Description
Research has linked Psychological Capital (PsyCap) to employees’ positive attitudes, behaviors, and performance in organizations and is characterized by hope, self-efficacy, resilience, and optimism.
5
Organizational Psychological Capital in
Family-owned Franchise Firms and
Corporate Social Responsibility
Esra Memili and Dianne H. B. Welsh
ABSTRACT
Research has linked Psychological Capital (PsyCap) to employees’ positive attitudes,
behaviors, and performance in organizations and is characterized by hope, self-efcacy,
resilience, and optimism. Despite the demonstrated efects of PsyCap on employee
outcomes, PsyCap has not been researched in family frms (except for Memili, Welsh,
& Luthans, forthcoming). Previous research has highlighted the potential efects of
family infuence on family frms’ human resources policies and procedures, as well as the
subsequent efects on employees’ value-creating attitudes and behaviors. Here, we
extend this line of research by drawing primarily upon theory of PsyCap and the extant
family business and franchising literature to explore whether family-owned franchise
frms exhibit more organizational PsyCap than non-family franchise frms and the
impact of family involvement and organizational PsyCap on corporate social
responsibility (CSR) in family-owned franchise frms.
KEY WORDS: Franchise Family Firms; Psychological Capital; Corporate Social
Responsibility
ESRA MEMILI is an Assistant Professor of Entrepreneurship at University of North Carolina-Greensboro,
Bryan School of Business and Economics, 370 Bryan, P.O. Box 26170, Greensboro, NC 27402. Telephone:
662.617.1459 Email: [email protected]
DIANNE H. B. WELSH is Hayes Distinguished Professor of Entrepreneurship at University of North
Carolina-Greensboro, Bryan School of Business and Economics, 328 Bryan, P.O. Box 26170, NC 27402.
Telephone: 336.256.8507 Email: [email protected]
Journal of Ethics & Entrepreneurship, Vol. 4, No. 1 (Spring 2014), pp. 5-20
©Gardner-Webb University. All rights reserved.
ISSN 2326-3776 (Print) ISSN 2326-3806 (Online)
Memili, E., & Welsh, D.H.B. (2014). Psychological capital in family-owned franchise firms and corporate social responsibility. Journal of Ethics and Entrepreneurship, 4(1),
5-20.
Made available courtesy of Gardener-Webb University:
http://www.gardner-webb.edu/academics/journal-of-ethics-and-entrepreneurship/index
Reprinted with permission. No further reproduction is authorized without written permission from Gardner-Webb University.
INTRODUCTION
Family involvement in businesses is prevalent around the world and substantially
infuences their strategic decisions (Becchetti & Trovato, 2002; Sharma, Chrisman, &
Chua, 1997; Welsh, Memili, Kaciak, Ochi, forthcoming). Franchise form of business is also
a major player of the worldwide economy (Alon & Welsh, 2001, 2003; Welsh & Alon,
2001, 2002). Indeed, franchising accounts for greater than 40% of all retail sales and totals
more than 1.5 trillion dollars in revenue annually around the world (International
Franchise Association, 2006). Many of these are family-owned franchises (Alon & Welsh,
2003; Welsh & Alon, 2002). However, only a handful of studies focus on family frm issues
in a franchise domain and studies have mostly been on U.S. family-owned franchises
(Chirico, Ireland, & Sirmon, 2011; Kaufmann, 1999; Udell, 1973). We focus on franchise
family frms owing to their both theoretical and practical importance. Yet, little is known
about this phenomenon despite its impact on world economies.
Te involvement of the family in a franchise frm is likely to infuence strategic decisions
(e.g., corporate social responsibility), frm behavior, and frm performance (Ensley, Pearson,
& Sardeshmukh, 2007). Strategic decisions that determine corporate self-regulatory actions
appear to be of particular importance to the performance and long-term success of family
frms (e.g. Berrone, Cruz, Gomez-Mejia, & Larraza-Kintana, 2010), yet we are unaware of
any systematic attention to such decisions in the family business or franchising literature.
Terefore, distinctive factors afecting strategic decisions, specifcally concerning the
Corporate Social Responsibility (CSR) and the idiosyncratic conditions (i.e., PsyCap)
infuencing such decisions in family franchise frms deserves more research attention.
Indeed, the controlling families within family frms do not focus solely on maximizing
economic returns (Gomez-Mejia, Haynes, Nunez-Nickel, Jacobson, & Moyano-Fuentes,
2007). Instead, they tend to exercise discretionary power to pursue non-economic goals to
be able to abide by family values and norms, preserve the family’s control of the frm, fulfll
family obligations, and preserve family harmony (Berrone, Cruz, Gomez-Mejia, and
Larraza-Kintana, 2010; Chrisman, Chua, Pearson, & Barnett, forthcoming; Gomez-Mejia
et al., 2007, 2010). Te pursuit of these non-economic goals leads to diferences in frm
behavior and performance not only between family and non-family frms, but also among
family frms themselves (Gomez-Mejia et al., 2007; Zellweger & Nason, 2008).
Accordingly, research has examined the socioemotional wealth in family frms which lead
them to survive to primarily meet family’s needs and expectations even though they may
not be proftable (Gomez-Mejia et al., 2007; 2010). Te achievement of non-economic
goals creates socioemotional wealth for the family and elevates the intentions to sustain
family control (Chua et al., 1999; Gomez-Mejia et al., 2007). Te loss of socioemotional
wealth, however, can result in diminished intimacy, lowered status, and inability to meet
family’s expectations (Gomez-Mejia et al., 2007). Hence, some family frms are willing to
accept greater performance hazard in order to preserve socioemotional wealth rooted in
noneconomic goals (Chrisman et al., 2003; Gomez-Mejia et al., 2007). Gomez-Mejia et al.
(2007) show that family frms may be willing to accept risk to their performance to avoid
the loss of socioemotional wealth, but at the same time be risk averse in making other
business decisions. However, we do not know enough about these phenomena within the
family-owned franchise frm context.
Journal of Ethics & Entrepreneurship
6
Aside from socioemotional wealth, another important, intangible asset of family-owned
franchises may be their organizational Psychological Capital (PsyCap). PsyCap is based on
the work on Positive Organizational Behavior that can be defned as the study and
application of positively oriented human resource strengths and psychological capabilities
that can be measured, developed, and efectively managed for performance improvement.
Positive Psychological Constructs (or simply PsyCap) are defned as an individual’s positive
psychological state of development and are characterized by hope, self-efcacy, resilience,
and optimism as identifed by Luthans and colleagues (Luthans, 2002; Luthans & Youssef,
2004; Luthans, Youssef, & Avolio, 2007). When these four are combined, they have been
determined to be a second-order construct (Luthans, Avolio, Avey, & Norman, 2007). In a
forthcoming Entrepreneurship Teory and Practice special issue article on family frms,
Memili and colleagues introduce the organizational PsyCap of family frms which can be
particularly valuable for family frms owing to their challenges in raising other forms of
capital such as fnancial or human capital. Te authors also suggest that family frms may
exhibit higher levels of organizational PsyCap than non-family frms owing to family frm
idiosyncrasies (Steier, Chrisman, & Chua, 2004) such as family bonding, collectivity,
shared history, and long-term orientation. However, to our knowledge, organizational
PsyCap of franchise family frms has not been investigated yet.
