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How stakeholder management fosters firm growth behaviour: emerging patterns from

family firms that out-perform competitors.

ABSTRACT

In this paper we adopt multiple and longitudinal case study research to explore the connections between firm growth and stakeholder management. Through the analysis of five family-owned firms that reached and maintained a leadership position in their respective industries or segments over a long time period, we develop a model showing that outperforming competitors adopt (i) an idiosyncratic growth behaviour and (ii) a hierarchical, dynamic stakeholder management, that are embedded in the leaders’ view of the firm wellbeing as an overarching goal. This article contributes to advancing theory on the strategic management vs. ethics debate and can be a useful guide for managers who are interested in reflecting on goals, values, and beliefs underlying their firm’s growth behaviour. KEYWORDS

Growth behaviour; Stakeholder management; Competitive performance; Longitudinal case study; Family firms INTRODUCTION

Since the seminal work of Carroll and Hoy (1984), several scholars have called for studies

that integrate corporate social responsibility (CSR) and strategic management. While

stakeholder theory (Freeman, 1984) represented per se a clear advancement in this direction,

recent contributions underline that much still needs to be done in order to provide a clear

picture of how the economic, competitive and social domains interact in modern firms.

Freeman and Velamuri (2006) warn against the “separation thesis”, that is the idea that

‘business’ is separate from ‘ethics or society’ and that CSR is ultimately an “add-on” that

serves to attenuate or compensate negative consequences that firms impose on society.

While early scholars of both strategic management and stakeholder theory (like, respectively,

Andrews and Freeman) shared an integrative view of morality and strategic decision-making,

the two domains seem to have subsequently diverged (Elms at al., 2010). Thus, Freeman

himself and colleagues (2010) advocate for “efforts to apply stakeholder theory to strategic

management”.

In spite of a huge empirical efforts, studies aiming at demonstrating that corporate social

performance (CSP) improves corporate financial performance (CFP) seem to be largely

inconclusive (Margolis and Walsh, 2003). Instead, some promising studies that explore the

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connections between stakeholder management and competitive advantage have been recently

carried out (e.g., Harrison et al., 2010).

This study aims to reduce the gap between stakeholder theory and strategic management

theory by exploring the interdependences among stakeholder management, growth strategies,

stakeholder support and firm competitive performance in the context of family business.

Adopting a multiple case-study research (Eisenhardt and Graebner, 2007), we conducted a

longitudinal analysis of family-owned Italian firms that outperformed their competitors over a

long period. In particular, this work stands from three research questions: (i) how do family

firms that outperform competitors grow? (ii) which stakeholder management approach do

they adopt? (iii) how are stakeholder management and firm growth interconnected?

In the following sections we first summarize existing literature on both firm growth and

stakeholder theory. We then describe the logic behind our case selection, and the process of

data collection and data analysis. In the subsequent section we present the five case studies as

well as concepts and theoretical insights that emerge from cross-case comparison, and then

infer a theoretical model explaining the strategic logic that underlies outstanding performance

of family-owned firms. Finally, we reflect on implications of our study for both theory and

managerial practice.

THEORETICAL BACKGROUND

Firm growth literature

Firm growth represents a defining concept of entrepreneurship as a scholarly field (Nelson &

Winter, 1974; Penrose, 1959; Schumpeter, 1934). Since these seminal contributions, both

theorists and researchers have devoted great energies to exploring and understanding the

multifaceted concept of growth. In spite of this huge effort, the fundamental questions

underlying research on this topic still attract scholarly interest.

In the present section we propose a review of this literature based on the identification of

three different (albeit partially overlapping) streams of studies, which consider growth as: 1)

an outcome; 2) a strategy; 3) a process.

Given that firm growth is a performance dimension – according to Casillas et al. (2010: 28),

“a better indicator of long-term performance” – and a desirable outcome of managerial action,

one of the most recurring research questions deals with the antecedents/determinants of

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growth. Among others, existing studies have investigated the role of resource slack and

entrepreneurial management (Bradley et al., 2011), internationalization (Sapienza et al.,

2006), innovativeness (Casillas et al., 2010), strategic leadership (Tonge et al., 1998),

resources stickiness (Mishina et al., 2004), idiosyncratic interfirm relationships with

customers (Zander and Zander, 2005). According to Baum et al. (2001), CEOs’ specific

competencies and motivations and firm competitive strategies are direct predictors of venture

growth. In small businesses, growth depends on managers’ motivation (Delmar and Wiklund,

2008), an active, paradigm questioning learning orientation (Sadler-Smith et al., 2001), and

can be constrained by internal finance (Carpenter and Petersen, 2002).

