Balancing family and business goals: how management control systems shape strategic capabilities in family CEO-led firms

This study explores the role of formal controls and organic organizational culture in family CEO-led firms. Drawing on the family business literature, the study theorizes that having a family member as chief executive officer (CEO) would entail preserving family goals in addition to pursuing business goals (i.e., goal diversity). This study emphasizes how the management control system (MCS) is designed and used to resolve goal diversity, and to what extent the interdependence between management control practices can leverage the strategic capabilities in family CEO-led firms. The research model is empirically tested using survey data from 958 family CEO-led firms. Consistent with the hypotheses, the results show a positive relationship between goal diversity and combining the use of formal controls and organic organizational culture. Furthermore, this combination is found to be imbalanced (i.e., the relative magnitude of using the two management control practices). The findings suggest that formal controls and organic culture have a complementary interdependent effect on developing the operational capability, but no effect on human resources capability in family firms. The results also indicate that MCS may indirectly affect family firms' performance through strategic capabilities.