Family Firms, Alliance Governance and Mutual Knowledge Creation
| Author | Robin Pesch,Martin Ratzmann,Beate Cesinger,Ricarda B. Bouncken,Mathew Hughes |
| Date | 01 October 2020 |
| DOI | http://doi.org/10.1111/1467-8551.12408 |
| Published date | 01 October 2020 |
British Journal of Management, Vol. 31, 769–791 (2020)
DOI: 10.1111/1467-8551.12408
Family Firms, Alliance Governance and
Mutual Knowledge Creation
Ricarda B. Bouncken, Mathew Hughes ,1Martin Ratzmann,
Beate Cesinger 2and Robin Pesch
Faculty of Law, Business and Economics, University of Bayreuth, Universitätsstrasse 30, 95444, Bayreuth,
Germany, 1School of Business and Economics, Loughborough University, Loughborough, Leicestershire, LE11
3TU, UK, and 2Faculty of Technology and Business, New Design University, Mariazeller Straße 97a, 3100, St.
Pölten, Austria
Corresponding author email: bouncken@uni-bayreuth.de
For family rms, alliances represent a form of heightened entrepreneurial risk-taking.
However,a dearth of research exists on the implications of forms of alliance governance
for family rms. In a study of 939 non-equity alliances of family and non-family rms,
we analyse how contracts and trust inuence mutual knowledge creation. Both contract
completeness and trust assist non-family rms in knowledge creation. However, family
rms rely on high levelsof trust forthe creation of knowledge.Knowledge creation suffers
when family rms encounter very complete contracts tied to attempts at high levels of
trust. The negative interaction effect is especially strong fornon-owner-run family rms.
Introduction
Researchersincreasingly discuss the differences be-
tween family rms and their non-family counter-
parts (Cesinger et al., 2016; Eddleston et al., 2010;
Feranita, Kotlar and De Massis, 2017). The inter-
ests of the family are at the forefront when fam-
ily rms make risky decisions, such as entering
alliances (Gómez-Mejía et al., 2007). As set out
by the relational view, alliances allow complemen-
tarities often based on knowledge transfers (Dyer
and Hatch, 2006; Dyer and Singh, 1998; Pesch
and Bouncken, 2018; Weber, Bauke and Raibulet,
2016). While family rms operate on a path-
dependent knowledge stock, they especially fear
the leakage of valuable knowledge about their al-
liance and aim to protect their knowledge (Sirmon
and Hitt, 2003). Simultaneously, family rms need
We are grateful to Professor Franz Kellermanns for his
feedback in the development of this paper. We are also
grateful to participants at the Strategic Management So-
ciety annual conference fortheir feedback on an early ver-
sion of this paper.
to access and create new knowledge through al-
liances. While unilateral knowledge transfers are
highly risky, rms might secure value creation and
capture by creating mutual knowledge with their
alliance partners (Grant and Baden-Fuller, 2004).
Mutual knowledge creation can stem from trans-
ferring, merging and marvelling about knowledge,
creating further potential spillovers.
However, mutual knowledge creation needs
coordination in the alliance.Previous (non-equity)
alliance research concentrated on trust and/or
contracts as coordination or governance mech-
anisms (Makadok and Coff, 2009; Oxley, 1997).
Contracts and their enforcement may secure value
creation and capture, but often alongside what
has been foreseen and stated in the initial contract
(Reuer and Ariño, 2007). The dynamic relational
view emphasizes that trust can promote social
processes and learning between rms (Dyer and
Hatch, 2006; Dyer and Singh, 1998). Trust, often
developed in repeated and anticipated future ties
(Dyer and Hatch, 2006; Dyer and Singh, 1998),
thus fosters the exchange of knowledge, might ac-
tivate unforeseen value and allows more exibility
© 2020 The Authors.British Journal of Management published by John Wiley & Sons Ltd on behalf of BritishAcademy
of Management. Published by John Wiley & Sons Ltd, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main
Street, Malden, MA, 02148, USA.
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commercial and no modications or adaptations are made.
770 R. B. Bouncken et al.
over the course of the alliance. Still, value creation
and capture might be limited in a trust regime,
by inducing partner ‘blindness’ and ignorance
of external information, especially weak signals
(Szulanski, Cappetta and Jensen, 2004).
