Family Owned Business Institute

Research Scholar's Abstracts 2010 - David Hanrisch, Sabine Klein

Contextualizing Organizational Boundary Decisions: Management Consulting in Family Businesses

David Hanisch, Sabine B. Klein
2010

Whereas strategy process research has long acknowledged context as an influence on decision making (Hutzschenreuter & Kleindienst, 2006; Papadakis, Lioukas, & Chambers, 1998), strategy content research has more or less neglected this dimension (Johns, 2006). Context can be characterized as “stimuli and phenomena that surround and thus exist in the environment external to the [object under research], most often at a different level of analysis” (Mowday & Sutton, 1993: 198). An important part of content research that has not been adequately contextualized is boundary decisions of organizations, where boundaries refer to the decision whether a certain transaction shall be governed externally through a market mechanism (“buy”) or internally through a hierarchical mechanism (“make”) (Williamson, 1975).
A particular organizational boundary decision we will build on is whether to use management consultants to support management projects. Management consulting is “an advisory service contracted for and provided by specially trained and qualified persons who assist, in an objective manner, the … [client’s top-management] to identify and analyze management problems, recommend solutions and help in the implementation of those solutions” (Greiner & Metzger, 1983: 7). Our central research question is how organizational context influences the organizational boundary decision to use management consultants. In order to explore this question, we build a boundary research model and examine the decision to use external management consultants to support management projects. An appropriate theoretical framework enabling research on organizational boundary is the resource-based view (RBV) (Barney, 1992; Leiblein, 2003).
Empirical research of this question requires a high variation in the dependent variable and a stable but distinct organizational context in order to obtain meaningful results. Family businesses fit these criteria. In a family business, a family exerts power over the organization and its strategic direction through ownership, top management, or board positions (Klein, Astrachan, & Smyrnios, 2005). Thus, we believe that family businesses are appropriate to conduct multilevel research on organizational context, as family businesses provide a rather stable but also distinct organizational context (Klein et al., 2005). This context enables us to build subgroups of family businesses that are internally inclusive and externally exclusive. Further, anecdotal evidence suggests a high variance in the use of management consultants within family businesses. A lot of owner-managers refrain from using consultants, whereas some family businesses use them.
Our paper will make several contributions to the academic literature. First, where existing research decisions have focused on the transaction level (e.g., Canbäck, 1998; Kehrer & Schade, 1995; Niewiem, 2005), we research a single-level organizational boundary decision in an organizational context, thus providing a multilevel perspective in a professional service setting. Second, we depart from the ubiquitous use of TCE in organizational boundary decisions by using the RBV as our theoretical framework (Hitt et al., 2007). Third, we refine the possible application of boundary theory under different preconditions in a multidimensional approach to family businesses. This will help to differentiate among different types of family businesses with respect to their use of external resources.
Besides its academic contribution, this research will also support practitioners. On the one hand, it helps consultants to better distinguish and understand family business clients who would benefit from their service. On the other, it provides guidance to decision makers in family businesses on when to use management consultants.