Nowadays, the globalized competitive environment drives organizations to renew themselves at an increasing pace (Kianto 2011
), emphasizing the importance of strategic renewal management (Pratap and Saha 2018
; Schmitt et al. 2018
), which has emerged as a contemporary and flourishing research area (Pérez-Pérez and Hernández-Linares 2020
; Klammer et al. 2017
). Strategic renewal involves strategy reformulation, reorganization, and organizational change, leading to new combinations of resources (Zahra 1993
), and it is considered a dynamic management process for modifying or replacing firm’s business models to address emerging environmental opportunities and risks, for long-term survival and prosperity (Schmitt et al. 2018
The systematic leverage of knowledge and strategic flexibility for continuous strategic renewal requires that the firm has an elaborate and appropriate strategy (Kianto 2011
). However, an integrated understanding of how this strategy is managed when increasing strategic renewal goals needs further assessment (Bamel and Bamel 2018
), particularly considering that strategic flexibility and knowledge-management practices are conditioned by the characteristics of the organization and its members (Gavana et al. 2019
; Bojica et al. 2017
; Segaro et al. 2014
). In this regard, family businesses are characterized as a special form of company by their “familiness”, which affects not only how they do business in general, but also how they deal with knowledge (Döring and Witt 2019
) and flexibility. In this vein, family firms are usually defined as conservative and slow to recognize and respond to changes in their environment (Zahra et al. 2008
Additionally, according to the socioemotional wealth (SEW) concept, family firms have idiosyncratic strategic behaviors, mostly driven by their long-term orientation and the strong ties among their members, and that their behavior separates them from non-family firms. Furthermore, the extensive literature sustains that family firms share certain characteristics that make them heterogeneous (Dekker et al. 2013
; Basco and Pérez Rodríguez 2009
; Sharma and Nordqvist 2008
; Westhead and Howorth 2007
), exhibiting differences in their governance structure (Siebels and Knyphausen-Aufseß 2012
) and in their attitudes and behaviors (Graves and Thomas 2006
) toward strategic renewal goals. For example, “the literature maintains a strong tension between entrepreneurial and innovative family firms and family firms that are reluctant to change and are highly conservative” (Stanley et al. 2019, p. 174
). Despite the relevance of considering family firms’ diversity, a close review of the relevant literature revealed that the studies that explore knowledge management (Döring and Witt 2019
; Pérez-Pérez and Hernández-Linares 2020
) and strategic flexibility (Bamel and Bamel 2018
) as supporting anchors of strategic renewal (Zahra 2012
) are still limited in the context of family-owned firms. Studies exploring the above relationships use either a sample of family firms (Bamel and Bamel 2018
) or examine the family businesses as a specific category of organizations that differs from other categories of organizations—the nonfamily firms—(Pérez-Pérez and Hernández-Linares 2020
; Menendez-Requejo 2005
) which wrongfully creates the notion that all businesses within this category show similar characteristics and face similar challenges (Melin and Nordqvist 2007
). This oversimplifies the essence of a family business to such an extent that the mere presence of family becomes a signifier for all firm behaviors, activities, and outcomes (Dekker et al. 2013
), thus making it difficult to appreciate why some family firms are more or less adaptive to their environment than others. As such, the research field is in need of adequate differentiating tools to distinguish between types of family firms (Dekker et al. 2013
Within this context, to respond to the calls from the research field and find effective ways to distinguish between different categories of family firms, this study proposes a main goal to explore how family firms pursue different strategies, that promote strategic flexibility and knowledge-management practices, to respond to strategic renewal goals. More precisely, we aim to analyze the following research question:
How do family firms pursue strategies that promote strategic flexibility and knowledge management (KM) practices to respond to strategic renewal goals?