The relationship between trust and contracts
built a long-term debate in alliance research
(Cao and Lumineau, 2015). Contracts and/or
trust might facilitate mutual knowledge creation
in alliances, but trust might increase exibility
and serendipity and thus serve better the mu-
tual knowledge creation among rms (Larsson
et al., 1998; Squire, Cousins and Brown, 2009).
The dilemma is that excessive trust can increase
cognitive lock-ins thatdamage knowledge creation
(Bermiss and Greenbaum, 2015). Value appropri-
ation might become endangered when trust sub-
stitutes contracts (Oxley, 1997). Conversely, con-
tracts can signal distrust (Bouncken et al., 2020;
Fredrich, Bouncken and Kraus, 2019). In sum,
studies report various and conicting ndings on
trust and detailed contracts, suggesting that rm
characteristics and contingencies are at play (Cao
and Lumineau, 2015).
Previous research has not considered trust and
contracts for alliances by family rms. Family
rms use fewer external relationships because
they put at risk the family’s resources, especially
their knowledge stocks (Carney, 2005; Pittino and
Visintin, 2011). Family rms emphasize trust in
general (Scholes, Mustafa and Chen, 2016), which
might then also stretch to their use of trust for
knowledge creation with external entities (Stanley
and McDowell, 2014). The question is how trust
and contracts affect mutual knowledge creationin
family rms compared to non-family rms.
The theoretical background of our study is the
dynamic relational view, which we extend with the
trust–contract discussion in alliance governance
(Cao and Lumineau, 2015). Our model assumes
that non-family rms can benet from more com-
plete contracts to safeguard value creation and
value capture that allows mutual knowledge cre-
ation. Differently, very complete contracts impose
expectations and restrictions that are unattractive
or uncommon to family rms, which are used to
acting more autonomously and allowing exibil-
ity through intense trustful personal relationships
(Carney, 2005). Trust does not dilute the family’s
control over their business when entering alliance
relationships (Cesinger et al., 2016) and is a pillar
of their exibility-oriented strategic activities
(Scholes, Mustafa and Chen, 2016). Thus, our
model assumes that non-family rms can improve
knowledge creation by following a contractual
logic or using the advantages of trusting relation-
ships too. Instead, family rms will favour trust
for mutual knowledge creation, and heavily spec-
ied contracts may be damaging their knowledge
creation in alliances.
Our study of 939 rms trading in Europe
from two industries (packaging and medical de-
vice manufacturing) industries on their non-equity
alliances nds that family rms achieve high mu-
tual knowledge creation when they follow trust
only. In both industries, mutual knowledge cre-
ation might emerge from exchanging knowledge
about technical potentials and customer demands
within a regulated frame. Co-developing knowl-
edge will help to connect technical components in
a novel way, alter the design and integrate new
customer demands. Considering alliance gover-
nance, non-family rms can use trust and contract
completeness independently and jointly, but fam-
ily rms cannot, and their deleterious effects are
greater for those family rms that are non-owner-
run businesses. Our results contribute to theory
and research on family rm management, alliance
governance and family rm alliance research spec-
ifying the conditions for family rm alliances. The
boundary condition of our research is that we
focus on contracts and trust (Bacharach, 1989;
Bradach and Eccles, 1989; Clauss and Bouncken,
2019).
Theoretical background
Alliances refer to ‘any voluntarily initiated coop-
erative agreements between rms’ (Gulati, 1995,
pp. 620–621). Following the dominant lenses in
alliance research, the relational and the dynamic
relational views, alliances allow complementar-
ities that are often based on opportunities for
learning in alliances (Dyer and Hatch, 2006; Dyer
and Singh, 1998). Knowledge exchanges create
relational rents, improve their partner-specic
understanding and discover further comple-
mentarities (Weber, Bauke and Raibulet, 2016).
Mutual knowledge creation among allying rms
can provide far more signicant complemen-
tarities and creativity than a plain transfer of
knowledge among allying rms can do for both
innovation and rm performance (Buckley et al.,
© 2020 The Authors.British Journal of Management published by JohnWiley & Sons Ltd on behalf of British
Academy of Management.
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