Family governance: understanding the relationship between informal family meetings, formal governance practices and family-centered non-economic goals

The uniqueness of family firms is largely attributed their pursuit of both economic and non-economic goals (Berrone et al., 2012; Gómez-Mejía et al., 2007; Kotlar et al., 2014). The adoption of these goals in family firms is a complex process that deals with interactions between two overlapping and coupled social systems, the family and the business (Frank et al., 2017; Habbershon et al., 2003; Suess, 2014). To primarily fulfill the needs of the family system, a key factor that sets family firms apart from non-family firms, concerns the adoption family-centered non-economic goals, which are defined as “goals stemming from the emotional value of owning a family firm” (Chrisman et al., 2012, p. 270). These goals often relate to the attitudes, values and intentions of the business family running the firm. It can include their preferences for exercising control and autonomy, family supportiveness and loyalty, the creation and conservation of strong identification of the family with the business, and perpetration of the family business through dynastic succession (Chrisman et al., 2012; Zellweger et al., 2013). In fact, the importance of these family-centered non-economic goals is attributed to their central role in establishing the premises that guide family firms (Kotlar and De Massis, 2013; Richards, 2023). They allow business families to exert their power, and influence decisions that reflect their values, attitudes, intentions and perception, thus building cohesion and reducing conflicts (Hu and Hughes, 2020; Mustakallio et al., 2002). They can also create alignment and agreement among family members (Zellweger et al., 2013), thus facilitating more responsive decision making that enable the creation and exploitation of new opportunities, which is an essential factor for entrepreneurship (Carney, 2005; De Massis et al., 2015; Tobak et al., 2018). Furthermore, family firms pursue family-centered non-economic goals when the controlling family seeks to enforce goals that contribute to their affective endowments (Berrone et al., 2012; Gómez-Mejía et al., 2010). Hence, these goals aim to preserve the socioemotional wealth that the family derive from being in control and having influence over the business (Richards, 2023; Zellweger et al., 2013). In this sense, Gómez-Mejía et al. (2007, p. 106) articulate the relationship and importance of family-centered non-economic goals in the context of socioemotional wealth when defining socioemotional wealth as “non-financial aspects of the firm that meet the family’s affective needs, such as identity, the ability to exercise family influence, and the perpetuation of the family dynasty.” Given that family-centered non-economic goals are often a fundamental priority of business families, pursuing such goals also enables the family to maintain the socioemotional wealth they gain from managing the business (Kotlar et al., 2014).

Recognizing the complexity of family business goals, we focus on family-centered non-economic objectives, as evidence suggests that these goals are uniquely shaped and prioritized by family firms (Chrisman et al., 2012) influencing business strategies such as internationalization, innovation and performance outcomes (Chrisman and Patel, 2012; Kotlar et al., 2018). Chrisman et al. (2018) specifically suggest that governance mechanisms applied to goal setting in family firms is distinct and heterogeneous as it emanates from both formal and informal mechanisms. Some families may adopt more informal governance mechanisms and resort to decision making and business conversations at for example the dinner table or during weekend family gatherings (Cicek et al., 2022; Parada et al., 2020). Kotlar and De Massis (2013) find that these interactions are more effective than formal ones in shaping family-centered non-economic goals, in small- and medium-sized family firms. On the other hand, more formal governance mechanisms such as family protocols, board of directors and family constitutions are critical in facilitating negotiations and reaching official decisions (Suáre and Santana-Martín, 2004) as well as achieving long-term sustainability (Parada et al., 2020; Suess, 2014). Despite the recognition that both formal and informal governance mechanisms are essential decision forums in family firms (Arteaga and Escribá-Esteve, 2021; Chrisman et al., 2018), research into their impact on family-centered non-economic goals frequently remains underexplored in these discussions (Daspit et al., 2018). This oversight is noteworthy and means that the field lacks a strong understanding of how the management process associated with (in)formal governance mechanisms lead to the adoption of family-centered non-economic goals in family firms. This weak spot in family business research can potentially be attributed to the fact that research on family-centered non-economic goals has foremost investigated the construct as an explanatory variable (Campopiano et al., 2019; Chrisman et al., 2012; Michiels et al., 2022) without thorough investigation into its antecedents. Given the great importance and value associated with family-centered non-economic goals to business families (Mustakallio et al., 2002), understanding how these goals are formed by informal and formal governance mechanism becomes highly relevant. This is largely because informal and formal family governance practices differ and affect the level of professionalization of family businesses. While family meetings are unstructured and follow the family logic affecting the family business professionalization, formal family mechanisms are structured practices that allow business families to bridge the family and business logics (Cicek et al., 2022). These motivations lead us to investigate the following research questions: Do informal family meetings impact the adoption family-centered non-economic goals? If yes, what is the mediating role of family governance practices in this relationship?

To address this research question the study draws on new system theory (Luhmann, 1995; von Schlippe and Frank, 2013), as its contentions help provide a holistic understanding of the complex interactions and interdependencies in family firms where the family and the business systems interact to form decisions, ultimately offering insights to uncover the complex establishment of family-centered non-economic goals. The theory offers extensive scope, enabling the exploration and understanding of family firms and their complexities through both quantitative and qualitative approaches (Frank et al., 2017). In this context, a quantitative approach is most natural in responding to the established research questions because it allows us to test the model in question on a large cross-country sample of family firms. Specifically, data from the 2014 Successful Transgenerational Entrepreneurship Practices (STEP) survey is used to test our hypotheses. 1,056 respondents completed the survey, thus providing a useable sample of 490 observations. The hypotheses are investigated using robust ordinary least square (OLS) estimations, with additional robustness checks conducted to further validate the model. The results are consistent with the anticipated predictions. Informal family meetings positively influence family-centered non-economic goals. Additionally, the findings show that this relationship is fully mediated by family governance practices.