For this, we will use a two-step cluster analysis to reveal natural groupings from a sample of 288 small and medium-sized Spanish family enterprises (SMEs). Spain was selected as a representative of Western Europe Countries, where family businesses are the dominant corporate figure in the economic structure. Specifically, family business constitutes 90% of the productive fabric, 70% of private employment, and its weight in economic activity is equivalent to 57% of private sector GDP (Instituto de la Empresa Familiar (IEF) 2018
). More specifically, this study will generate different family firm groups, so that family firms in a given cluster are homogeneous in some sense, and family firms in different clusters are dissimilar to a great extent. After two-step cluster analysis we conducted analysis of variance (ANOVA) to assess the differences across the clusters. Then, we used CEO and board characteristics, as well as the generational stage of the company, to further profile the cluster solution. This paper contributes to the literature discussing family firm heterogeneity, as it will allow us to differentiate between family firms, thus permitting researchers to access a fuller range of information, providing rich explanations for managerial decision-making purposes.
The rest of the paper is organized as follows: Section 2
presents an overview of the key literature about the topic of this study; data and methods are presented in Section 3
; the Section 4
presents the results of the two-step cluster analysis and the paper closes with a conclusion.
2. Literature Review
Strategic renewal is considered a dynamic management process of modifying or replacing an organization’s current business model, to address emerging environmental opportunities and risks for long-term survival and prosperity (Schmitt et al. 2018
; Pérez-Pérez and Hernández-Linares 2020
). Yet, strategic renewal literature suggests that strategic renewal actions over time should be co-aligned with the pace of change in the external environment. This indicates that managers can behave proactively in achieving the firm–environment fit, by intentionally managing change (Ben-Menahem et al. 2013
) through active management of the strategic flexibility and knowledge-management practices of the firm, which are considered the two essential anchors for supporting strategic renewal goals (Hughes and Mustafa 2017
; Del Giudice et al. 2013a
; Crossan and Berdrow 2003
; Crossan et al. 1999
Flexibility is largely considered a source of competitive advantage, which has recently gained significance (Singh et al. 2013
) in the strategic renewal literature. This is because it facilitates organizations in successfully dealing with the turbulent business environment (Brozovic 2016
). Strategic flexibility involves changes in the nature of organizational activities and can be understood as an organization’s willingness to change, relative to its current situation (Volberda et al. 2001
). In this regard, flexible organizations are able to identify the weak signals in their environment and, thereby, to identify the potential of future business models in a flexible manner, through addressing new customers’ demands, defining new markets, or reversing ineffective strategic decisions (Shimizu and Hitt 2004
; Young-Ybarra and Wiersema 1999
). Therefore, strategic flexibility embodies offensive or defensive actions that can be either proactive or reactive (Zahra et al. 2008
) in making rapid modifications and changes, in response to altering situations (Zhou and Wu 2010
; Combe et al. 2012
). Furthermore, flexible organizations are usually described as open and responsive organizations, or, in other words, organizations that are willing to learn.
Along this vein, research on strategic renewal has also highlighted the importance of knowledge management (KM), which plays a crucial role in a firm’s overall ability to renew its competencies, and, therefore, for adapt to environmental change and sustain competitive advantage (Pérez-Pérez and Hernández-Linares 2020
; Lengnick-Hall and Inocencio-Gray 2013
; Kianto 2011
). KM can be defined as a set of activities, initiatives, and strategies that companies use to generate, store, transfer, and apply knowledge within and between organizations (Hussinki et al. 2017
; Calvo-Mora et al. 2016
; Jayasingam et al. 2013
; Zack et al. 2009
) under the influence of their history, people, interests, and actions that have been institutionalized in the organizations (Kostova 1999
). The newer strategic renewal literature recognizes KM as a synergistic link/capability of strategic flexibility (Lin and Wu 2014
; Bamel and Bamel 2018
), because cross-functional exchange of knowledge helps organizations quickly understand the changing environment, allowing the firm to plan organizational priorities and actions accordingly (Fernández-Pérez et al. 2013
). However, an important factor in KM for achieving a firm’s strategic renewal goals is the coordination of the different types of KM practices, and the identification of the most relevant to enable the firm to focus and prioritize its investments and efforts (Kianto 2011
). Donate and Sánchez de Pablo
) argued that there are four types of KM practices, namely, KM transfer, KM storage, KM application, and KM creation. KM transfer activities allow the firm to share, disseminate, and replicate information, spreading this information to locations that need it by the establishment of informal, formal, personal, or impersonal communication channels. KM storage activities include activities for maintaining a structured organizational memory for the firm (i.e., information stored in electronic databases, documented organizational procedures, etc.). KM application activities focus on applying existing knowledge to organizational activities to make problem-solving easier and more effective for the firm, through mechanisms based on routines, norms, or decision-making in specific situations. Finally, KM creation activities typically relate to the internal development of knowledge through research and development.
