What Can the Family Contribute to Business? Examining Contractual Relationships

Abstract

The degree to which the family dominates as a form of business organization depends in part on whether a business's operations favor the implicit informal personal relationships of families or the explicit, formal, impersonal contractual relationships, characteristic of market-oriented organizations. In some situations family identity, trust, personal ties, and the monitoring functions that family relationships provide promote greater incentives for success than explicit, formal contracts. In other cases, formal relationships can provide a more effective means of linking workers within the firm, even when the workers are family members.