According to Chirico et al. (2011) family-owned franchises are more likely to attain
competitive advantages than non-family counterparts. Tere are a few studies that have
examined family frm franchises directly (Chirico, Ireland, & Sirmon, 2011) or indirectly
(Kaufmann, 1999; Udell, 1973). However, to the best of our knowledge, no study has
investigated organizational PsyCap as a critical resource in family-owned franchise frms
and whether family-owned franchises exhibit more organizational PsyCap than non-family
counterparts, which may impact their frm performance. A recent study by Welsh and
Raven (2011) examines hope, which is an important component of Psychological Capital
(Snyder et al., 1991; Luthans et al., 2007), among franchisees and franchisors and draws
attention to the importance of studies investigating hope in business settings. Nevertheless,
PsyCap encompassing hope in family versus nonfamily franchise frms is not examined yet.
Hence, the theory of the family frm will be advanced by investigating whether family-
owned franchise frms exhibit more organizational PsyCap than non-family counterparts
and explaining how it infuences family-owned franchise frms’ CSR.
Our article addresses three important research questions regarding organizational
PsyCap in family-owned franchise frms; specifcally: (1) Do family-owned franchise frms
have more organizational PsyCap than non-family franchise frms, (2) How does family
involvement afect CSR in franchise frms, and (3) How does organizational PsyCap
infuence the relationship between family involvement and corporate social responsibility
(CSR) in franchise frms? We use PsyCap, CSR, and the extant family business and
franchising literature to explore organizational PsyCap in family frms compared to that in
non-family frms, how family involvement impacts CSR activities, and how organizational
PsyCap afects the relationship between family involvement and CSR.
Tis article contributes to the family frm literature in several ways. First, we use
Psychological Capital and CSR theories as the theoretical lenses to explain whether family-
owned franchise frms have more organizational PsyCap than non-family franchise frms,
how family involvement infuences CSR, and to what extent organizational PsyCap
impacts the relationship between family involvement and CSR. Tis line of research
Memili & Welsh
7
enhances the development of the theory of the family frm and highlights the importance
of incorporating Psychological Capital and CSR theories into family business studies.
Second, we contribute to a better understanding of the diferences between not only family
and nonfamily frms, but also among family frms themselves. Tird, we present a PsyCap
model to demonstrate the family frm idiosyncrasies and CSR diferences in family-owned
franchise frms, which play an important role in corporate citizenship around the world.
Figure 1 provides a visual representation of our propositions.
FIGURE 1. Family Involvement, Organizational PsyCap, and CSR Activities
THEORETICAL OVERVIEW
Although family frms are prevalent in franchising (Chirico, Ireland, & Sirmon, 2011;
Welsh & Raven, 2004), the focus of franchising research has been on non-family frms and
many issues that family-owned franchises face remain unclear theoretically and practically,
as in other organizational studies (Dyer, 2003; Hoy & Verser, 1994). Franchising occurs
when a franchisor sells to the franchisee the right to market its branded products and use
its business practices (Combs, Ketchen, & Hoover, 2004a). Franchising is an economic
powerhouse and is so widespread that one out of every 12 retail businesses in the U.S. is a
franchised business, with more than 8 million people employed in franchised businesses
and comprising greater than 40% of all retail businesses (International Franchise
Association, 2004). While research on franchising has been conducted for four decades
(Combs & Ketchen, 2003; Oxenfeldt & Kelley, 1969) surprisingly little research has been
conducted concerning franchising and corporate social responsibility despite the
worldwide focus on this issue. In fact, Young and McIntyre (2011) examined 25 years of
research from the International Society of Franchising, the academic organization that
exclusively studies franchising, and found only seven articles concerning ethics and social
responsibility in 1986, and from 1988-1999, and virtually no articles on the topic from
2000-2010. Additionally, a thorough review of academic journal articles revealed no
articles on franchise corporate social responsibility. None of these studies included family
frm franchises.
Journal of Ethics & Entrepreneurship
8
Organizational PsyCap
Family Involvement
CSR Activities in
Franchise Firms
P3 +
P2 +
Psychological Capital
Within the framework of positive psychology, positive organizational behavior (i.e. “the
study and application of positively oriented human resource strengths and psychological
capacities that can be measured, developed, and efectively managed for performance
improvement”) has started to gain research attention with a focus on positive development
and management of human resources in contemporary work environment (Luthans, 2002:
59; Luthans, Avolio, Avey & Norman, 2007). Deriving from the defnition of positive
organizational behavior, the positive psychological constructs have been identifed as hope,
resilience, optimism, and self-efcacy constituting Psychological Capital (PsyCap) (Avey et
al., 2011; Luthans et al., 2007). Hence, PsyCap composite construct is an individual’s
positive psychological state of development characterized by self-efcacy (i.e. having
confdence), optimism (i.e. making a positive attribution about succeeding at present and
in the future, hope (i.e. persevering toward goals), and resilience (i.e. bouncing back and
even beyond when faced with difculty and challenges) (Luthans et al., 2007).
A meta-analysis by Avey et al. (2011) shows that PsyCap is associated with important
employee outcomes. Te authors show that PsyCap is positively related to favorable
employee attitudes such as job satisfaction, organizational commitment, and psychological
well-being, favorable employee behaviors such as citizenship, and self, objective, and
supervisor evaluations of performance. Te authors also show that PsyCap is negatively
associated with undesirable employee attitudes such as cynicism, turnover intentions, job
stress, and anxiety and undesirable employee behaviors such as deviance. Moreover, Avey
and colleagues highlight that PsyCap is a motivating mechanism in attaining goals which is
open for development.
Organizational PsyCap may be particularly important in family-owned franchise frms
where there is high level of dependence on family members and their contributions for
transgenerational survival and success (Memili et al., 2013). Indeed, family frms are
distinguished from nonfamily frms by family involvement through ownership,
governance, management, and intentions for transgenerational succession (Chua et al.,
1999; Chrisman et al., 2005). Family involvement based on these components and
intentions, vision, familiness, and/or behavior based on the essence approach (Chrisman,
Chua, & Litz, 2003; Chrisman, Chua, & Sharma, 2005) are both likely to have efects on
developing valuable intangible assets such as organizational PsyCap. However, whether
family-owned franchise context nurtures or restricts the development of organizational
PsyCap and how organizational PsyCap infuences their strategic decisions and frm
behavior such as CSR have been under-researched.
Research has associated family frms with traditions restricting change, reluctance to take
risks, emotionally signifcant and illiquid investments, and unwillingness to grow (Wilken,
1979; Ward, 1997). Other studies identify family frm dynamics that are family bond,
moderate levels of individualism, open family frm culture, external orientation, and
decentralization, which may facilitate the development of organizational PsyCap in family
frms (Wilken, 1979; Hall et al., 2001; Habbershon & Pistrui, 2002; Steier, Chrisman &
Chua, 2004; Zahra et al., 2004). When present, organizational PsyCap is expected to
infuence family frm strategies and behavior, which may have substantial positive impact
on the communities they operate in.