Collating all the above points, it is pertinent to propose that KM enhances the availability of the right knowledge, both reducing error in decision-making and enabling a flexible response to opportunities or threats (Roberts and Stockport 2009
), thus favoring the fulfillment of a firm’s strategic renewal goals. However, systemic characteristics of firms can influence whether or not they engage in strategic renewal. In this regard, family firms constitute a peculiar organizational context, where the identity overlap between the family and the firm tends to affect both the strategic flexibility and the KM process (Biscotti et al. 2018
), thus suggesting the relevance of exploring this singular context (Fang et al. 2018
; Gupta and Bhattacharya 2016
) considering that family firms cannot be simplistically viewed as homogeneous entities (Sharma 2002
; Chrisman et al. 2005
). In fact, a recent study from Family Business Review (Stanley et al. 2019
) highlights that research in family firm has begun to stress that family firms can be quite diverse and that a lot of variance exists within the family firm population. In this vein, a theory of the family firm must not only differentiate between family and nonfamily firms, but also “explain variations among family businesses” (Stanley et al. 2019, p. 176
), which requires identifying the important characteristics by which they may vary. Within this context, this exploratory study proposes the following hypothesis:
Hypothesis 1 (H1).
There are heterogeneous groups of family firms in terms of knowledge management, strategic flexibility and strategic renewal goals.
To answer this research question, based on the SEW model (Gómez-Mejía et al. 2007
), this study considers that family businesses’ behaviour is influenced by the family members’ affective or emotional commitment to the firm (Biscotti et al. 2018
; Higginson 2010
), as a stock of affective values that the family derives from its controlling position. This cohesiveness and emotional attachment among family members may contribute to their capacity to transfer knowledge-based resources (Chirico and Salvato 2016
), or their capacity to collect and store knowledge (Andersén 2015
; DiPasquale and McInerney 2010
). “Family owners derive utility from exercising authority, acting altruistically regarding family members and preserving the family firm’s social capital. Therefore, the identity of the family members is closely tied to the business and the preservation of family owners’ SEW becomes an end in itself, guiding firm behaviour by influencing management, strategies and approach towards risk” (Gottardo and Moisello 2015, p. 68
). Thus, managerial choices are driven by the desire to preserve and increase the family’s SEW, that is, if SEW is threatened, family firms would make decisions to avoid the loss of SEW, in spite of their economic efficiency (Gottardo and Moisello 2015
). Moreover, in the scant previous literature about flexibility in family firms, family influence has been described as a barrier to strategic flexibility (Broekaert et al. 2016
). This is because strategic flexibility is a context variable that can depend on the chief executive officer’s (CEO) personality or team management. Founders are driven to exhibit flexibility behavior, while second and later generations may focus instead on SEW, and be more risk-averse. Additionally, while firms with a family CEO have a greater incentive to reduce firm-specific risk, a nonfamily CEO will likely bring new ideas and skills to the family firm, thus increasing flexibility behavior. In this way, “higher ownership enables particularistic behavior, which allows the family to pursue innovative and risker strategies, particular as high ownership will give them “slack,” as failed innovation does not hinder their pursuit of SEW as their controlling state in the organization is not threatened” (Stanley et al. 2019, p. 179
). Strong bonds to the company, or to certain parts of it, can lead to a desire to preserve the status quo and to resist change. Family traditions may create strong path dependencies that inhibit the family firm’s adaptability. Strong family members that cling to tradition may preserve a closed company culture that blocks new ideas and change.