This paper has several implications for theory and practice. First, the research addresses the call for a deeper understanding into how business family involvement in family firm governance and family-centered non-economic goals relate to each other (Chrisman et al., 2012; Daspit et al., 2018). Second, the theoretical insights from new systems theory provide a deeper understanding of how communication structures and strategic decision-making occurs when family firms practice governance (Basco and Pérez Rodríguez, 2009; Chrisman et al., 2012; Mustakallio et al., 2002; Zellweger et al., 2013). At last, the paper also has implications for practice, offering insights to how the family system is rooted in the family business. The discovery of a positive contribution of informal family meetings signifies that these meetings extend beyond their influence on family harmony, identity and social status. Indeed, having formal family governance practices within family firms additionally serves to provide necessary structure, outlines essential processes and enforces accountability to unify family actions and promote work toward common family goals, while also minimizing conflicts.

Goal setting is a crucial process whereby individual goals are transformed into strategic actions in organizations (Cyert and March, 1963; Kotlar et al., 2018). It is an especially crucial process in family firms, where most notably the family but also other stakeholders, play a central role in shaping and influencing the establishment of goals (Kotlar et al., 2014; Williams et al., 2018). This is likely to result in more complexity given the unique interaction between the family and business (Habbershon et al., 2003; Kotlar and De Massis, 2013). It gives rise to the pursue of both economic goals as well as family-centered non-economic goals (Chrisman et al., 2012; Gómez-Mejía et al., 2007), which are not necessarily mutually exclusive (Williams et al., 2018). Family-centered non-economic goals are a set of non-economic considerations, derived in the family system, that reflect the values, motivation and intentions of family members in control of the firm (Campopiano et al., 2019; Richards, 2023). Although, these goals are derived in the family systems, there is a continuous transfer of goals between the family and the business systems (Chua et al., 2003). Chrisman et al. (2012) observe that family-centered non-economic goals encompass promotion of family harmony, elevation of family social status and preservation of family identity. Furthermore, such goals aim to protect the family business status, prioritize family control and influence to maintain ownership in the business (Michiels et al., 2022). As such, there is a close relationship between family-oriented non-economic goals and socioemotional endowments, with some researchers suggesting that socioemotional endowments may actually stem from and be shaped by these family-centered non-economic goals (Richards, 2023; Williams et al., 2018). Similarly, family-centered non-economic goals focus on safeguarding the socioemotional endowments that business families accumulate by maintaining control over their businesses (Zellweger et al., 2013). In this context, scholars suggest that family-centered non-economic goals are primary drivers that influence family firms’ strategic decisions and their outcomes (Chrisman and Patel, 2012; De Massis and Rondi, 2020; Kotlar et al., 2018). Although, such decisions often provide family members with non-economic utilities and socioemotional endowments (Gómez-Mejía et al., 2007), these decisions can also be seen from a business perspective, providing a source of competitive advantage to the firm (Berrone et al., 2012).

Previous studies show that familial social interactions are more effective than business interaction when forming family-centered non-economic goals (Kotlar and De Massis, 2013). Informal family meetings can be used as a means of protecting the interests of the family and avoid ceding influence and power to non-family managers (De Massis et al., 2016; Williams et al., 2018), thus upholding family-centered non-economic goals. Although the legitimacy of these meetings may be questioned, they are deemed to have significant impact on the formation of goals in family firms (Liljeström et al., 2023). In this context, it is common for family businesses to hold informal family meetings to coordinate actions and pursue shared goals. However, there has been limited research on how these informal meetings influence formal family governance practices and the degree to which family-centered non-economic goals are effectively achieved (Daspit et al., 2018; Kotlar and De Massis, 2013). Thus, a deeper understanding of the sequential process through which informal and formal governance systems of family firms interact and affect the development of family-centered non-economic goals is warranted.

Family firms are considered as social systems that couple business families with the family business. Drawing on Luhmann’s new systems theory (Luhmann, 1995) from a family firm perspective, the family has the ability to influence the business by communicating their decisions, thus influencing the future of the firm itself. New systems theory assumes that communication is the central element that connects different systems, thus opposing the assumption that individuals are principal actors of systems (Luhmann, 1995). The focus on communication structures allows researchers to observe the processes and interactions among the elements of communication, the underlying expectations, and the essential structure that influences the communication patterns (von Schlippe and Frank, 2013). In this way, each system observes the other closely and uses these observations to create their own structure of expectations (von Schlippe and Frank, 2013). Building upon new system theory, a family business can be defined as “a communication system incorporating the decision premises shaped by a family” (Frank et al., 2017, p. 4). Furthermore, new systems theory offers a framework through which actual decision making in family firms can be understood. Given that family-centered non-economic goals serve as reference points for decisions-making in family firms (Kotlar et al., 2014), and recognizing that governance practices within family firms are typically viewed as a consequence of executed decisions (Carney, 2005; Chrisman et al., 2018), there is additional rationale for utilizing new systems theory in this study. In this context, new systems theory maintains that family firms are made up of decisions, capable of making decisions, with business families frequently forming decision premises (von Schlippe and Frank, 2013). Decision premises are communicated realities that frame and guide the decision making in family businesses. Thus, decision premises have an important function as they allow business families to control, influence and reduce complexity in decision making (Frank et al., 2017). That being said, new systems theory introduces innovative approaches to studying family firms, offering valuable insights into the process of forming family business goals. It highlights the mutual influence between family and business logics, enhancing our understanding of how these dynamics shape one another (Luhmann, 1995; von Schlippe and Frank, 2013). In this context, it simplifies the complex relationship among individuals and social systems by looking at communicated realities (Simon, 2005). It thus allows family business researchers to understand not only individual systems but also how they are coupled and how business families exert control and influence on their business in a complex context (Hasenzagl et al., 2018). This may be achieved by setting distinctive family-centered non-economic goals.