Memili & Welsh
9
Corporate Social Responsibility
Within the domain of Corporate Social Responsibility (CSR) theory, frms operate in a
socio-cultural system ( Johnson, 1971). Accordingly, CSR research addresses the
relationship between the frm and the society through the frm’s decisions and actions
benefting the society beyond the frm’s economic and legal obligations (Carroll, 1999;
McGuire, 1963). Tereby, studies highlight the voluntary aspect of CSR and its broad
constituents such as the frm’s employees, customers, suppliers, and communities
(Frederick, 1960; Jamali, 2008; Jones, 1980; Manne & Wallich, 1972). Hence, CSR actions
fulfll expectations of public, solve societal problems, and elevate socio-economic welfare
(Carroll, 1999; Fitch, 1976; Frederick, 1960).
Research also suggests that frms’ being socially responsible pays of for the frm as well as
the society (Burke & Logsdon, 1996). For example, a study by Turban and Greening
(1997) shows that CSR can lead to positive reputation and attractiveness of frms as
employers. Tese can help maximize proft and shareholder wealth and elevate total value
added (Hawkins, 2006; Jamali, 2008; Mattila, 2009; Phillips et al., 2003; Wallace, 2003).
Voluntary approaches to CSR have been receiving increasing research attention (e.g.
Andrews, 1998; Khanna & Anton, 2002; Videras & Alberini, 2000).
However, there have been only a small number of recent studies investigating the CSR
activities in family frms which tend to behave diferently than non-family frms because of
family involvement and infuence exerted into the business through ownership and/or
management (e.g. Berrone et al., 2010; Craig & Dibrell, 2006; Mir & Feitelson, 2007).
CSR studies focusing on family frms suggest that family business owners’ greater
commitment to the family frm, direct contact with customers, proactiveness in nurturing
relationships with all stakeholders, long-term orientation, involvement in the community,
and reputation concerns can facilitate CSR activities (Bingham et al., 2011; Deniz, 2005;
Dyer & Whetten, 2006; Uhlaner, Van Goor-Balk, & Masurel, 2004). However, little is
known about the drivers of CSR activities in family-owned franchises and how they afect
the adoption and implementation of such programs. Hence, we are investigating these
important research questions through the lens of PsyCap and CSR as well as the extant
family business and franchising literature. Specifcally, we investigate whether family owned
franchise frms have more organizational PsyCap than non-family franchise frms, how
family involvement afects CSR activities in franchise frms, and how organizational
PsyCap infuences this relationship.
PROPOSITIONS
Organizational PsyCap in Family versus Non-Family Franchise Firms
Family-frm specifc idiosyncrasies may facilitate the development of organizational
PsyCap in family-owned franchise frms more than that in non-family franchise frms.
Reciprocal altruism (i.e. a mutual moral value motivating individuals to act in a manner
that would beneft other individuals without expecting anything in return) is an important
relational element (Schulze, Lubatkin, & Dino, 2002), which can nurture the development
of organizational PsyCap in family-owned franchise frms. Te parent’s welfare is linked to
that of children (Stark, 1995) leading to frm-wide reciprocally altruistic behaviors in
family frms. When family business members are reciprocally altruistic to each other
(Chrisman, Chua, & Sharma, 2005), their interests may be aligned with the interests of the
Journal of Ethics & Entrepreneurship
10
family frm (Corbetta & Salvato, 2004) and family business members may hold business
objectives above their personal objectives (Zahra, 2003). As reciprocal altruism facilitates
bonding through trust, communication, respect, and love (Lubatkin, Schulze, Ling, &
Dino, 2005), family frms depict collectivistic behaviors rather than self-serving behaviors
(Corbetta et al., 2004). Tis can elevate efcacy, optimism, hope, and resilience
constituting organizational PsyCap in family-owned franchise frms.
Family-owned franchise frms particularly with succession expectations tend to be more
long-term oriented in business activities (Ward, 1997; Habbershon & Williams, 1999;
James, 1999; Anderson & Reeb, 2003; Zellweger, 2007). Te longer time horizon is
rooted in the primary desire for the family’s continuity, stability, unity, and legacy (Upton
et al., 2001; Anderson & Reeb, 2003; Miller & Le Breton-Miller, 2008), which can also
enhance the development of hope, optimism, efcacy, resilience components of
organizational PsyCap.
Furthermore, the creation and preservation of socioemotional wealth through the
attainment of non-economic goals is a key factor diferentiating family frms from non-
family frms (Chrisman, Chua, & Sharma, 2005). Family-centered non-economic goals
include, among other things, the preservation of family values, harmony, social capital, and
reputation, as well as the ability to behave altruistically toward family members (Chrisman,
Chua, Pearson, & Barnett, forthcoming; Gomez-Mejia et al., 2007; Pearson, Carr, & Shaw,
2008). Achievement of these goals creates socioemotional wealth for the family and
increases the desirability of transgenerational family control. Hence, creation and
preservation of socioemotional wealth are expected to elevate positive organizational
behaviors in the forms of hope, optimism, efcacy, and resilience in family-owned franchise
frms.
Based on the unique family frm dynamics discussed above:
Proposition 1. Family-owned fanchise frms will have higher levels of organizational
psychological capital than non-family fanchise frms.
Family Involvement in Franchise Firms and CSR
Family frms are distinguished from nonfamily frms by the involvement of the family
through ownership, management, and transgenerational succession expectations
(Chrisman, Chua, & Sharma, 2005; Chua et al., 1999). However, the majority of small-to-
medium sized enterprises, such as single-unit franchisees or newer franchisors that are
ofentimes family businesses, exhibit family involvement through ownership and/or
management (Haksever, 1996). While family ownership and management are necessary
for a family to exert its infuence on frm behavior, they may not be sufcient to identify
idiosyncrasies in frm behavior because they do not capture the underlying rationale or
willingness of a family to exert its infuence on the frm in a way that is distinctive from
non-family frms. On the other hand, when a family has distinctive desires and intentions,
such as maintaining transgenerational control of the frm, it is likely to develop policies and
strategies that difer in meaningful ways from the policies and strategies of non-family
frms. For example, frms with family ownership and management that lack intra-family
succession intentions are likely to be managed for short-term rewards. Indeed, the unique
vision and goals of a family for the frm (Chrisman et al., 2003; Chrisman et al., 2005) are
expected to have the key impact on shaping frm-level behavior in the form of strategies.
Memili & Welsh
11
12
Journal of Ethics & Entrepreneurship
In frms with a certain level of family involvement, strategic decisions are shaped by
values and aspirations of the family business owners and managers (Chrisman, Chua, &
Zahra, 2003). When family objectives and business strategies are linked (Aronof & Ward,
1995; Habbershon & Williams, 1999; Sundaramurthy & Kreiner, 2008), distinctive efects
on frm behavior are inevitable (Sharma et al., 1997). Because intra-family succession
requires that the frm survive and prosper beyond the life of its founder, the longer term
perspective of its decision makers (Anderson & Reeb, 2003; Habbershon & Williams,
1999; James, 1999; Ward, 1997; Zahra et al., 2008) is expected to play a key role in
formulating and implementing strategies, such as CSR.
Image and reputation concerns encourage family owners and/or managers to refrain
from wrongdoings and managerial mishaps and strive for the well-being of stakeholders.
