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Informal Governance Practices in Family Business Groups: A Framework and Suggestions for Research

In: The Palgrave Handbook of Managing Family Business Groups

Author

Listed:
  • Tom Liljeström

    (LUT University)

  • Tuuli Ikäheimonen

    (LUT University)

  • Timo Pihkala

    (LUT University)

Abstract

Existing literature presents only occasional comments on the existence of informal governance practices, although they are commonly used in family business groups. More importantly, informal governance practices can form an embeddedness without which the function of formal practices would be severely hampered. In this chapter we show how owners, boards and managers respond to internal or external objectives or needs through informal practices. We present three major contributions. First, we highlight the decisive role of informal governance practices to enable effective formal governance practices. Second, we suggest a conceptual set of informal governance practices building on the aspects of duration, transparency, and legitimacy. As a third contribution, we point out that informal governance practices are vital to ensure the effectiveness of governance in family business groups. As a conclusion, we propose that understanding informal governance better is crucial to advancing our understanding of the whole corporate governance process.

Suggested Citation

  • Tom Liljeström & Tuuli Ikäheimonen & Timo Pihkala, 2023. "Informal Governance Practices in Family Business Groups: A Framework and Suggestions for Research," Springer Books, in: Marita Rautiainen & Maria José Parada & Timo Pihkala & Naveed Akhter & Allan Discua Cruz & Kajari Mu (ed.), The Palgrave Handbook of Managing Family Business Groups, chapter 0, pages 299-316, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-13206-3_12
    DOI: 10.1007/978-3-031-13206-3_12
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