We test competing theoretical perspectives of family firm governance in two separate studies by investigating whether family firm control moderates the detrimental effect of a management training ground on internal auditor objectivity and on the external auditor’s decision to rely on the internal audit function. In Study 1, we assess the objectivity of internal auditors working under an IAF that serves as a MTG or non-MTG and located in a family or non-family firm. A key result of Study 1 is (...) the mitigating role of family firm control, as we find that the objectivity of internal auditors is reduced when the IAF serves as a MTG but only in non-family firms. When the IAF is located in a family-controlled firm, the objectivity of internal auditors is unaffected by the opportunity to be promoted into management positions outside of the IAF. In Study 2, we utilize a controlled laboratory experiment with experienced Big 4 auditors as participants and examine their decision to rely on an IAF when it serves as a MTG. Our analyses indicate that external auditors reduce their reliance on non-family firm IAFs that are also MTGs and their decision is fully mediated by the perceived objectivity of non-family firm internal auditors. In contrast, external auditors’ reliance on family firm IAFs and their perceptions of internal auditor objectivity are unaffected under a MTG regime. The results of Studies 1 and 2 provide support for the alignment perspective of family firms. (shrink)

The ethical behavior prevalent in an organization often determines business success or failure. Much research in the business context has scrutinized ethical behavior, but there are still few insights into its roots; this study furthers this line of inquiry. In line with identity work theory, we examine how employees’ identification with a family business shapes internal ethical decision-making processes. Because it is individuals who engage in decision-making—be it ethical or not—our research perspective centers on the individual level. We followed an (...) inductive, qualitative approach and conducted interviews with 19 employees in seven family businesses. We found that individuals engage in identity work when they identify as individual family firm employees and when they identify with the perceived characteristics of the family firm. These processes of identification, in turn, influence how employees cope with ethical situations. Our findings contribute to ethics and family business research, as well as to identity theory. (shrink)

In the biblical Book of Ruth, Boaz instructs his workers not to molest Ruth. We draw insights on the problem of workplace sexual harassment in the family-firm setting from the Book of Ruth. We then integrate these insights with several discrete findings in the literatures on workplace sexual harassment and family firms: First, family firms are relatively strong when it comes to a culture of fairness and respect. Second, family firms sometimes lack formal codes of ethics, which could hamper integrity. (...) Third, religious exemplars can reinforce the positive culture of family firms and even substitute for a formal code of ethics. Fourth, religious exemplars can also attenuate excessive risk-taking behavior in family firms. (shrink)