Indeed, families tend to establish cohesive organizational environments as “their personal
values and ethics are deeply embedded in their company and refected in all its behavior”
(Miller & Le Breton-Miller, 2005: 521). Te core ethical concern for families tends to be
making contributions that count and will refect well on a controlling family and its future
generations (Miller & Le Breton-Miller, 2005). Controlling families’ building relationships
with internal and external stakeholders based on generosity, trustworthiness, and high
ethical standards tend to diminish the possibility of wrongdoings and enhance their
concerns for CSR. Accordingly, Berrone et al. (2010) show that U.S. manufacturing frms
required to report their emissions family frms voluntarily adopt environment-friendly
policies and risky environmental investments beyond regulatory requirements owing to
their noneconomic goals such as maintaining family legacy and prestige and accumulating
social capital.
Long-term orientation fosters enduring relationships with key stakeholders (Aronof &
Ward, 1995; Dick & Basu, 1994; Habbershon & Williams, 1999; Lyman, 1991), which are
important in CSR activities. Family frms ofen work to build strong social ties in their
communities so that the next generation can beneft from the accrued trust and
cooperation. A frm’s support for a community tends to be reciprocated over time through
the loyalty of stakeholders (Niehm, Swinney, & Miller, 2008). Furthermore, due to their
personal involvement in the family frm, family leaders are able to develop more consistent,
durable and credible relationships with the community (Arregle et al., 2007; Carney, 2005;
Lounsbury & Glynn, 2001; Sirmon & Hitt, 2003). Community ties are seen as an
important mechanism through which family leaders protect and nurture their businesses
(Lester & Cannella, 2006). Family frms with strong social ties in their communities are
more easily able to communicate the value of their activities to stakeholders and garner
strategic resources (Sirmon & Hitt, 2003). Given that relational exchanges and trust are
built over time, the complex networks and enduring relationships that family frms build
within their communities (Miller et al., 2008; Sirmon & Hitt, 2003; Sorenson, Folker, &
Brigham, 2008; Steier, 2001) can be a primary source in CSR activities. Indeed, family
frms that have strong social ties are expected to compete more efectively than those that
lack social ties ( James, 1999; Sharma, 2008; Sirmon & Hitt, 2003).
Additionally, the personal responsibility that well-connected family business leaders
ofen feel for their communities can push them to undertake projects so as to beneft their
local area and townspeople (Stavrou, 1998). Moreover, owing to family managers’ higher
levels of identifcation with the frm, they exhibit a stronger emotional attachment to the
frm, enhancing their organizational commitment and involvement (Minichilli et al.,
2010), which consequently can facilitate CSR activities.
13
Memili & Welsh
Terefore, family frm idiosyncrasies discussed above can foster CSR in family frms.
Hence, we expect that family involvement in franchise frms will be associated with higher
level CSR activities.
Proposition 2. Family involvement in fanchise frms will be positively associated
with CSR activities.
Moderation Efects of Organizational PsyCap
Te components of organizational PsyCap are expected to infuence the relationship
between family involvement in franchise frms and CSR activities. Indeed, the positive
organizational behavior in the form of PsyCap, involving hope, optimism, efcacy, and
resilience, in family-owned franchise frms can enhance this relationship by mitigating the
risk aversion toward uncertainties associated with CSR activities and elevate the
perceptions concerning the family frm capabilities in implementing CSR programs. For
example, a family frm exhibiting high levels of organizational PsyCap may be more willing
to undertake CSR activities even though they may have limited fnancial means.
Terefore, we expect that organizational PsyCap will enhance the relationship between
family involvement in franchise frms and CSR activities.
Proposition 3. Organizational PsyCap will moderate the relationship between family
involvement in fanchise frms and CSR activities, such that organizational PsyCap will
strengthen the positive relationship.
DISCUSSION AND CONCLUSION
In this paper, we attempt to provide some initial answers to three important research
questions: (1) Are family frms more or less likely to perform CSR activities than non-
family frms, (2) How is the impact of family involvement in franchise frms on CSR
activities, and (3) What role does organizational PsyCap play in the relationship between
family involvement in franchise frms and CSR activities? We propose that family frms
may develop more organizational PsyCap than that in non-family franchise frms.
Furthermore, we suggest that when family involvement in franchise frms will be positively
associated with CSR activities. We also suggest that organizational PsyCap will strengthen
the relationship between family involvement in franchise frms and CSR activities.
Terefore, we contribute to the literature in several ways. First, this article is one of the
only attempts to use organizational PsyCap and CSR theories to shed some light onto the
diferences in the strategic decisions of family frms versus non-family frms concerning
CSR activities. Not only does this add to our understanding of family frms and provide
avenues for future research, such as empirical testing of our propositions, it also suggests
the value of a combination of organizational PsyCap and CSR perspectives to family
business studies. Second, we contribute to the CSR literature by suggesting a key driver of
CSR activities, namely the organizational PsyCap combined with family involvement in
family-owned franchise frms.
Furthermore, the impact of family involvement, organizational PsyCap, and the
interaction efects might vary in franchise frms depending upon life-cycle stages, industry,
or the imminence of succession. Tis information could be valuable to the franchise
industry in improving its overall public image in relation to CSR. Te franchise industry
has notoriously been perceived in the popular press as low in CSR and focused solely on
profts. Recent popular articles on franchises that are paying attention to CSR and taking
action have appeared in trade magazines (Mailloux, 2010; “Social Responsibility,” 2010).
All these factors suggest additional applications of PsyCap and CSR theories to the study
of family businesses.
Aside from organizational PsyCap we have addressed in this paper, there may be other
determinants of CSR activities such as family image concerns (Dyer & Whetten, 2006;
Craig, Dibrell, & Davis, 2008) that are worth investigating since frms infuenced by family
involvement tend to strategize based on both economic and non-economic goals
(Chrisman et al., 2005).
Furthermore, our article considered CSR activities as one particular outcome of the
interaction of family involvement and organizational PsyCap. Future studies can explore
how this interaction may afect other functional strategies such as operations, R&D, and
fnance, as well as other strategic actions at the corporate and business levels that are
important in frm success. For example, whether the interaction efects of family
involvement and organizational PsyCap lead to higher innovation inputs (e.g. R&D
intensity) and then higher innovation outputs (e.g. patents) would be interesting to
examine.
Finally, further comparative analyses of non-family and family frms can investigate how
diferent family governance confgurations (e.g. family versus non-family CEO) afect CSR
strategies. In doing so, consideration of the time element is important because, as we have
argued, intentions for transgenerational succession and a consequent long-term orientation
may lead family frms to follow strategies that sacrifce short-term performance in order to
achieve long-term strategic and family objectives.
In conclusion, our conceptual framework presented in this paper provides a PsyCap
perspective to family frms and their strategic decisions concerning CSR activities. Our
paper can help family business practitioners and scholars better understand the unique
family frm propensities that afect the development of organizational PsyCap in family-
owned franchise frms. If family-owned franchise frms can successfully develop and
capitalize on organizational PsyCap through family frm-specifc idiosyncrasies, they can
enhance the business growth and long-term prosperity through CSR activities. We believe
that future family business studies within the framework of positive organizational
behavior and CSR will also result in better understanding of the formulation of family
frms’ strategic decisions in many other areas that have not been dealt with in this paper.