Two-step clustering results revealed that the dataset can be split into three clusters (see Table 3
and Figure 1
). From the overview summarized in Table 3
and Figure 1
, it is worth noting that a correspondence exists between the level of KM practices, the level of strategic flexibility, and the level of strategic renewal behavior of family businesses. More specifically, when higher values of strategic flexibility and KM practices are observed, it is expected that the firm has higher strategic renewal results.
Furthermore, an analysis of variance (ANOVA) test allowed us to confirm that significant differences amongst the three clusters exist (see Table 4
). Thus, the results show that the different groups of family firms identified are heterogeneous in the management of their strategic flexibility and KM practices to be more entrepreneurial. The hypothesis proposed is therefore accepted.
summarizes the main characteristics of these three heterogeneous clusters, with regards to the CEO and board characteristics, as well as the generational stage of the company. Each of the clusters is described below.
The first cluster is the highest (n 113), and it identifies the “proactive family business”. Businesses that compose this cluster are intensively active in all KM practices, and exhibit higher flexible responses and strategic renewal actions. That is, family firms of this cluster promote a knowledge-creating culture comprising the implementation of persistent KM practices, that delves into the communication channels or information filters which provide integrated repertoires for action increasing the organizational memory of the firm. This cluster is dominated by small and younger enterprises with international activity. Among the three clusters identified, this cluster contains the highest proportion of CEO founders (36.3%) or family CEOs (92.9%), who in most cases hold a university degree (68.2%). Furthermore, it is also the cluster that has the highest proportion of second family generation involvement in the management team of the firm. The data suggest an open, flexible, and responsive strategy, or, in other words, a proactive strategy. Family firms that compose this cluster are willing to learn and have the ability not only to hold multiple interpretations simultaneously, but also to incorporate them into the strategy process. Such behavior is especially important when an environment is too unstable or complex to comprehend, or too imposing to defy.
Representing the smallest group (n 80), the second cluster could be identified as “transitional or adaptive family firms”. Family firms that compose this cluster have middling values of KM practices and strategic flexibility, with less emphasis on strategic renewal goals than cluster 1. This cluster does not markedly differ from cluster 1 with regard to the proportion of CEO founders (39.1%) and its academic formation (69.4%). However, cluster 2 is be markedly different from the other clusters regarding the degree of professionalization of the family firms that compose it. Data show that cluster 2 has a smaller percentage of directors and managers who are family members. Furthermore, there is less second-generation involvement in the management team (36.4%), as well as a higher proportion in the board of directors (41.3%). These characteristics suggest a higher degree of professionalization, that could affect the strategic process. In this respect, strategy participation could be more widespread, with decentralized decision-making, and broader learning attitudes for promoting cultures and strategic actions which are more predisposed to creativity. This statement can be justified in light of the values of KM practices—the data show that KM creation practices present values very close to those obtained in cluster 1 (2.88 and 3.07, respectively).
The third cluster (n 95) comprises “rigid family firms”. They have the smallest level of strategic renewal and strategic flexibility values. Unlike the other clusters, this one contains family firms that place less emphasis on the implementation of KM practices—the lowest values of KM transfer, application, and creation practices were identified—and a limited implementation of KM storage practices. These results suggest the lack of an elaborated strategy for managing knowledge. This cluster contains the ancient enterprises and the lowest proportion of CEO founders (18.5%), as well as the lowest proportion of respondents with a university degree. The small proportion of CEO founders could suggest less cohesiveness and emotional attachment among family members, that could affect the capacity of the firms that compose this cluster to transfer, apply, and create knowledge-based resources. The presence of family CEOs is greater than in cluster 2, which suggests a desire to preserve the status quo and resist changes, preserving a closed company culture that blocks new ideas and change. This is because family traditions may create strong path dependencies that inhibit a family firm’s adaptability, thus limiting the strategic flexibility response of the firm. Furthermore, cluster 3 has the lowest percentage of board of directors (22.2%).
