In family firms altruistic effects can arise in order to preserve the ownership of the firm within the family. The family firm may chose to carry or take measures against these effects. Regardless, it will lead to different agent costs. Therefore, the aims of the study were to explain how altruistic effects in family firms exert an influence on the administrative systems and possible counter measures.
In order to explain the origin of altruistic effects, we built a theory which showed that the altruistic effects were followed by agent costs. The family can take measures to counteract these original effects. These counter measures gave rise to new effects. Both the counter measures and the new effects were each followed by agent costs. Rational economics will presume the family to implement counter measures if the sum of the agent costs for counter measures and new effects are lower than those caused by the original effects. However, the owner family may still prefer not to perform any counter measures even if it is unprofitable and increases the costs for the family firm.
Interview guides were based on different effects of altruism, their counter measures and new effects were chosen to be studied. Five different family firms were visited and at each firm one family member who was the owner/managing director and one non-family member at higher direction level were interviewed.
Generally, our study indicated that family firms do prefer to accept the effects of altruistic behaviour. Only few of them carried out counter measures to compensate for these original effects and the aim was to favour family members. For example, education and early socialisation with the firm would counteract non-optimal decisions and awareness of possible disputes would counteract an inefficient management.
The board of the firm was composed of family members only in order to keep the asc...