While an outcome per se, firm growth is unsustainable unless it leads also to increase profits.

Hence, a specific line of research is concerned about how firms achieve a profitable growth.

Raisch (2008), for instance, leveraging on the ambidexterity organizational literature,

discusses the benefits of adopting balanced structures, that is, mechanistic and organic

structures to pursue exploitation and exploration simultaneously. Linder (2006) asks whether

innovation drives profitable growth and proposes new metrics to measure both of these

variables. Markman and Gartner (2002) question about the profitability of extraordinary

growth.

In the family business literature governance factors, family evolution and life-cycle,

relationships among family members, as well as goals/values/attitudes of the founder and

successive family owners/managers are reported to be major antecedents of firm growth. In

particular, intergenerational differences impact on family firms’ capital structure and growth

(Molly et al., 2011; Nordqvist and Zellweger, 2011); the appointment of outside directors are

expected to support growth (Napoli, 2012); conflicts among family members are deemed to

be a major reason for family business stagnation (Ward, 1997). Leveraging on resource based

view, Sirmon and Hitt (2003) contend that family firms are expected to grow at higher rates

than nonfamily firms, while other studies show that only family firms with a higher business

orientation have a higher capacity to grow (e.g., Dunn, 1995).

Growth is also a (part of) strategy in that, first, how it occurs falls in the field of managerial

decision-making and, second, growth decisions need to be made in accordance and

consistently with other strategic choices. McKelvie and Wiklund observe that what they

consider as a lack of development in firm growth research is due to “the impatience of

researchers to prematurely address the question of ‘how much?’ before adequately providing

answers to the question ‘how?’” (2010: 261). Hence, after calling for studies that focus on

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“qualitative differences in terms of how firms go about achieving this growth” (2010: 261),

they explain three different modes of growth, namely organic, acquisitive, and hybrid. In

particular, acquisitions may revitalize a firm and improve its ability to anticipate or to react

adequately to changing external conditions (Lockett et al., 2011; Wiklund and Sheperd,

2005). The cultural and managerial ferment induced by acquisitions and post-acquisition

integration breaks through the acquirer’s rigidities and inertial forces, leaving an organization

more suitable to pursue entrepreneurial activities. These positive outcomes will only accrue to

acquiring organizations when acquisition growth is coupled with the development of

acquisition capabilities, i.e., with the accumulation, storage, and exploitation of fresh

organizational knowledge (Salvato et al., 2007).

Not only how a firm grows, but also the speed of growth falls into managerial discretion

domain, as it can be calibrated in accordance with profitability goals. Stated differently, the

speed of growth is an integral part of the growth strategy. Eisenmann (2006), for instance,

defines accelerated growth strategies as “efforts to acquire customers rapidly in new markets

through heavy marketing spending, discounting aggressively, or absorbing rivals through

mergers” (p. 1184). These strategies lead to sacrificing current profits, that otherwise would

be increased only by “‘myopic’ decisions about pricing, marketing, or mergers – in order to

maximize the present value of future profits” (2006: 1184). The idea of growth as a

component of firm strategy emerges also from Hambrick and Fredrickson’s (2005) concept of

strategy, which is defined as an integrated set of choices encompassing arenas, vehicles,

differentiators, staging, and economic logic. Indeed, these “vehicles” are still the modes of

growth (or “expansion modes”) that a firm decides to adopt, and “staging” refers to growth in

that it is the speed and sequence of major moves (like acquisitions, investments, and so on)

“to take in order to heighten the likelihood of success” (p. 55). To drive success, these five

elements must be integrated to form a “coherent strategy”.

The issue of sustainability spans over both the performance and strategy conceptualizations of

growth. Indeed, sustainable growth is a desirable outcome per se, but also a mode of growth

which can be decided by managers through the joint consideration of growth and capital

decisions (Molly et al., 2011) in order to keep the debt-to-assets level constant (Demirgüç-

Kunt and Maksimovic, 1998).

