Beyond the Steady State: Toward a Theory-Based View of the Family Firm

We develop a theory-based view of family firms. We cast decision-makers as forming theories about what might create value, testing premises underlying these theories, and updating them in response to feedback. We conceptualize theory-based learning as a process that combines top-down theorizing with bottom-up feedback. We propose that family firms are strong learners within established theories. However, they tend to hold rigid theories in stable periods, struggle to test novel theories, swing to hypersensitive theories during succession, and often underweight challenging feedback from nonfamily members. We recast family control as a question of learning in a permanent quest for adaptive fitness.