Burkart, M., Panunzi, F., & Shailfer, A. (2003). Family firms. Journal of
Finance, 58, 2167-2201.
Burke, B. J. (2007). Working for the family: A study of the family and
nonfamily manager subgroups in family business management
teams. Unpublished doctoral dissertation, Rutgers University, New
Brunswick, NJ.
Cabrera-Suárez, K., De Saa-Pérez, P., & García-Almeida, D. (2001). The
succession process from a resource- and knowledge-based view of the
family firm. Family Business Review, 14, 37-46.
Carter, B., & McGoldrick, M. (Ed.). (1998). The expanded family life
cycle: Individual, family and social perspectives (3rd ed.). Boston:
Allyn & Bacon.
Castillo, J., & Wakefield, M. W. (2007). An exploration of firm performance
factors in family businesses: Do families value only the “bottom line”?
Journal of Small Business Strategy, 17(2), 37-51.
Chrisman, J. J., Chua, J. H., & Sharma, P. (1998). Important attributes of
successors in family businesses: An exploratory study. Family Business
Review, 21, 35-47.
Corwin, R. G. (1972). Strategies for organizational innovation: An empir-
ical comparison. American Sociological Review, 37, 441-454.
Daff, R. L. (2003). Organization theory and design (8th ed.). Florence,
KY: Cengage Learning.
Damanpour, F. (1991). Organizational innovation: A meta-analysis of
effects of determinants and moderators. Academy of Management
Journal, 34(3), 555-590.
Danes, S. M., Rueter, M. A., Kwon, H. K., & Doherty, W. D. (2002).
Family FIRO model: An application to family business. Family
Business Review, 15, 31-43.
Danes, S. M., Zuiker, V. S., Kean, R., & Arbuthnot, J. (1999). Predictors
of family business tensions and goal achievement. Family Business
Review, 12, 241-252.
Davis, P., & Stern, D. (1981). Adaptation, survival and growth of the
family business: An integrated systems perspective. Human Relations,
34, 207-224.
Davis, P., & Stern, D. (1996). Adaptation, survival, and growth of the
family business: An integrated systems perspective. In C. E. Aronoff,
J. H. Astrachan, & J. L. Ward (Eds.), Family business sourcebook II
(pp. 278-309). Marietta, GA: Business Owner Resources.
Dean, S. M. (1992). Characteristics of African American family-owned
businesses in Los Angeles. Family Business Review, 5(4), 373-395.
Dess, G. G., & Robinson, R. B., Jr. (1984). Measuring organizational
performance in the absence of objective measures: The case of the
privately-held firm and conglomerate business unit. Strategic
Management Journal, 5, 265-273.
Downloaded from fbr.sagepub.com at FFI-FAMILY FIRM INSTITUTE on November 4, 2011
  
Dyer, W. G., Jr. (1989). Integrating professional management into a family
owned business. Family Business Review, 2(3) 221-235 .
Dyer, W. G., Jr., & Sanchez, M. (1998). Current state of family business
theory and practice as reflected in Family Business Review, 1988–
1997. Family Business Review, 11(4), 287-295.
Emerson, R. (1972a). Exchange theory, part I: A psychological basis for social
exhange. In J Berger, M. Zelditch, & B. Anderson (Eds.), Sociological
theories in progress (Vol. 2, pp. 38-57). Boston: Houghton Mifflin.
Emerson, R. (1972b). Exchange theory, part II: Exchange relations and
network structures. In J. Berger, M. Zelditch, & B. Anderson (Eds.),
Sociological theories in progress (Vol. 2, pp. 58-87). Boston: Houghton
Mifflin.
Eppink, J. (1978). Planning for strategic flexibility. Long Range Planning,
11, 9-15.
Feltham, T. S., Feltham, G., & Barnett, J. J. (2005). The dependence of
family businesses on a single decision-making. Journal of Small
Business Management, 43, 1-15.
Fleming, Q. J. (2000). Keep the family baggage out of the family business:
Avoid the seven deadly sins that destroy the family business. New
York: Simon & Schuster.
Forrester, R., & Drexler, A. B. (1999). A model for team-based organiza-
tion performance. Academy of Management Executive, 13(3), 36-49.
Frank, K., & Fahrbach, K. (1999). Organization culture as a complex
system: Balance and information in models of influence and selection.
Organization Science, 10(3), 253-277.
Galvin, B., Astrachan, J., & Green, J. (2007). American Family Business
Survey. Boston: MassMutual Financial Group.
Gersick, K. E., Davis, J. A., Hampton, M., & Lansberg, I. (1997).
Generation to generation: Life cycles of the family business. Boston:
Harvard Business School Press.
Gomez-Mejia, L. R., Nuñez-Nickel, M., & Gutierrez, I. (2002). The role
of family ties in agency contracts. Academy of Management Journal,
44(1), 81-95.
Habbershon, T. G., & Astrachan, J. H. (1997). Perceptions are reality:
How family meetings lead to collective action. Family Business
Review, 10(1), 37-52.
Habbershon, T. G., & Williams, M. L. (1999). Resource-based framework
for assessing the strategic advantages of family firms. Family Business
Review, 12, 1-15.