Growth process, that is the identification of relatively common and stable stages of growth,

represents a third, long-lasting line of inquiry (e.g., Greiner, 1972, Scott and Bruce, 1987).

Recently, Levie and Lichtenstein (2010) have questioned the validity of stages theory, which

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is based on the assumption that “Organizations grow as if they are developing organisms”

(Tsoukas, 1991: 575) and, consequently, their development over time can be framed using a

life-cycle approach. Therefore, they suggest to reframe this theory by proposing that firms

evolve passing through dynamic states. A dynamic state consists of an opportunity tension,

that drives the definition of a new business model, which, in turn, leads to value creation. A

shift to a new dynamic state occurs as the perceived match between an organization’s

business model and the market potential that sustains the existing one weakens. In family

firms (which compose our sample), the growth process, the founder or owner’s life cycle and

the evolution over generations intersect. Molly et al. (2011) found empirical support to the

hypothesis that first generation family firms realize higher levels of growth with respect to

second and third-generation family firms; moreover, in the former the difference between the

actual and the internal growth rate is higher compared with the latter. Casillas et al. (2010)

show that in first-generation family business proactiveness is less positively related to growth

than in second-generation firms. Souder et al. (2012) show that market expansion decreases

over the course of a founder CEO’s tenure and that patterns of market expansion over time are

different for founder and agent-led firms.

Stakeholder theory literature

A huge amount of contributions have been stimulated by the well-known book of Freeman

(1984) “Strategic management: A stakeholder approach”. Ten years ago Margolis and Walsh

(2003) made a review of hundreds of books and articles on this topic.

A critical, while incomplete and synthetic, review of this literature can usefully move from

the likely reasons underlying such a thriving stream of academic studies and research. These

reasons ultimately reside on stakeholder theory being perceived as challenging and promising,

grounded on ethical principles, but also ambiguous and difficult to practise.

Basically, stakeholder theory assumes that the firm’s goal is to create value for a plurality of

constituencies. Such an assumption is challenging and to some extent provocative, because it

questions the dominant neo-institutional paradigm of shareholder primacy and of profit

(Friedman, 1962) or value (Sundaram and Inkpen, 2004) maximization to their benefit as the

fundamental purpose of the firm. Profit remains a must in the stakeholder paradigm, but

“concern for profits is the result rather than the driver in the process of value creation”

(Freeman et al., 2004: 364). More recently, stakeholder theory has challenged even corporate

social responsibility (CSR), warning against possible misleading interpretations of this

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concept and contending that it may foster the “separation fallacy” between business and

society, between business and ethics. The separation fallacy, in turn, is grounded on a

prejudicial and negative view of capitalism in itself (Freeman et al., 2004; Freeman and

Velamuri, 2006). Hence, CSR would be an “add-on” to ameliorate the supposedly harsh

consequences of this view of capitalism” (Freeman and Velamuri, 2006: 10).

Stakeholder theory is also promising, in that it proposes to the firm a win-win solution.

Provided that stakeholders are also key resources suppliers to the firm, managing to satisfy

their interests would facilitate firm access to resources and hence value creation to be shared

among them. While overall inconclusive (Margolis and Walsh, 2003), empirical studies that

investigated the relationships between Corporate Social Performance (CSP) and Corporate

Financial Performance (CFP) seem to find more positive empirical support when CSP takes

the form of stakeholder management rather than CSR or a general commitment to social

issues (Hillman and Keim, 2001). More recently, theoretical studies (e.g., Harrison and

Freeman, 1999; Harrison et al., 2010; Ghemawat, 2010) also provided strong arguments to the

assumption that commitment to stakeholders’ wellbeing can be a source of competitive

advantage. The key-link is trust, that “promotes cooperative behaviour within organizations

(...) and between organizational stakeholder groups (...), as it fosters commitment (...),

motivation (...), creativity, innovation, and knowledge transfer (...)” (Pirson and Malhotra,

2011: 1087).