Social systems, such as family businesses, have their own traditions and histories. Consequently, the direct impact of the external environment on these social systems is somewhat limited. Thus, systems are able to act in a structure-determined manner (von Schlippe and Frank, 2013). Additionally, Luhmann (1995) suggests that systems are autopoietic, self-referential and operationally closed. This means that they produce their own structures with no direct effect from systems externally. Any external impact is processed by meaning structures within the system that clearly limits any influence from the environment (von Schlippe and Frank, 2013).

Additionally, the theory posits that systems exert a significant causal effect due to their temporal nature. For instance, the occurrence of an event establishes a “before” and “after”, illustrating the progression of time and its impact (from Von Schlippe and Frank after the translation of Luhmann 2000). To have an effect on the system, it is necessary to have a meaning, because meaning provides borders to the context in which the communication happens (Luhmann, 1995). Meaning structures help allocate the process of communication in a specific context and provide the premises for future decisions (Luhmann, 1995; Suess-Reyes, 2017). Here, decision premises tend to be long-lasting and they provide stability to the system (Suess-Reyes, 2017). Additionally, they reduce the complexity in decision making by relying on former communicated decisions (Frank et al., 2017).

Given that, family-centered non-economic goals are core for balancing the family and the business in the firms’ strategic decisions, it is key to have a clear understanding of both these logics. By striving to fulfill the priorities of the family and business systems, Habbershon et al. (2003) suggest that family firms are better able to explore advantages of wealth creation. Here, informal and formal family meetings are events in which family members get together and discuss both family and business issues (Habbershon and Astrachan, 1997; Neubauer and Lank, 2016) and plan future decisions for the firm (Suess-Reyes, 2017). As such, when the family forms their decisions in informal opposed to formal communication structures, it entails the systematic interaction between family and business systems (Kotlar and De Massis, 2013). Here, a better understanding of the mechanisms surrounding the family and business systems would lead to more comprehensive knowledge of the transgenerational orientation and superior wealth creation of family firms (Chua et al., 1999; Habbershon et al., 2003). In this context, few studies have applied new system theory for observing how families form decisions through involving the business and family system, and how this impacts the essence of the firm, particularly family-centered non-economic goals (Suess-Reyes, 2017).

Informal family meetings are often the first structure of communication allowing family members to speak about family issues, which may be related to the firm or not (Martin, 2001). These meetings are usually occurring for the purpose of building the meaning structures of the family business system, thus processing the family beliefs (Habbershon and Astrachan, 1997). Typically, informal family meetings bring together several generations in an informal setting, where a wide range of family issues, including plans, events and strategic decisions, are openly discussed. In this context, informal family meetings stand out, representing one of the most essential and common practices within family governance (Martin, 2001). In this study, informal family meetings are defined as events where foremost family members discuss family issues that may or may not concern the family firm. Informal family meetings are unique because of their (1) duration, often characterized by an absence of defined time, (2) transparency, issues discussed are often kept in a closed circle and secret, (3) legitimacy, they hold legitimacy, but doubts regarding their legitimacy may be raised (Liljeström et al., 2023). While informal family meetings are characterized by these key attributes, their format tends to evolve, though they often continue across generations. Over time, these meetings may become more formal and include a broader range of participants, some of whom may not even be family members (Cicek et al., 2022). According to Dyer (1989), informal family meetings represent a key distinction between the management styles of professional managers and family business leaders, with the latter often favoring more informal approaches to running their businesses (such as chats at the kitchen table). Professional managers are embedded in more formal organizational systems. Working environments where informal family meetings are utilized often lead to the establishment of relational contracts and may even replace transactional contracts (De Massis et al., 2016). Establishing such work environments are means of achieving governance effectiveness in situations where more formal governance mechanisms do not serve the purpose or are too slow or rigid (Liljeström et al., 2023).

Informal family meetings, attended by family members, mostly focus on the goals of the family being maintained, although these goals must be transferred to and considered in relation to the goals of the business (Diaz-Moriana et al., 2024). In informal family meetings, the family logic often takes precedence over the business logic as these meetings focus on the goals of the family being maintained. However, a slight overlap with the business logic is natural in these meetings. Such overlap exists as family firm governance, whether it is formal or informal, requires that issues are explored from multiple perspectives in ways that allow both family and business goals to be managed simultaneously (Suáre and Santana-Martín, 2004).