Habbershon, T. G., Williams, M. L., & MacMillan, I. C. (2003). A unified
systems perspective of family firm performance. Journal of Business
Venturing, 18, 451-465.
Hatum, A., & Pettigrew, A. (2004). Adaptation under environmental tur-
moil: Organizational flexibility in family-owned firms. Family
Business Review, 17, 237-259.
Haynes, G. W., Onochie, J. I., & Muske, G. (2007). Is what’s good for the
business, good for the family: A financial assessment. Journal of
Family and Economic Issues, 28, 395-410.
Haynes, G. W., Walker, R., Rowe, B. R., & Hong, G. (1999). The inter-
mingling of business and family finances in family-owned businesses.
Family Business Review, 12(3), 225-239.
Hienerth, C., & Kessler, A. (2006). Measuring success in family busi-
nesses: The concept of configuraltional fit. Family Business Review,
19, 115-133.
Hoffman, J., Hoelscher, M., & Sorenson, R. (2006). Achieving sustained
competitive advantage: A family capital theory. Family Business
Review, 24, 137-146.
Ibrahim, A. B., Soufani, K., Poutziouris, P., & Lam, F. (2004). Qualities of
an effective successor: The role of education and training. Education
and Training, 46, 474-480.
80   Family Business Review
Jorissen, A., Laveren, E., Martens, R., & Reheul, A. (2005). Real versus
sample-based differences in comparative family business research.
Family Business Review, 18, 229-246.
Kalleberg, A. L., & Leicht, K. T. (1991). Gender and organizational
performance: Determinates of small business survival and success.
Academy of Management Journal, 34(1), 136-161.
Kaye, K. (1991). Penetrating the cycle of sustained conflict. Family Business
Review, 4(1), 21-44.
Kerr, M., & Bowen, M. (1988). Family evaluation. New York: Norton.
Krijnen, H. C. (1979). The flexible firm. Long Range Planning, 12, 63-75.
Lansberg, I., & Astrachan, J. H. (1994). Influence of family relationships
on succession planning and training: The importance of mediating
factors. Family Business Review, 7(1), 39-59.
Levinson, H. (1971, March/April). Conflicts that plague family business.
Harvard Review, pp. 90-98.
Litz, R. A., & Kleysen, R. F. (2001). Your old men shall dream dreams,
your young men shall see visions: Toward a theory of family firm
innovation with help from the Brubeck family. Family Business
Review, 14, 335-351.
Lubatkin, M. H., Ling, Y., & Schulze, W. S. (2003, August). Explaining
agency problems in family firms using behavioral economics and jus-
tice theories. Paper presented at the Academy of Management annual
meeting, Seattle, WA.
Levinger, G. (1982). “A Social Exchange View on the Dissolution of Pair
Relationships.” In F. I. Nye (Ed) Family Relations: Rewards and
Costs. Beverly Hills, CA: Sage.
Lussier, R. N., & Sonfield, M. C. (2006). The effect of family business
size as firms grow: A USA–France comparison. Journal of Small
Business and Enterprise Development, 13, 314-325.
Marsden, P., & Friedkin, N. E. (1994). Network studies of social influence.
Sociological Methods and Research, 22, 127-151.
Marshall, J. P., Sorenson, R., Brigham, K., Wieling, E., Reifman, A., &
Wampler, R. (2006). The paradox for the family firm CEO: Owner age
relationship to succession-related processes and plans. Journal of
Business Venturing, 21(3), 348-368.
McConaughy, D. L. (2000). Family CEOs vs. nonfamily CEOs in the
family-controlled firm: An examination of the level and sensitivity of
pay to performance. Family Business Review, 18, 121-132.
Miner, J. B. (1997). The expanded horizon for achieving entrepreneurial
success. Organizational Dynamics, 25(3), 54-67.
Minuchin, S. (1974). Families and family therapy. Cambridge, MA:
Harvard University Press.
Montemerlo, D., & Ward, J. L. (2005). The family constitution: Agreements
to secure and perpetuate your family and your business. Marietta, GA:
Family Enterprise.
Morris, M. H., Williams, R. O., Allen, J. A., & Avila, R. A. (1997).
Correlates of success in family business transitions. Journal of
Business Venturing, 12, 385-401.
Nichols, M. P., & Schwartz, R. C. (2004). Family therapy concepts and
methods (6th ed.). New York: Pearson.
Olson, D. H. (2000). Circumplex model of marital and family systems.
Journal of Family Therapy, 22(2), 144-167.
Olson, D. H., Sprenkle, D. H., & Rusell, C. S. (1979a). Circumplex
model of marital and family systems: I. Cohesion and adaptability
dimensions, family types, and clinical applications. Family Process,
18, 3-28.
Olson, D. H., Sprenkle, D. H., & Rusell, C. S. (1979b). Circumplex model
of marital and family systems: IV. Theoretical update. Family Process,
22, 69-83.
Downloaded from fbr.sagepub.com at FFI-FAMILY FIRM INSTITUTE on November 4, 2011
Olson, P. D., Zuiker, V. S., Danes, S. M., Stafford, K., Heck, R. K. Z., &
Duncan, K. A. (2003). The impact of the family and business on family
business sustainability. Journal of Business Venturing, 18(5), 639-666.