Just one number unambiguously shows how stakeholder theory has been perceived as being

relevant from an ethical viewpoint. Asking the “Business Source Complete” database for

papers published in journals with “Business Ethics” in their names and with the word

“stakeholder” in the title we got 288 publications between 1989 and 2013 (around 11.5 per

year on average). We believe that this (actual or supposed) ethical foundation has encouraged

business scholars to reflect on how stakeholder theory could help firms and their managers

and entrepreneurs act in a more ethically inspired manner (Bennis and O’Toole 2005;

Ghoshal, 2005). Nevertheless, stakeholder management can be merely instrumental or

decoupling, even in form of “calculative deception” (Crilly et al., 2012: 1429). However, in

the stakeholder theory perspective, in the long period there are no trade-offs among different

stakeholders’ interests (Dess et al., 2003). Once again, Freeman unambiguously clarifies that

“there is no conflict between serving all your stakeholders and providing excellent returns for

shareholders. In the long term it is impossible to have one without the other. However,

serving all these stakeholder groups requires discipline, vision, and committed leadership”

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(2010: 9). In this perspective, managerial ethics would reside in addressing the firm on a path

of long term, sustainable value creation. Yet, in the short term trade-offs among different

stakeholders still remain and need to be managed (Minoja, 2012).

While stakeholder theory is also managerial (Donaldson and Preston, 1995), it has also been

considered as fundamentally ambiguous and difficult to practise. According to Jensen,

“Because stakeholder theory provides no criteria for what is better or what is worse, it leaves

boards of directors and executives in firms with no principled criterion for problem solving”

(2002: 242). Thus, several Authors tried to manage this ambiguity by proposing criteria on

how to prioritize specific stakeholder classes (e.g., Mitchell et al., 1997; Ackermann and

Eden, 2011) and in so doing facilitate managers in practicing the theoretical principles.

Interestingly, the Journal of Business Ethics has recently devoted a special issue to

Stakeholder Theory(ies): Ethical Ideas and Managerial Action. Their Editors clarify that

“Stakeholder theory, as its proponents make plain, is best regarded practically or

pragmatically, rather than as theory in any rarified sense” (Freeman et al., 2012: 1).

Several Authors ask if family-owned firms adopt any specific approaches to address

stakeholder management issues. At a first look, the idea that family-owned firms are more

inclined to meet stakeholders’ expectations seems to prevail in the literature. Zellweger and

Nason (2008) state that family firms: a) have the family as an additional stakeholder group

(Campbell, 1997); b) each individual in family firms play multiple stakeholder roles and,

hence, their requests receive particular attention in these firms; c) nevertheless, “the family

entrepreneurs often view their firms as an extension of the self and their families, which

makes them more likely to be socially responsible and, hence, satisfy societal stakeholders”

(p. 205). Similarly, Dyer and Whetten (2006) recognize that founders link a family’s social

identity with firm identity and reputation, which motivates them to avoid the risk of being

labelled as socially irresponsible. According to Bingham et al. (2011), family firms adopt a

more relational orientation toward their stakeholders than nonfamily firms, and thus engage in

higher levels of corporate social performance. Moving from the assumption that family firms

often aim at achieving also noneconomic outcomes, Zellweger and Nason (2008) argue that

exploiting opportunities of constructive relationships between different performance

outcomes leads to better stakeholder satisfaction, which, in turn, improves organizational

effectiveness. In particular, synergistic effects can occur between financial and non financial

performance (e.g., Sharma, 2001). In family firms, stakeholders’ perceptions of benevolence

depends not only on the actual adoption of benevolent behaviour toward them, but also on

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categorization processes by stakeholders themselves that are positively influenced by family

business image (Hauswald and Hack, 2013).

Some authors take a more “neutral” perspective or adopt a contingent approach. Cennamo et

al. (2012), for instance, contend that the implementation of proactive stakeholder engagement

activities depends on whether or not family principles use proactive socioemotional wealth

(SEW) (Berrone et al., 2010) as a frame of reference. Moreover, what (internal or external)

stakeholders prioritize and for what (normative or instrumental) motives depends on which

dimensions of SEW they favour. The recognition of heterogeneity of family firms entails

acknowledging that their commitment to stakeholders’ wellbeing also varies. While primarily

concerned with unique and more complex stakeholder salience in family firms – where two

different institutions like business and family intersect –, Mitchell et al. (2011) acknowledge

that “family firms are heterogeneous in the manner in which they view and respond to the

claims and pressures of family (and non-family) stakeholders (Melin & Nordqvist, 2007)” (p.