Informal family meetings are the initial stage of communication within the family firm. Studies have observed the importance of these informal family meetings for the purpose of building family members commitment to the family firm (Bloemen-Bekx et al., 2021). Additionally, studies have also shown that family meetings are useful and essential means for creating long-term sustainability in family firms (Parada et al., 2020). Informal family meetings also provide a structured platform for family members to discuss and share their values, aspirations and concerns (Arteaga and Escribá-Esteve, 2021; Diaz-Moriana et al., 2024). In this context, De Massis et al. (2016) identify informal family meetings as a governance mechanism that enhances collaboration and coordination throughout the family. This provides the opportunity to improve family relations and fosters stronger family bonds and cohesion (Hu and Hughes, 2020), leading to increased family supportiveness and loyalty which are important aspects of non-economic goals and objectives of business families (Chrisman et al., 2012; Zellweger et al., 2013). From the standpoint of new system theory, during informal family meetings, the family logic prevails over the business logic because the communication structure is informal and family issues are mainly discussed (von Schlippe and Frank, 2013), while business issues could be raised as well. By exchanging information about the functioning of the company and its ambitions these meetings frame and guide the decision-making foundations in the business. Thus, creating decision premises that both active and passive family members align to. This alignment reduces frictions and increases the likelihood of achieving shared family objectives, thus increasing family unity which is an important non-economic goal element of family firms (Meroño-Cerdán, 2024). Similarly, informal family meetings build awareness that family members are united for a common goal (Cicek et al., 2022). Since informal family meetings are tied to the family system, where family logic predominates, the common goals that emerge from these gatherings typically encompass identity, values and intentions—essentially, family-centered non-economic goals. Hence, the outcome of informal family meetings would be a family system aligned around common interests among family members, while uniting them along shared family-centered non-economic goals (Figure 1). Therefore, it can be hypothesized,

Family governance is defined as “voluntary mechanisms established by the business family with the primary aim of governing and strengthening relations between the family and the business, as well as the relationships between the members of the business family itself” (Suess, 2014, p. 17). Family governance practices embrace open family communication structures (Martin, 2001), and they set the foundation for creating a strong and unified vision for the family firm (Berent-Braun and Uhlaner, 2012). Furthermore, family governance practices facilitate and structure the relationship between the family system and the business system (Michiels et al., 2022).

According to Suess (2014), there are several family governance practices, where family constitution, family protocols and family foundations are examples, intended to improve the relationship between the family and the business, but also to society in general. In this study, the focus is on family constitutions, family protocols and family foundations, aiming to explore the communication processes within both the family and the business. Furthermore, the establishment of these family governance practices allow family firms to pursue non-economic goals (De Massis et al., 2021). With that said, these practices are to a high degree rather formal in their manner. In this context, family constitutions and family protocols are a normative agreement in which the fundamental principles and guidelines of the family firm are stated. These documents explain and organize the relationship between the business family and the family business, and clarify how the rules and regulations in the family relate to the business or owning group (Berent-Braun and Uhlaner, 2012). In other words, they convey the family governing position in the firm and clarifies the expectations and fundamental values the family is pursuing (Neubauer and Lank, 2016). On the other hand, family foundations are family governance mechanisms that serve a social and public purpose for business families (Suess, 2014). Family foundations are in this sense an important governance mechanism as they can help a business family pursue their non-economic goals (De Massis et al., 2021). Family business studies confirm a relationship between family governance practices and the strategic decisions of these firms (Suess, 2014), and that these factors not only influence economic goals (Berent-Braun and Uhlaner, 2012) but also non-economic goals (Habbershon and Astrachan, 1997; Mustakallio et al., 2002). From the perspective of the new system theory, family governance practices constitute the communication systems that link the family values and the business. As such, these communication systems establish decision premises that provide a framework for decisions in relation to the business (Suess-Reyes, 2017). These decision premises can provide necessary structure for the purpose of mitigating the complexities surrounding an expanding family and dispersed ownership (Jaffe and Lane, 2004).

However, family businesses are potential grounds for conflicts. These conflicts may start in an informal family meeting in which the predominant logic is the family and then transpired into the business. von Schlippe and Frank (2013) provide a clear example of this situation. Their example concerned a young couple, approached by the parents of one of them after Christmas day (informal family meeting). The parents offered them to take over the family hotel. The young couple was excited and in the next informal family meeting, they provided a business strategy and explained to the parents their succession plan. After this event, while the parents were hurt as the young couple had approached them in such a business way, the young couple was confused because they were communicating their business ideas as the parents had offered them the family hotel in the first place. von Schlippe and Frank (2013) explained that the issue was the differing communication styles between the two parties: the parents communicated in the family logic, showing emotions and gratitude, while the young couple communicated in the business logic, seeking business opportunities and creating business prospects. In addition to this, the communication was during an informal family meeting, in which the family logic prevails, creating confusion between both parties. To prevent potential misunderstandings of this type while also preserving family cohesion, formal family governance represents a critical bridge between the family and business logics, that facilitates the successful adoption of family-centered non-economic goals. This is largely because it provides the necessary structure, outlines essential processes and enforces accountability, while emphasizing the business logic within the family business context (Daspit et al., 2018; Tobak et al., 2018). Consequently, it provides the means to ensures that visions are established, discussions are productive, conflicts are resolved and decisions are efficiently implemented (Habbershon et al., 2003; Suess, 2014), ultimately fostering a more effective and focused approach to pursuing non-economic objectives while also unifying the family in this pursuit. Therefore, it is emphasized that family governance practices serve as a crucial channel of communication between informal family meetings and the effective implementation of family-centered non-economic goals. Hence, it is hypothesized,