Overholt, M. H. (1997). Flexible organizations: Using organizational
design as a competitive advantage. Human Resources Planning,
20(1), 22-32.
Pearson, A. W., Carr, J. S., & Shaw, J. C. (2008). Towards a theory of
familiness: A social capital perspective. Entreprenuership Theory and
Practice, 32(6), 949-969.
Rahim, M. A. (1983). A measure of styles of handling interpersonal con-
flict. Academy of Management Journal, 26, 268-376.
Raudenbush, S. W., & Bryk, A. S. (2002). Hierarchical linear models:
Applications and data analysis methods. Thousand Oaks, CA: Sage.
Sabetelli, R. M., & Shehan, C. L. (1993). Exchange and resource theories.
In P. G. Boss, W. J. Doherty, R. LaRossa, W. R. Schumm, & S. K.
Steinmetz (Eds.), Sourcebook of family theories and methods: A con-
ceptual approach (pp. 385-411). New York: Plenum Press.
Schulze, W. S., Lubatkin, M. H., Dino, R. N., & Buchholtz, A. K. (2001).
Agency relationships in family firms: Theory and evidence.
Organizational Science, 12(2), 99-116.
Sharma, P. (2004). An overview of the field of family business studies:
Current status and directions for the future. Family Business Review,
27, 1-36.
Sharma, P., Chrisman, J. J., & Chua, J. H. (1997). Strategic management
of the family business: Past research and future challenges. Family
Business Review, 10(1), 1-35.
Sharma, P., & Nordqvist, M. (2008). A classification scheme for family firms:
From family values to effective governance to firm performance. In
J. Tapies & J. L. Ward (Ed.), Family values and value creation: How
do family-owned businesses foster enduring values (pp. 71-101). New
York: Palgrave Macmillan.
Sharma, P., & Rao, A. S. (2000). Successor attributes in Indian and
Canadian family firms: A comparative study. Family Business Review,
23, 313-330.
Sonfield, M. C., & Lussier, R. N. (2005). Family business ownership and
management: A gender comparison. Journal of Small Business
Strategy, 15, 52-75.
Sorenson, R. L. (1999). Conflict strategies used by successful family busi-
nesses. Family Business Review, 12(4), 325-339.
Sorenson, R. L., Folker, C. A., & Brigham, K. H. (2008). The collabora-
tive network orientation: Achieving business success through collabora­
tive relationships. Entrepreneurship Theory and Practice, 32(4),
615-634.
Stafford, K., Duncan, K. A., Danes, S. M., & Winter, M. (1999). A research
model of sustainable family business. Family Business Review, 12(3),
197-208.
Steier, L. (2001). Next-generation entrepreneurs and succession: An
exploratory study of modes and means of managing social capital.
Family Business Review, 24, 259-279.
Taguiri, R., & Davis, J. A. (1996). Bivalent attributes of the family firm.
Family Business Review, 9(2), 199-208. (Reprinted from Bivalent
attributes of the family firm, by R. Taguiri & J. A. Davis, 1982,
Cambridge, MA: Harvard Business School)
Thibaut, J. W., & Kelley, H. H. (1959). The social psychology of groups.
New York: John Wiley.
Tower, C. B., Gudmundson, D., Schierstedt, S., & Hartman, E. A. (2007).
Do family meetings really matter? Their relationship to planning and
performance outcomes in small family businesses. Journal of Small
Business Strategy, 18(1), 85-94.
 Distelberg, Sorenson / A Focus on Values and Resource Flows   81  

Turner, J. H. (1986). The structure of sociological theory. Homewood, IL:
Dorsey Press.
Vayda, A. P. (1983). Progressive contextualization: Methods for research
in human ecology. Human Ecology, 11(3), 265-281.
von Bertalanffy, L. (1969). General system theory. New York: Braziller.
Ward, J. L. (1987). Keeping the family business healthy: How to plan for
continuing growth, profitability, and family leadership. San Francisco:
Jossey-Bass.
Wasserman, S., & Faust, K. (1994). Social network analysis: Methods and
applications. Cambridge, UK: Cambridge University Press.
Wong, B., McReynolds, S., & Wong, W. (1992). Chinese family firms in
the San Francisco Bay areas. Family Business Review, 5(4), 355-372.
Zahra, S. A. (2005). Entrepreneurial risk taking in family firms. Family
Business Review, 18, 23-40.
Zody, Z., Sprenkle, D., MacDermid, S., & Schrank, H. (2006). Boundaries
and the functioning of family and business systems. Journal of Family
and Economic Issues, 27(2), 185-206.
Brian Distelberg is a doctoral candidate at Michigan State University in
the Department of Family and Child Ecology, as well as a professional
marriage and family therapist.
Ritch L. Sorenson is the Opus Endowed Chair in Family Enterprise and
the academic director for the Center for Family Enterprise at the University
of St. Thomas, Minneapolis.

Downloaded from fbr.sagepub.com at FFI-FAMILY FIRM INSTITUTE on November 4, 2011