241). Moreover, they contend that idiosyncratic aspects of family business context “increase

the potential for conflict” (p. 246). Most importantly, they call for studies that explain “why,

when, and exactly how family involvement and interactions lead to positive or negative

externalities” (p. 248), that is to more ethical or opportunistic behaviour toward stakeholders.

To answer this call – we argue – there is a need of studies that focus on firm sustainable

competitiveness as a key link between family firms idiosyncratic aspects and stakeholder

satisfaction and wellbeing. While several studies have tried to connect family-owned firms’

specific aspects to firm competitiveness or to their behaviour toward stakeholders, there is a

need of exploring how these fundamental issues are linked to each other.

We therefore can now turn to the methodology used to explore how family outperforming

firms pursue firm growth through a hierarchical stakeholder management.

METHOD

Our focus on the interconnections between stakeholder management and growth performance

required observing and jointly examining a large number of variables that influence

governance structures as well as strategy decision making and, in particular, the complex

relationships among them (Huber & Van de Ven, 1995). The heterogeneity of the

phenomenon requires rich and deep descriptions aimed at assessing the abstractions and

generalizations that can be meaningfully attempted (Davidsson, 2005: 56).

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To address our research questions, we performed an in-depth longitudinal case study research

approach. Hence, we decided to conduct a “qualitative” study, targeting a relatively limited

number of companies (5) over time, analyzing them in-depth by using many different data

sources, and developing insights through a comparative logic.

Case selection

We decided to focus on family business, since it is an empirical field that favours analysis

guided from stakeholder theory (Mitchell et al., 2011; Bingham et al., 2011; Carney et al.,

2010; Cennamo et al., 2012) and growth behavior (Molly et al., 2012). We define family

businesses those that are under family control, that is firms ”where the same family owns

more than 50 per cent of the shares” (Minichilli et al., 2010: 212).

As this research is aimed at theory-generation, the cases were not randomly chosen from the

population of interest (Yin 1984, Pettigrew 1988, Eisenhardt 1989). Rather, they were

selected according to the principles of ‘theoretical sampling’, allowing focal topics to be

studied in contexts enabling transparent observation.

We selected cases of family firms that outperformed their competitors over a long period of

time. More specifically, we selected firms that, on such a long time span, (1) have been able

to reach the leadership in one or more significant segments of their respective industries, or

(2) to gain significant market positions. Therefore, the selected firms have not necessarily

grown, in absolute terms, at impressive rates, or, at least, not for all their lives.

Following the tradition of case studies in strategic management literature (Handler, 1989;

Sharma and Irving, 2005; Eisenhardt and Graebner 2007), we chose exemplary firms that

were likely to provide rich and detailed descriptions of events from multiple respondents.

While all the firms we selected are family-owned, they are relatively heterogeneous in terms

of absolute size (as measured by sales or total assets), industry, ownership size, number of

family generations. Moreover, one of them is listed and the other four are not. Heterogeneity

of family-owned firms is consistent with previous research on family business. Minichilli et

al. (2010), for instance, include in their sample firms with a turnover higher than €500

million, with a turnover between €250 and €500 million, and with a turnover lower than €250

million, as well as listed and non-listed firms.

We tracked down the whole history of each case concerning both growth performance as well

as stakeholder management and governance structure development, which in three cases

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traced back to the early 1950s. However, the comparative analyses focus on the 2002 to 2011

period (see Table 1 and 2 for an overview). Data reported in table 2 summarize growth

performance achieved by firms composing our sample.

Table 1. Overview of the family firms analysed

Firms Industry Sales (mil. € 2011)

Number of employees

(2011)

Foundation (generation involved)

Number of family members as:

Owners Board members

TMT members

Arti Grafiche Boccia

Typography, printing

44 143 1961 (1st + 2nd)

3 3 0

Gi Group Employment Agency

(staffing company)

1.156 2.800 (55.000 FTE

intermediated)

1998 (1st)

1 1 1

Manni Steel products for buildings

499 921 1945 (1st + 2nd)

5 2 2

Sabaf Components for gas kitchens

149 714 1950 (1st + 2nd)

3 4 0

Veronesi Food and animal feed

2.580 7.011 1958 (1st + 2nd

+3rd)

10 12 2

Table 2. Firm growth performance (from 2002 to 2011)