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doc_886529811.pdf
Research has linked Psychological Capital (PsyCap) to employees’ positive attitudes, behaviors, and performance in organizations and is characterized by hope, self-efficacy, resilience, and optimism.
5
Organizational Psychological Capital in
Family-owned Franchise Firms and
Corporate Social Responsibility
Esra Memili and Dianne H. B. Welsh
ABSTRACT
Research has linked Psychological Capital (PsyCap) to employees’ positive attitudes,
behaviors, and performance in organizations and is characterized by hope, self-efcacy,
resilience, and optimism. Despite the demonstrated efects of PsyCap on employee
outcomes, PsyCap has not been researched in family frms (except for Memili, Welsh,
& Luthans, forthcoming). Previous research has highlighted the potential efects of
family infuence on family frms’ human resources policies and procedures, as well as the
subsequent efects on employees’ value-creating attitudes and behaviors. Here, we
extend this line of research by drawing primarily upon theory of PsyCap and the extant
family business and franchising literature to explore whether family-owned franchise
frms exhibit more organizational PsyCap than non-family franchise frms and the
impact of family involvement and organizational PsyCap on corporate social
responsibility (CSR) in family-owned franchise frms.
KEY WORDS: Franchise Family Firms; Psychological Capital; Corporate Social
Responsibility
ESRA MEMILI is an Assistant Professor of Entrepreneurship at University of North Carolina-Greensboro,
Bryan School of Business and Economics, 370 Bryan, P.O. Box 26170, Greensboro, NC 27402. Telephone:
662.617.1459 Email: [email protected]
DIANNE H. B. WELSH is Hayes Distinguished Professor of Entrepreneurship at University of North
Carolina-Greensboro, Bryan School of Business and Economics, 328 Bryan, P.O. Box 26170, NC 27402.
Telephone: 336.256.8507 Email: [email protected]
Journal of Ethics & Entrepreneurship, Vol. 4, No. 1 (Spring 2014), pp. 5-20
©Gardner-Webb University. All rights reserved.
ISSN 2326-3776 (Print) ISSN 2326-3806 (Online)
Memili, E., & Welsh, D.H.B. (2014). Psychological capital in family-owned franchise firms and corporate social responsibility. Journal of Ethics and Entrepreneurship, 4(1),
5-20.
Made available courtesy of Gardener-Webb University:
http://www.gardner-webb.edu/academics/journal-of-ethics-and-entrepreneurship/index
Reprinted with permission. No further reproduction is authorized without written permission from Gardner-Webb University.
INTRODUCTION
Family involvement in businesses is prevalent around the world and substantially
infuences their strategic decisions (Becchetti & Trovato, 2002; Sharma, Chrisman, &
Chua, 1997; Welsh, Memili, Kaciak, Ochi, forthcoming). Franchise form of business is also
a major player of the worldwide economy (Alon & Welsh, 2001, 2003; Welsh & Alon,
2001, 2002). Indeed, franchising accounts for greater than 40% of all retail sales and totals
more than 1.5 trillion dollars in revenue annually around the world (International
Franchise Association, 2006). Many of these are family-owned franchises (Alon & Welsh,
2003; Welsh & Alon, 2002). However, only a handful of studies focus on family frm issues
in a franchise domain and studies have mostly been on U.S. family-owned franchises
(Chirico, Ireland, & Sirmon, 2011; Kaufmann, 1999; Udell, 1973). We focus on franchise
family frms owing to their both theoretical and practical importance. Yet, little is known
about this phenomenon despite its impact on world economies.
Te involvement of the family in a franchise frm is likely to infuence strategic decisions
(e.g., corporate social responsibility), frm behavior, and frm performance (Ensley, Pearson,
& Sardeshmukh, 2007). Strategic decisions that determine corporate self-regulatory actions
appear to be of particular importance to the performance and long-term success of family
frms (e.g. Berrone, Cruz, Gomez-Mejia, & Larraza-Kintana, 2010), yet we are unaware of
any systematic attention to such decisions in the family business or franchising literature.
Terefore, distinctive factors afecting strategic decisions, specifcally concerning the
Corporate Social Responsibility (CSR) and the idiosyncratic conditions (i.e., PsyCap)
infuencing such decisions in family franchise frms deserves more research attention.
Indeed, the controlling families within family frms do not focus solely on maximizing
economic returns (Gomez-Mejia, Haynes, Nunez-Nickel, Jacobson, & Moyano-Fuentes,
2007). Instead, they tend to exercise discretionary power to pursue non-economic goals to
be able to abide by family values and norms, preserve the family’s control of the frm, fulfll
family obligations, and preserve family harmony (Berrone, Cruz, Gomez-Mejia, and
Larraza-Kintana, 2010; Chrisman, Chua, Pearson, & Barnett, forthcoming; Gomez-Mejia
et al., 2007, 2010). Te pursuit of these non-economic goals leads to diferences in frm
behavior and performance not only between family and non-family frms, but also among
family frms themselves (Gomez-Mejia et al., 2007; Zellweger & Nason, 2008).
Accordingly, research has examined the socioemotional wealth in family frms which lead
them to survive to primarily meet family’s needs and expectations even though they may
not be proftable (Gomez-Mejia et al., 2007; 2010). Te achievement of non-economic
goals creates socioemotional wealth for the family and elevates the intentions to sustain
family control (Chua et al., 1999; Gomez-Mejia et al., 2007). Te loss of socioemotional
wealth, however, can result in diminished intimacy, lowered status, and inability to meet
family’s expectations (Gomez-Mejia et al., 2007). Hence, some family frms are willing to
accept greater performance hazard in order to preserve socioemotional wealth rooted in
noneconomic goals (Chrisman et al., 2003; Gomez-Mejia et al., 2007). Gomez-Mejia et al.
(2007) show that family frms may be willing to accept risk to their performance to avoid
the loss of socioemotional wealth, but at the same time be risk averse in making other
business decisions. However, we do not know enough about these phenomena within the
family-owned franchise frm context.
Journal of Ethics & Entrepreneurship
6
Aside from socioemotional wealth, another important, intangible asset of family-owned
franchises may be their organizational Psychological Capital (PsyCap). PsyCap is based on
the work on Positive Organizational Behavior that can be defned as the study and
application of positively oriented human resource strengths and psychological capabilities
that can be measured, developed, and efectively managed for performance improvement.
Positive Psychological Constructs (or simply PsyCap) are defned as an individual’s positive
psychological state of development and are characterized by hope, self-efcacy, resilience,
and optimism as identifed by Luthans and colleagues (Luthans, 2002; Luthans & Youssef,
2004; Luthans, Youssef, & Avolio, 2007). When these four are combined, they have been
determined to be a second-order construct (Luthans, Avolio, Avey, & Norman, 2007). In a
forthcoming Entrepreneurship Teory and Practice special issue article on family frms,
Memili and colleagues introduce the organizational PsyCap of family frms which can be
particularly valuable for family frms owing to their challenges in raising other forms of
capital such as fnancial or human capital. Te authors also suggest that family frms may
exhibit higher levels of organizational PsyCap than non-family frms owing to family frm
idiosyncrasies (Steier, Chrisman, & Chua, 2004) such as family bonding, collectivity,
shared history, and long-term orientation. However, to our knowledge, organizational
PsyCap of franchise family frms has not been investigated yet.
