Edited by Mattias Nordqvist, Leif Melin, Mattias Waldkirch and Gershon Kumeto
Chapter 4: Agency theory and the family business
Individual business and family preferences form a unique situation in family firms, leading to multiple sources of agency costs that negatively influence performance. Hence, the theory of agency became a dominant organisation theory perspective that is applied to and further developed in family business research. This chapter elucidates prior research and demonstrates relational and altruistic aspects of family firms as sources of agency costs identified by family business research. It proposes to differentiate between heterogeneous structures of family firms when analysing agency costs and recommends taking an agency perspective when looking at the relationship of entrepreneurial attitudes and performance. Finally, it suggests ways to reduce agency costs by monitoring and contractual mechanisms. Keywords: family business, agency theory, agency costs, altruism, monitoring, heterogeneity, entrepreneurial attitudes
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