Data from the STEP project collected from September 2014 to February 2015 in 35 countries representing all major continents was utilized. The data was collected by 48 universities affiliated with the STEP project. The STEP project survey examines the transgenerational nature of family businesses and how they generate and preserve new economic value across time. The STEP project selected family firms fulfilling the following criteria: (1) one family should hold the largest or dominant block of voting shares in the firm; (2) the firm should be at least in the second generation; and (3) the firm should be among the most important players in the industry where it operates. An experienced research team in empirical research, with expert knowledge on the topic of transgenerational family firms created the STEP questionnaire. The questions were based on previously validated scales. The survey contained four blocks: general information, respondent information, family business group-level information (performance dimensions) and primary company-level information (entrepreneurial orientation, family resources, family involvement, family life cycle stages, business environment, industry).

The STEP project used a multirespondent methodology, where two members from each participating family firm answered the same survey (Basco et al., 2019). 1,056 individuals responded to the questionnaire, belonging to 686 family firms, at a response rate of 27%. Data from 23 countries is explored (Australia, Belgium, Canada, Chile, Colombia, Dominican Republic, France, Germany, Hong Kong, Ireland, Italy, Japan, Malaysia, Mexico, Netherlands, Peru, Puerto Rico, Spain, Sweden, Switzerland, United Kingdom, United States and Venezuela). A final useable sample of 490 respondents is used, where 156 family businesses provided double responses and 178 provided single responses.

The average firm age is 56.961 years, and 1,075 is the average number of full-time employees. On average the respondents perceive similar growth in the market share when comparing the last three years (mean = 3.794). The average number of formal family meetings is 4.814 per year. In addition to this, 46.73% of the family businesses have one generation involved in the business, 46.33% have two generations involved and 6.94% has three or more generations involved in the business. The majority of the family businesses were in the construction and manufacturing sectors (23.47%), 17.14% were in the trade sector, 15.71% were in other service sectors and 12.09% were in the tourism and gastronomy sectors. The health service sector accounts for 4.29% of the businesses. Only a few family businesses are in the information, technology, and communication (3.67%), and consulting (3.27%), the rest are distributed in other services and manufacturing sectors. In our sample, 44.90% of our respondents were in Europe, 31.02% in North America, 18.37% in Latin America and 5.71% in Asia.

Furthermore, some procedural and statistical remedies were adopted to diminish potential common method biases (Podsakoff et al., 2003). First, the respondents were guaranteed that their answers were anonymous. Second, the questionnaire was crafted to avoid desirability bias by soliciting perceptual information with no right or wrong answer. Moreover, to preclude respondent fatigue, the questionnaire designers avoided common scale formats, and predictor and criterion variables were not measured in proximity. Fourth, a Harman (1976) single-factor to check for common method bias was applied. All the self-reported measures were entered into a principal component analysis with varimax rotation. The single-factor solution indicated that one factor explained 22.84% of the variance. A confirmatory factor analysis is run to confirm construct validity. The two-factor model (family-centered non-economic goals and family governance practices) showed that the model fits the data well (χ² (8) = 22.283; χ²/df = 2,785,375; CFI = 0.962; RMSEA = 0.06; SRMR = 0.039; TLI = 0.962). When comparing this model to a one-factor model, it is observed that the one-factor model has a poor model fit (χ² (9) = 292.820; χ²/df = 32,535; CFI = 0.592; RMSEA = 0.254; SRMR = 0.166; TLI = 0.320). Thus, it is concluded that the model is well suited to assess the hypotheses because the results of this procedure indicate that the constructs are unidimensional.

The questions on family-centered non-economic goals were based on Chrisman et al. (2012) criteria affecting family firm decisions. These items are consistent with previous literature which has studied family-centered non-economic goals (Zellweger et al., 2013). Three items from the STEP survey were used, each answered on a Likert scale ranging from 1 (not at all) to 5 (a great deal). In these questions, the respondents were asked to indicate the level of influence that three criteria (family harmony, family social status and family identity) have on family firm decisions. The Cronbach’s alpha was 0.781, well above the minimum threshold set for reliability (Nunnally, 1967). Table 1 provides additional information about the reliability and validity test of the constructs.

The respondents were asked to what extent family firms use informal family meetings. The question was ranked using 5-point Likert scales which are ranging from 1 (not at all) to 5 (very much). As such, this question was used to establishing the extent to which informal family meetings are held in each family firm. This question was based on Johnson et al. (1993) in order to capture the usage and content of family governance instruments. Previous studies have established the importance of informal meetings as governance mechanism where decisions concerning the family firm are taken (Nordqvist and Melin, 2010; Wang et al., 2023).

This variable was operationalized using data from the STEP project. To measure family governance practices three items were used, where family firms were asked the extent to which the family firm use: “family constitution”, “family protocol” and “family foundation”. Each of the items was ranked using 5-point Likert scales, ranging from 1 (not at all) to 5 (very much). Prior studies have employed similar items and observe that family governance practices are important governance mechanisms, impacting organizational outcomes of family firms (Mustakallio et al., 2002; Suess-Reyes, 2017). The descriptive statistics and pairwise correlation of all variables included in the regression estimation are shown in Table 2.