According to Chirico et al. (2011) family-owned franchises are more likely to attain
competitive advantages than non-family counterparts. Tere are a few studies that have
examined family frm franchises directly (Chirico, Ireland, & Sirmon, 2011) or indirectly
(Kaufmann, 1999; Udell, 1973). However, to the best of our knowledge, no study has
investigated organizational PsyCap as a critical resource in family-owned franchise frms
and whether family-owned franchises exhibit more organizational PsyCap than non-family
counterparts, which may impact their frm performance. A recent study by Welsh and
Raven (2011) examines hope, which is an important component of Psychological Capital
(Snyder et al., 1991; Luthans et al., 2007), among franchisees and franchisors and draws
attention to the importance of studies investigating hope in business settings. Nevertheless,
PsyCap encompassing hope in family versus nonfamily franchise frms is not examined yet.
Hence, the theory of the family frm will be advanced by investigating whether family-
owned franchise frms exhibit more organizational PsyCap than non-family counterparts
and explaining how it infuences family-owned franchise frms’ CSR.
Our article addresses three important research questions regarding organizational
PsyCap in family-owned franchise frms; specifcally: (1) Do family-owned franchise frms
have more organizational PsyCap than non-family franchise frms, (2) How does family
involvement afect CSR in franchise frms, and (3) How does organizational PsyCap
infuence the relationship between family involvement and corporate social responsibility
(CSR) in franchise frms? We use PsyCap, CSR, and the extant family business and
franchising literature to explore organizational PsyCap in family frms compared to that in
non-family frms, how family involvement impacts CSR activities, and how organizational
PsyCap afects the relationship between family involvement and CSR.
Tis article contributes to the family frm literature in several ways. First, we use
Psychological Capital and CSR theories as the theoretical lenses to explain whether family-
owned franchise frms have more organizational PsyCap than non-family franchise frms,
how family involvement infuences CSR, and to what extent organizational PsyCap
impacts the relationship between family involvement and CSR. Tis line of research
Memili & Welsh
7
enhances the development of the theory of the family frm and highlights the importance
of incorporating Psychological Capital and CSR theories into family business studies.
Second, we contribute to a better understanding of the diferences between not only family
and nonfamily frms, but also among family frms themselves. Tird, we present a PsyCap
model to demonstrate the family frm idiosyncrasies and CSR diferences in family-owned
franchise frms, which play an important role in corporate citizenship around the world.
Figure 1 provides a visual representation of our propositions.
FIGURE 1. Family Involvement, Organizational PsyCap, and CSR Activities
THEORETICAL OVERVIEW
Although family frms are prevalent in franchising (Chirico, Ireland, & Sirmon, 2011;
Welsh & Raven, 2004), the focus of franchising research has been on non-family frms and
many issues that family-owned franchises face remain unclear theoretically and practically,
as in other organizational studies (Dyer, 2003; Hoy & Verser, 1994). Franchising occurs
when a franchisor sells to the franchisee the right to market its branded products and use
its business practices (Combs, Ketchen, & Hoover, 2004a). Franchising is an economic
powerhouse and is so widespread that one out of every 12 retail businesses in the U.S. is a
franchised business, with more than 8 million people employed in franchised businesses
and comprising greater than 40% of all retail businesses (International Franchise
Association, 2004). While research on franchising has been conducted for four decades
(Combs & Ketchen, 2003; Oxenfeldt & Kelley, 1969) surprisingly little research has been
conducted concerning franchising and corporate social responsibility despite the
worldwide focus on this issue. In fact, Young and McIntyre (2011) examined 25 years of
research from the International Society of Franchising, the academic organization that
exclusively studies franchising, and found only seven articles concerning ethics and social
responsibility in 1986, and from 1988-1999, and virtually no articles on the topic from
2000-2010. Additionally, a thorough review of academic journal articles revealed no
articles on franchise corporate social responsibility. None of these studies included family
frm franchises.
Journal of Ethics & Entrepreneurship
8
Organizational PsyCap
Family Involvement
CSR Activities in
Franchise Firms
P3 +
P2 +
Psychological Capital
Within the framework of positive psychology, positive organizational behavior (i.e. “the
study and application of positively oriented human resource strengths and psychological
capacities that can be measured, developed, and efectively managed for performance
improvement”) has started to gain research attention with a focus on positive development
and management of human resources in contemporary work environment (Luthans, 2002:
59; Luthans, Avolio, Avey & Norman, 2007). Deriving from the defnition of positive
organizational behavior, the positive psychological constructs have been identifed as hope,
resilience, optimism, and self-efcacy constituting Psychological Capital (PsyCap) (Avey et
al., 2011; Luthans et al., 2007). Hence, PsyCap composite construct is an individual’s
positive psychological state of development characterized by self-efcacy (i.e. having
confdence), optimism (i.e. making a positive attribution about succeeding at present and
in the future, hope (i.e. persevering toward goals), and resilience (i.e. bouncing back and
even beyond when faced with difculty and challenges) (Luthans et al., 2007).
A meta-analysis by Avey et al. (2011) shows that PsyCap is associated with important
employee outcomes. Te authors show that PsyCap is positively related to favorable
employee attitudes such as job satisfaction, organizational commitment, and psychological
well-being, favorable employee behaviors such as citizenship, and self, objective, and
supervisor evaluations of performance. Te authors also show that PsyCap is negatively
associated with undesirable employee attitudes such as cynicism, turnover intentions, job
stress, and anxiety and undesirable employee behaviors such as deviance. Moreover, Avey
and colleagues highlight that PsyCap is a motivating mechanism in attaining goals which is
open for development.
Organizational PsyCap may be particularly important in family-owned franchise frms
where there is high level of dependence on family members and their contributions for
transgenerational survival and success (Memili et al., 2013). Indeed, family frms are
distinguished from nonfamily frms by family involvement through ownership,
governance, management, and intentions for transgenerational succession (Chua et al.,
1999; Chrisman et al., 2005). Family involvement based on these components and
intentions, vision, familiness, and/or behavior based on the essence approach (Chrisman,
Chua, & Litz, 2003; Chrisman, Chua, & Sharma, 2005) are both likely to have efects on
developing valuable intangible assets such as organizational PsyCap. However, whether
family-owned franchise context nurtures or restricts the development of organizational
PsyCap and how organizational PsyCap infuences their strategic decisions and frm
behavior such as CSR have been under-researched.
Research has associated family frms with traditions restricting change, reluctance to take
risks, emotionally signifcant and illiquid investments, and unwillingness to grow (Wilken,
1979; Ward, 1997). Other studies identify family frm dynamics that are family bond,
moderate levels of individualism, open family frm culture, external orientation, and
decentralization, which may facilitate the development of organizational PsyCap in family
frms (Wilken, 1979; Hall et al., 2001; Habbershon & Pistrui, 2002; Steier, Chrisman &
Chua, 2004; Zahra et al., 2004). When present, organizational PsyCap is expected to
infuence family frm strategies and behavior, which may have substantial positive impact
on the communities they operate in.