The results obtained in this study make several theoretical contributions to the research in this field and have practical implications for family firms. Firstly, they contribute to the family firm and entrepreneurship literature, usually focused on the differences between family and non-family firms, by providing empirical evidence that increases our understanding of how family firms manage their strategies for achieving strategic renewal goals. In particular, this study makes a step forward by examining how strategic flexibility and knowledge management together enable and constrain strategic renewal. The results obtained in the study suggest a central role for both strategic flexibility and KM practices in supporting the strategic renewal process. This result is in line with previous studies that have explored the effect of either of these drivers in isolation, suggesting that either knowledge management, by reducing error in decision-making (Pérez-Pérez and Hernández-Linares 2020
; Klammer et al. 2017
), or the implementation of flexibility actions to respond to opportunities or threats (Pérez-Pérez et al. 2019
; Broekaert et al. 2016
; Roberts and Stockport 2009
), enable the development of firm’s strategic renewal goals. Thus, organizations should realize the importance of promoting both of them to achieve growth and development through the potential of strategic renewal (Jain and Moreno 2015
; Crossan and Berdrow 2003
). This study is particularly relevant for SMEs, given the special challenges they face adapting to environmental changes with their limited resources (Drnevich and Kriauciunas 2011
Secondly, in line with previous studies (i.e., Stanley et al. 2019
; Randolph et al. 2017
; Pérez-Pérez et al. 2019
; Chrisman et al. 2015
; Chrisman et al. 2012
), the gathered evidence of this exploratory study confirms the existence of heterogeneity among the family firms population. Our findings suggest that the varied strategic renewal orientations of family firms are impacted by the CEO’s characteristics (Nadkarni and Herrmann 2010
), the level of family involvement (Glaser et al. 2015
) and the firm’s unique capabilities of acquiring and promoting knowledge (Pérez-Pérez and Hernández-Linares 2020
). This is a relevant finding, that can offer some counterbalance to those studies that tend to study family businesses as a homogeneous entity, thus instigating further discussion of family firm heterogeneity. For example, the higher presence of CEO founder and family board members among proactive and transitional family firm clusters could suggest that renewal benefits from the active involvement of the owner (Pérez-Pérez and Hernández-Linares 2020
), who can take an active resource role in triggering and supporting change. Owners, as the SEW model proposes, can act as catalysts for the renewal process (Sievinen et al. 2019
; Huff et al. 1992
) by making, for example, symbolic acts to stabilize disruptive managerial actions, facilitating strategy renewal implementation, or promoting knowledge management practices that create commitment to the new strategic direction. In this vein, our exploratory results suggest that KM application and KM transfer practices appear relevant for businesses attempting to become more entrepreneurial. It is consistent with previous research that sustains that organizations should demonstrate a willingness to learn in order to foster strategic renewal (i.e., Klammer et al. 2017
). Firms that promote knowledge management practices tend to execute a higher degree of strategic renewal, in contrast, firms that are resistant to learning tend to struggle to successfully renew their strategies. This result offers valuable managerial information by adding to the understanding of the most effective KM practices to promote strategic flexibility in influencing strategic renewal results. Based on the results, managers might promote different mechanisms, based on routines or norms, to share, disseminate, and replicate information, maintaining an organizational memory of existing knowledge of the firm that supports the long-term orientation of family firms.
In addition, this paper has practical implications. Firstly, this study could serve as guidelines in the decision-making process for family firms’ managers interested in promoting strategic renewal goals through flexibility and KM practices. More precisely, managers could identify their own characteristics and behaviours by identifying the cluster their enterprises could be positioned in. In this vein, managers from the “rigid family firms” cluster should change their views related to KM practices and flexibility. Firms from “transitional or adaptative family firms” cluster are progressing in the correct way, and they should invest in KM practices. Finally, firms from “proactive family firms” cluster should continue with their policies.
Besides the theoretical and practical contributions noted earlier, this article is not exempt from limitations. The study’s main potential limitations are its cross-sectional design and the use of subjective measures. In addition, this research is exploratory in nature, and it is limited to only one country (Spain). Finally, the generalizability of our findings is also limited by the nature of the samples used in this study (SMEs), and it remains for future studies to determine whether these results will be similar for larger companies.