The study followed previous literature (Chrisman et al., 2012) and controlled for firm age and number of employees (numeric variables). The number of employees is a logarithmic transformation of the number of employees of the firm. The growth in market share was also controlled for. Following former literature (Eddleston et al., 2008), the respondents were asked “how would you rate your primary company’s current performance as compared to that of your competitors in the last three years (2010, 2011, 2012) in terms of growth in market share” (numeric variable on a 5-point Likert scale where “1” indicates much worse and “5” much better). Generational involvement was controlled for. The respondents were asked to answer “which generation(s) are actively involved in your family business group as owners?” Following previous literature (Sonfield and Lussier, 2004), the variable was operationalized as a dummy variable where “0” represents that one generation is involved in the family firm, “1” refers that two generations are involved in the family firm and “3” refers to three or more generations being involved in the firm. The number of formal meetings held per year were also controlled for because they indicate the level of reoccurring governance practices and the extent to which family members gather inside the family firm (Martin, 2001; Neubauer and Lank, 2016). The industry was also added as a control (categorical variable in which 1 = information, technology and communication, 2 = trade, 3 = consulting, 4 = advertising and marketing, 5 = education and training, 6 = tourism and gastronomy, 7 = health services, 8 = other services, 9 = architecture and engineering, 10 = construction and manufacturing, 11 = others). Finally, prior work observes that culture and location influence family firms (e.g. Jun and Sorenson, 2006). Given the great variety of countries, the world region was added as a control variable (categorical variable in which “0” refers to Asia, “1” indicates Europe, “2” refers to Latin America and “3” refers to North America”).

The hypotheses were tested using robust ordinary least square estimations, using STATA 18.0. The model is tested using the procedure recommended by Hair et al. (2017) for testing mediating models. Hair et al. (2017) suggest that the following conditions must be present to support a mediating relationship: (1) the existence of a relationship between the independent variable and the dependent variable; (2) the existence of a relationship between the mediating variables and the dependent variable; and (3) if these two criteria are met, the relationship between the independent, mediating and dependent variables can be tested. When all paths from criteria to predictor via mediator are positive and significant, it constitutes complementary partial mediation. If the signs are negative and significant, then it is competitive/inconsistent mediation. When the direct relationship is insignificant, and only indirect association is significant, then a full mediation occurs. Table 3 shows the results of these models. Additionally, robustness tests were conducted using bootstrap regression, structural equation modeling and two-stage least squares, incorporating all items to check for potential measurement errors, omitted variables and reverse causality.

Prior to specifying the regression, multicollinearity was tested for. The highest variance inflation factor (VIF) among the independent variables was 1.31 which is well below that of the conservative cut-off value of 5.0 (Studenmund, 1992). Therefore, multicollinearity was not a concern in this study. Table 3 shows the results of the robust OLS regression analysis. The results for the control variables confirmed one expectation (model 1). First, there is a negative and statically significant relationship between the number of employees and family-centered non-economic goals (B = −0.040, p < 0.1). In Model 2, the relationship between informal family meetings and the dependent variable is tested. H1 was supported, suggesting that informal family meetings is positively and statistically significantly associated with family-centered non-economic goals (⁠$β$ = 0.075, p < 0.05). Thus, the use of informal family meetings is positively associated with family-centered non-economic goals. In Model 3, the dependent variable must have a significant effect on the mediating variable. The results show that family governance practices are positively associated with family-centered non-economic goals (⁠$β$ = 0.146, p < 0.01). The adjusted R-squared was 0.080. Finally, in Model 4 the full model was tested. The results suggest that the relationship between family governance practices and family-centered non-economic goals continue being significant and positive (⁠$β$ = 0.138, p < 0.001), while the use of informal meetings is not significant related to the dependent variable (⁠$β$ = 0.055, n.s). Therefore, the existence of a full mediation effect of family governance practices can be confirmed. The adjusted R-squared was 0.084. Robustness test and additional tests are found in a supplementary file.

The aim of this paper was to explore the antecedents of family-centered non-economic goals given their importance and influence on family firm behavior. In testing the first hypothesis, support for a positive relationship between informal family meetings and family-centered non-economic goals was found. This finding suggests that informal family meetings are important governance mechanisms consisting of acts of communication that align goals and objectives among family members. This finding supports the idea that communication (in this case taking place in informal family meetings) connects family members and generates meaning, reduces complexity, builds cohesion and creates guidance for the firm (Frank et al., 2017). In particular, family systems rely on the informal meetings to communicate and discuss issues related to the family and the business (Nordqvist and Melin, 2010; Wang et al., 2023).

Additionally, it was found that family governance practices mediate the relationship between informal family meetings and family-centered non-economic goals. This suggests that informal family meetings are governance mechanisms that build the grounds for more formal governance practices, which in turn generates family-centered non-economic goals. This finding supports the idea that informal family meetings are the first step toward professionalization of family firms. In turn such professionalization has a positive influence on more formal governance practices (Hiebl and Mayrleitner, 2019). This finding also suggests that family firms are dependent on both informal and formal governance practices. Here, more informal mechanisms are used to govern the family system for the purpose of managing family relations, aligning values and mitigating social complexities (Jaffe and Lane, 2004). On the other hand, formal mechanisms represent a critical bridge between the family and business systems that promotes the successful adoption of family-centered non-economic goals. In other words, these formal mechanisms facilitate transparency and trust between the two systems and mitigate conflict of interest between various stakeholders (Cicek et al., 2022; Suáre and Santana-Martín, 2004).