Memili & Welsh
9
Corporate Social Responsibility
Within the domain of Corporate Social Responsibility (CSR) theory, frms operate in a
socio-cultural system ( Johnson, 1971). Accordingly, CSR research addresses the
relationship between the frm and the society through the frm’s decisions and actions
benefting the society beyond the frm’s economic and legal obligations (Carroll, 1999;
McGuire, 1963). Tereby, studies highlight the voluntary aspect of CSR and its broad
constituents such as the frm’s employees, customers, suppliers, and communities
(Frederick, 1960; Jamali, 2008; Jones, 1980; Manne & Wallich, 1972). Hence, CSR actions
fulfll expectations of public, solve societal problems, and elevate socio-economic welfare
(Carroll, 1999; Fitch, 1976; Frederick, 1960).
Research also suggests that frms’ being socially responsible pays of for the frm as well as
the society (Burke & Logsdon, 1996). For example, a study by Turban and Greening
(1997) shows that CSR can lead to positive reputation and attractiveness of frms as
employers. Tese can help maximize proft and shareholder wealth and elevate total value
added (Hawkins, 2006; Jamali, 2008; Mattila, 2009; Phillips et al., 2003; Wallace, 2003).
Voluntary approaches to CSR have been receiving increasing research attention (e.g.
Andrews, 1998; Khanna & Anton, 2002; Videras & Alberini, 2000).
However, there have been only a small number of recent studies investigating the CSR
activities in family frms which tend to behave diferently than non-family frms because of
family involvement and infuence exerted into the business through ownership and/or
management (e.g. Berrone et al., 2010; Craig & Dibrell, 2006; Mir & Feitelson, 2007).
CSR studies focusing on family frms suggest that family business owners’ greater
commitment to the family frm, direct contact with customers, proactiveness in nurturing
relationships with all stakeholders, long-term orientation, involvement in the community,
and reputation concerns can facilitate CSR activities (Bingham et al., 2011; Deniz, 2005;
Dyer & Whetten, 2006; Uhlaner, Van Goor-Balk, & Masurel, 2004). However, little is
known about the drivers of CSR activities in family-owned franchises and how they afect
the adoption and implementation of such programs. Hence, we are investigating these
important research questions through the lens of PsyCap and CSR as well as the extant
family business and franchising literature. Specifcally, we investigate whether family owned
franchise frms have more organizational PsyCap than non-family franchise frms, how
family involvement afects CSR activities in franchise frms, and how organizational
PsyCap infuences this relationship.
PROPOSITIONS
Organizational PsyCap in Family versus Non-Family Franchise Firms
Family-frm specifc idiosyncrasies may facilitate the development of organizational
PsyCap in family-owned franchise frms more than that in non-family franchise frms.
Reciprocal altruism (i.e. a mutual moral value motivating individuals to act in a manner
that would beneft other individuals without expecting anything in return) is an important
relational element (Schulze, Lubatkin, & Dino, 2002), which can nurture the development
of organizational PsyCap in family-owned franchise frms. Te parent’s welfare is linked to
that of children (Stark, 1995) leading to frm-wide reciprocally altruistic behaviors in
family frms. When family business members are reciprocally altruistic to each other
(Chrisman, Chua, & Sharma, 2005), their interests may be aligned with the interests of the
Journal of Ethics & Entrepreneurship
10
family frm (Corbetta & Salvato, 2004) and family business members may hold business
objectives above their personal objectives (Zahra, 2003). As reciprocal altruism facilitates
bonding through trust, communication, respect, and love (Lubatkin, Schulze, Ling, &
Dino, 2005), family frms depict collectivistic behaviors rather than self-serving behaviors
(Corbetta et al., 2004). Tis can elevate efcacy, optimism, hope, and resilience
constituting organizational PsyCap in family-owned franchise frms.
Family-owned franchise frms particularly with succession expectations tend to be more
long-term oriented in business activities (Ward, 1997; Habbershon & Williams, 1999;
James, 1999; Anderson & Reeb, 2003; Zellweger, 2007). Te longer time horizon is
rooted in the primary desire for the family’s continuity, stability, unity, and legacy (Upton
et al., 2001; Anderson & Reeb, 2003; Miller & Le Breton-Miller, 2008), which can also
enhance the development of hope, optimism, efcacy, resilience components of
organizational PsyCap.
Furthermore, the creation and preservation of socioemotional wealth through the
attainment of non-economic goals is a key factor diferentiating family frms from non-
family frms (Chrisman, Chua, & Sharma, 2005). Family-centered non-economic goals
include, among other things, the preservation of family values, harmony, social capital, and
reputation, as well as the ability to behave altruistically toward family members (Chrisman,
Chua, Pearson, & Barnett, forthcoming; Gomez-Mejia et al., 2007; Pearson, Carr, & Shaw,
2008). Achievement of these goals creates socioemotional wealth for the family and
increases the desirability of transgenerational family control. Hence, creation and
preservation of socioemotional wealth are expected to elevate positive organizational
behaviors in the forms of hope, optimism, efcacy, and resilience in family-owned franchise
frms.
Based on the unique family frm dynamics discussed above:
Proposition 1. Family-owned fanchise frms will have higher levels of organizational
psychological capital than non-family fanchise frms.
Family Involvement in Franchise Firms and CSR
Family frms are distinguished from nonfamily frms by the involvement of the family
through ownership, management, and transgenerational succession expectations
(Chrisman, Chua, & Sharma, 2005; Chua et al., 1999). However, the majority of small-to-
medium sized enterprises, such as single-unit franchisees or newer franchisors that are
ofentimes family businesses, exhibit family involvement through ownership and/or
management (Haksever, 1996). While family ownership and management are necessary
for a family to exert its infuence on frm behavior, they may not be sufcient to identify
idiosyncrasies in frm behavior because they do not capture the underlying rationale or
willingness of a family to exert its infuence on the frm in a way that is distinctive from
non-family frms. On the other hand, when a family has distinctive desires and intentions,
such as maintaining transgenerational control of the frm, it is likely to develop policies and
strategies that difer in meaningful ways from the policies and strategies of non-family
frms. For example, frms with family ownership and management that lack intra-family
succession intentions are likely to be managed for short-term rewards. Indeed, the unique
vision and goals of a family for the frm (Chrisman et al., 2003; Chrisman et al., 2005) are
expected to have the key impact on shaping frm-level behavior in the form of strategies.
Memili & Welsh
11
12
Journal of Ethics & Entrepreneurship
In frms with a certain level of family involvement, strategic decisions are shaped by
values and aspirations of the family business owners and managers (Chrisman, Chua, &
Zahra, 2003). When family objectives and business strategies are linked (Aronof & Ward,
1995; Habbershon & Williams, 1999; Sundaramurthy & Kreiner, 2008), distinctive efects
on frm behavior are inevitable (Sharma et al., 1997). Because intra-family succession
requires that the frm survive and prosper beyond the life of its founder, the longer term
perspective of its decision makers (Anderson & Reeb, 2003; Habbershon & Williams,
1999; James, 1999; Ward, 1997; Zahra et al., 2008) is expected to play a key role in
formulating and implementing strategies, such as CSR.
Image and reputation concerns encourage family owners and/or managers to refrain
from wrongdoings and managerial mishaps and strive for the well-being of stakeholders.
Indeed, families tend to establish cohesive organizational environments as “their personal
values and ethics are deeply embedded in their company and refected in all its behavior”
(Miller & Le Breton-Miller, 2005: 521). Te core ethical concern for families tends to be
making contributions that count and will refect well on a controlling family and its future
generations (Miller & Le Breton-Miller, 2005). Controlling families’ building relationships
with internal and external stakeholders based on generosity, trustworthiness, and high
ethical standards tend to diminish the possibility of wrongdoings and enhance their
concerns for CSR. Accordingly, Berrone et al. (2010) show that U.S. manufacturing frms
required to report their emissions family frms voluntarily adopt environment-friendly
policies and risky environmental investments beyond regulatory requirements owing to
their noneconomic goals such as maintaining family legacy and prestige and accumulating
social capital.
Long-term orientation fosters enduring relationships with key stakeholders (Aronof &
Ward, 1995; Dick & Basu, 1994; Habbershon & Williams, 1999; Lyman, 1991), which are
important in CSR activities. Family frms ofen work to build strong social ties in their
communities so that the next generation can beneft from the accrued trust and
cooperation. A frm’s support for a community tends to be reciprocated over time through
the loyalty of stakeholders (Niehm, Swinney, & Miller, 2008). Furthermore, due to their
personal involvement in the family frm, family leaders are able to develop more consistent,
durable and credible relationships with the community (Arregle et al., 2007; Carney, 2005;
Lounsbury & Glynn, 2001; Sirmon & Hitt, 2003). Community ties are seen as an
important mechanism through which family leaders protect and nurture their businesses
(Lester & Cannella, 2006). Family frms with strong social ties in their communities are
more easily able to communicate the value of their activities to stakeholders and garner
strategic resources (Sirmon & Hitt, 2003). Given that relational exchanges and trust are
built over time, the complex networks and enduring relationships that family frms build
within their communities (Miller et al., 2008; Sirmon & Hitt, 2003; Sorenson, Folker, &
Brigham, 2008; Steier, 2001) can be a primary source in CSR activities. Indeed, family
frms that have strong social ties are expected to compete more efectively than those that
lack social ties ( James, 1999; Sharma, 2008; Sirmon & Hitt, 2003).
Additionally, the personal responsibility that well-connected family business leaders
ofen feel for their communities can push them to undertake projects so as to beneft their
local area and townspeople (Stavrou, 1998). Moreover, owing to family managers’ higher
levels of identifcation with the frm, they exhibit a stronger emotional attachment to the
frm, enhancing their organizational commitment and involvement (Minichilli et al.,
2010), which consequently can facilitate CSR activities.
13
Memili & Welsh
Terefore, family frm idiosyncrasies discussed above can foster CSR in family frms.
Hence, we expect that family involvement in franchise frms will be associated with higher
level CSR activities.
Proposition 2. Family involvement in fanchise frms will be positively associated
with CSR activities.
Moderation Efects of Organizational PsyCap
Te components of organizational PsyCap are expected to infuence the relationship
between family involvement in franchise frms and CSR activities. Indeed, the positive
organizational behavior in the form of PsyCap, involving hope, optimism, efcacy, and
resilience, in family-owned franchise frms can enhance this relationship by mitigating the
risk aversion toward uncertainties associated with CSR activities and elevate the
perceptions concerning the family frm capabilities in implementing CSR programs. For
example, a family frm exhibiting high levels of organizational PsyCap may be more willing
to undertake CSR activities even though they may have limited fnancial means.
Terefore, we expect that organizational PsyCap will enhance the relationship between
family involvement in franchise frms and CSR activities.
Proposition 3. Organizational PsyCap will moderate the relationship between family
involvement in fanchise frms and CSR activities, such that organizational PsyCap will
strengthen the positive relationship.
DISCUSSION AND CONCLUSION
In this paper, we attempt to provide some initial answers to three important research
questions: (1) Are family frms more or less likely to perform CSR activities than non-
family frms, (2) How is the impact of family involvement in franchise frms on CSR
activities, and (3) What role does organizational PsyCap play in the relationship between
family involvement in franchise frms and CSR activities? We propose that family frms
may develop more organizational PsyCap than that in non-family franchise frms.
Furthermore, we suggest that when family involvement in franchise frms will be positively
associated with CSR activities. We also suggest that organizational PsyCap will strengthen
the relationship between family involvement in franchise frms and CSR activities.
Terefore, we contribute to the literature in several ways. First, this article is one of the
only attempts to use organizational PsyCap and CSR theories to shed some light onto the
diferences in the strategic decisions of family frms versus non-family frms concerning
CSR activities. Not only does this add to our understanding of family frms and provide
avenues for future research, such as empirical testing of our propositions, it also suggests
the value of a combination of organizational PsyCap and CSR perspectives to family
business studies. Second, we contribute to the CSR literature by suggesting a key driver of
CSR activities, namely the organizational PsyCap combined with family involvement in
family-owned franchise frms.
Furthermore, the impact of family involvement, organizational PsyCap, and the
interaction efects might vary in franchise frms depending upon life-cycle stages, industry,
or the imminence of succession. Tis information could be valuable to the franchise
industry in improving its overall public image in relation to CSR. Te franchise industry
has notoriously been perceived in the popular press as low in CSR and focused solely on
profts. Recent popular articles on franchises that are paying attention to CSR and taking
action have appeared in trade magazines (Mailloux, 2010; “Social Responsibility,” 2010).
All these factors suggest additional applications of PsyCap and CSR theories to the study
of family businesses.
Aside from organizational PsyCap we have addressed in this paper, there may be other
determinants of CSR activities such as family image concerns (Dyer & Whetten, 2006;
Craig, Dibrell, & Davis, 2008) that are worth investigating since frms infuenced by family
involvement tend to strategize based on both economic and non-economic goals
(Chrisman et al., 2005).
Furthermore, our article considered CSR activities as one particular outcome of the
interaction of family involvement and organizational PsyCap. Future studies can explore
how this interaction may afect other functional strategies such as operations, R&D, and
fnance, as well as other strategic actions at the corporate and business levels that are
important in frm success. For example, whether the interaction efects of family
involvement and organizational PsyCap lead to higher innovation inputs (e.g. R&D
intensity) and then higher innovation outputs (e.g. patents) would be interesting to
examine.
Finally, further comparative analyses of non-family and family frms can investigate how
diferent family governance confgurations (e.g. family versus non-family CEO) afect CSR
strategies. In doing so, consideration of the time element is important because, as we have
argued, intentions for transgenerational succession and a consequent long-term orientation
may lead family frms to follow strategies that sacrifce short-term performance in order to
achieve long-term strategic and family objectives.
In conclusion, our conceptual framework presented in this paper provides a PsyCap
perspective to family frms and their strategic decisions concerning CSR activities. Our
paper can help family business practitioners and scholars better understand the unique
family frm propensities that afect the development of organizational PsyCap in family-
owned franchise frms. If family-owned franchise frms can successfully develop and
capitalize on organizational PsyCap through family frm-specifc idiosyncrasies, they can
enhance the business growth and long-term prosperity through CSR activities. We believe
that future family business studies within the framework of positive organizational
behavior and CSR will also result in better understanding of the formulation of family
frms’ strategic decisions in many other areas that have not been dealt with in this paper.
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