Our robustness tests (found in the supplementary file) shed light on the complex interrelationship between family governance practices and family-centered non-economic goals, emphasizing the importance of formal mechanisms that lead to family business professionalization. The findings suggest that while informal family meetings significantly influence the set of family-centered non-economic goals, they can continue to play a key role alongside formal governance practices. With our alternative dependent variable test, the results suggest that family logic is one of the pillars of family-centered non-economic goals, and family members communicate their family logic through this channel. Our results in the supplementary file illustrate this well. We also segmented by regions and re-ran the models on European and North American regions, and the results remained consistent. However, in the Asian and Latin American regions, the robustness checks indicate that there is no significant interplay between (informal and formal) family governance practices and family-centered non-economic goals, demonstrating the importance of further studying this topic with a contextual perspective. Overall, family governance practices are a formal communication tool that allows business families to translate family logic from informal meetings into business logic in the form of family-centered non-economic goals.

The paper contributes to the research on family governance practices and family-centered non-economic goals. First, the results show that family involvement in two different governance practices relate to family-centered non-economic goals, thus providing important insights into how these governance practices influence the strategic actions of family firms (Kotlar and De Massis, 2013; Williams et al., 2018). In this context, the study responds to recent calls by Daspit et al. (2018) to address a growing demand for a deeper understanding of how family business practices associated with (in)formal governance mechanisms lead to the adoption of family-centered non-economic goals in family firms. This line on research advances the knowledge on family governance practices from being descriptive or normative to explanatory and coherent (Mustakallio et al., 2002; Suáre and Santana-Martín, 2004). Here, the study brings deeper understanding to the role of governance structures in connecting the family system to the firm. As such, governance structures should be seen as key practices that are interrelated to the family and business systems, as suggested by Penney and Combs (2013). Specifically, this study shows that governance practiced in informal family meetings can spill over to the business system, positively related to governance practices there. As a result, significantly predicting family-centered non-economic goals, which are goals that clearly differentiate family firms from non-family firms (Chrisman et al., 2012), thereby enriching our understanding of the origins of heterogeneity within family firms (Chua et al., 2012). Furthermore, a deeper understanding is provided into the governance practices in family firms and how they are related to the establishment of goals that represent the socioemotional affective needs of the business family. As such, given that researchers have proposed that governance mechanisms may relate to socioemotional wealth (Chua et al., 2015; Swab et al., 2020), the study contributes to a better understanding of how family firms can establish governance mechanisms that preserve and generate socioemotional wealth for the business family (Berrone et al., 2012; Gómez-Mejía et al., 2007). Given that, recent studies show that socioemotional wealth can contribute to family firm performance (Åberg et al., 2024); the study advances our understanding of how family firms can build a competitive advantage by utilizing their unique governance mechanisms. Given the great impact and widespread presence of family firms (De Massis et al., 2018), these theoretical insights also have the potential to create positive social impact by family firms. Because family-centered non-economic goals are rooted in socioemotional needs, which are likely to increase family firms’ responsible and sustainable practices (Campopiano and De Massis, 2015; Dyer and Whetten, 2006).

Secondly, by employing new systems theory, the study extends an established theoretical framework to analyze a phenomenon previously unexamined through this lens. Applying new systems theory, attention is drawn to the two-coupled social systems in family firms, the family system and the business system. This study indeed demonstrates, in line with the theoretical predictions that the coupling of the family and the business result in two systems that influence and shape each other (Frank et al., 2017; Luhmann, 1995; von Schlippe and Frank, 2013). Specifically, the study illustrates that one system influences another through interactions between the systems, occurring within both formal and informal governance mechanisms. Hence, these theoretical insights provide a better understanding of the role the holistic management of systems in family firms (Basco and Pérez Rodríguez, 2009). Although, Chua et al. (2003) suggest that this holistic management requires continuous transfer of goals, through use of communication between the family and business systems, this study shows which governance practices in family firms are used to bridge interactions leading to the establishment of family-centered non-economic goals.

Third, the study contributes to a deeper understanding of how a family can use its discretion to influence decision-making that promotes the adoption of family-centered non-economic goals (Chrisman et al., 2012; Kotlar and De Massis, 2013; Zellweger et al., 2013), highlighting that decisions influencing these goals emerge in both informal and formal governance settings (Berent-Braun and Uhlaner, 2012; Chrisman et al., 2018). In this context, new social systems theory provides valuable insights into the heterogeneity of decision-making within family firms, suggesting that family businesses can gain a competitive advantage by inducing decision premises that guide the firm (Frank et al., 2017). Finally, an empirical contribution is offered by observing that family-centered non-economic goals are developed through influence involving the family and business systems, but these goals are multifaceted and highly complex. Through the robustness checks, it was observed that informal meetings are a strong pillar for developing family-centered goals (e.g. Wang et al., 2023), but family governance practices might have stronger or weaker influence on bridging these systems. Further research should therefore continue the exploration of different informal and formal governance practices used by family firms to bridge family and business systems.

The study suggests that informal family meetings help harmonize family relationships and aligning family members. For example, such meetings can be used as a means of discussing important issues spontaneously without organizing a formal meeting. They foster inclusion and appreciation as anyone can take part, thus mitigating isolation of certain family members which could lead to conflict (Cicek et al., 2022). It can also be recommended that family firms set up more formal governance practices such as family constitutions, family protocols and family foundations. In this context, formal governance practices help translate family logic into business practices, enabling business families to professionalize. While informal family meetings provide the foundation for family-centered non-economic goals, these practices can create mixed messages and increase the potential for conflicts in family businesses. Formal governance practices are effective practices that reduce the potential for conflict by simplifying decision-making processes in already complex systems (Jaffe and Lane, 2004). Simplifying decision processes is valuable for family firms, particularly given the nature of family firm governance, where decisions must simultaneously consider both family and business goals—a process characterized by high complexity (Kotlar and De Massis, 2013; Suáre and Santana-Martín, 2004). Here, the discussions in this paper suggest that these practices help harmonize the relationships between the family and the business because they provide a business framework, where families can translate their ideas into formal ambitions while balancing them with business priorities. Additionally, the findings suggest that communication is key for having healthy family relationships as well as prosperous family firms. Through efficient communication within and between different governance forums the family and the business can align themselves, maintain cohesion and reach professionalization.

Finally, considering that decision premises representing the goals of the business family can be an effective means of establishing and institutionalizing familiness (Frank et al., 2017), the study indicates that family members can communicate their goals through family governance practices. While informal family meetings may be the starting point of these goals, business families should implement formal practices to structure them, as they are an important resource that can be managed and governed. As a result, family businesses can become more professional and increase their competitive advantage (Zellweger et al., 2010).

This study is not without limitations. A limitation of this study is that it has sole focus on the adoption of family-centered non-economic goals. Future research could investigate how economic and non-economic goals are formed through different types of meetings and governance mechanisms. Additionally, one could look at the particular role of family governance when there is an crisis situation with unexpected challenges, such as Covid-19 (De Massis and Rondi, 2020). Such situations need decisive and quick decision-making (Kraus et al., 2020). How these decisions are formed and what type of meetings are used for these situations, would be a topic for future studies. This also relates to the fact that the Covid-19 crisis has accelerated the use of flexible working arrangements which also influences the way governance meetings are held in family firms (Stamm et al., 2023). In this context, another limitation is the assumption that physical “meetings” are the main forum for family communication. However, digital technologies are increasingly playing a key role in communication, in particular, providing tools for family members who are far away to be in close contact with their family. Digital technologies potentially allow all family members to be more informed about and active in the family and business discussions, and can even lead to the identification of unexpected strategic opportunities (Kraus et al., 2020). Future research should study how these digital technologies affect family communication, and to what extent they influence strategic decisions of family firms. As our robustness checks show difference from the Global North and South, we recommend using an institutional perspective to test the model in this paper and explore whether culture, such as high in-group collectivistic vs low in-group collectivistic societies, influences communication in social systems and the adoption of family-centered non-economic goals. We acknowledge that our independent variable provides a rather restrictive view of informal family meetings. Although our robustness checks confirm a good representation of our independent variable, we encourage future research to measure informal family meetings using numerous items as it would allow for a more comprehensive representation of the concept, ensuring that various aspects are adequately captured. Such items can include questions about when (e.g. breakfast, lunch, dinners) and where (e.g. the family home, vacation homes, grandparent house, a rental place) informal meetings occur and to what extent they are accruing. We also suggest conducting qualitative research such as case studies to unpack how and why business families decide to implement formal governance practices, the role of informal and formal communication structures in these decisions, and how family goals evolve after the implementation of formal governance. Furthermore, another limitation of the study is that the relatively large size of the family firms in the sample could impact the generalizability of the findings to family SMEs. Future studies may therefore explore a similar research question while conducting a more in-depth analysis of the influence of firm size. Finally, the sample in this paper is cross-sectional, which means that changes in governance mechanisms across time cannot be explored. An interesting research question would be to test the model in this study and observe how family governance practices change when the firm is growing.

This study contributes significantly to the understanding of family-centered non-economic goals in family businesses. It advances the knowledge concerning family governance practices. Instead of merely describing these practices, the study offers an explanatory framework, which is empirically tested. The results demonstrate that informal family meetings play a pivotal role in aligning family members' objectives, ultimately influencing the development of more formal governance practices, which in turn shapes family-centered non-economic goals. Moreover, new systems theory is applied and emphasizes the interrelation between the family system and the business system within family firms. The study validates the theory’s predictions that communication between these systems is the primary channel through which they influence each other. Furthermore, the research deepens the understanding of decision-making in family businesses. It highlights how family influence is exerted through both informal family meetings and formal governance practices, simplifying complex decision processes. The study offers practical recommendations for family businesses where informal family meetings are recognized as vital for harmonizing family relationships and inclusively aligning family members. Additionally, the research suggests implementing formal governance practices, such as family meetings, foundations, constitutions and protocols, to bridge family and business dynamics effectively. In conclusion, this study deepens the understanding of family firm governance and the achievement of family-centered non-economic goals. Although the study responds to recent calls within the field, various exciting directions for future research remain to be explored.

The supplementary material for this article can be found online.