Firms Competitive position /relative performance Absolute growth Mode of growth

Arti Grafiche Boccia

2005-2011: +122% sales turnover; industry: -19,5% (Source: ISTAT);

CAGR sales 2002-2011 +17,8% (from 10 to 44 million €)

Organic

Gi Group It climbed to the third position in Italy (10,6% market share) in 2010, after Adecco and Manpower, becoming also leader in the Italian retail segment; one of the nine Global Corporate Member of Ciett (International Confederation of Private Employment Agencies)

CAGR sales 2002-2011: Parent company (Italian retail segment) +30,4% (from 64 to 695 million €); Group +37,9% (from 64 to 1.156 million €);

Organic + acquisitive (WorkNet in 2004 in Italy and Rigth4Staff in 2011 in UK added together 400 million to sales)

Manni Italian leader in the pre-processed steel products CAGR sales 2002-2011 +7,3% (from 260 to 490 million €)

Organic + acquisitive (main acquisitions: Officine Riunite di Crema and F.lli Lancini in 1980; Isopan in 1988; Coils Eurosider and CMM in 2006)

Sabaf World co-leader and European leader of the industry of kitchen gas components (with a market share of 10% and 50% respectively)

CAGR sales 2002-2011 +4,1% (from 103 to 149 million €)

Organic

Veronesi Italian market leader and 6° European producer of animal feed; the only Italian firm included in the ranking of “top producers” of the magazine Feed International; European leader in the poultry fresh products

CAGR sales 2002-2011 +4,9% (from 1.675 to 2.579 million €)

Organic + acquisitive (> 20 acquisitions in the 1976-2008 period)

The five cases are part of a research project held by the Italian Institute of Firm Values

(ISVI), that the authors have conducted under the supervision of scientific committee of three

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members coming from the academic and managerial community. Following Lincoln and

Guba (1985), this committee served as research auditors, helping establish the dependability

and robustness of the findings.

Data Collection and Analysis

We aim at generating new knowledge of the relationships between firm growth and

stakeholder management by developing a mid-range theory. A mid-range theory explains the

relationships between variables in a particular setting, and provides the basis for further

inquiry toward developing more general, less context contingent theories (see Eisenhardt and

Bourgeois, 1988, for an example). Therefore, this study aims to identify relations among

variables in the particular setting of family-owned firms that outperformed competitors over a

long time horizon.

For this reason, case studies should necessarily be based on a multitude of sources of evidence

(Lee, 1999; Miles & Huberman, 1994). Both primary and secondary data were employed in

our research.

Primary data prevailingly consisted of a series of semi-structured interviews that followed a

common format in all the cases examined, as well as a second group of unstructured

interviews that went in greater depth (Miles & Huberman, 1994; Wengraf, 2001). We

interviewed family members and multiple members of the top management team who

represented different hierarchical levels and functional areas. In total, we did 29 interviews

(on average, 5.8 per firm), and several site visits. The interviews lasted from 1 to 1.5 hours

each and were conducted with the support of a semi-structured questionnaire over a period of

around 1.5 years. When possible, two researchers attended the interviews. Each interview was

tape-recorded and transcribed for the post-interview analysis. From the transcriptions, we

could codify patterns of recurring topics regarding the growth process, the relationships with

stakeholders and with the families, firm strategy and how it evolved over time.

Secondary data include archival data, like financial reports, social reports, public declarations,

as well as firm documents (integrative contracts with labour unions, industrial plans, internal

reports and letters, etc), and press articles. In more details, we extracted from the database

Factiva 159 press articles published on “Il Sole 24 Ore” – the main Italian economic and

financial newspaper – regarding the five firms. We also amassed and analysed 50 financial

reports covering 10 years (from 2002 to 2011) for each firm. The examination of financial

statements enabled us to check for financial implications of growth and the effect of the

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severe, still pending economic crisis on the five firms. Information about sales is available

also for less recent years. To test the credibility of our empirical evidences we applied various

techniques (Lincoln and Guba, 1985; Hirschman, 1986).

To ensure that a good match resulted between the findings and the research interviewers’

perspectives we first submitted the findings to firm member checks, asking for their feedback,

sometimes in a further interview. We then presented the findings to the President or the CEO

of each firm, with the goal of involving him in the process of evaluating the accuracy of the

qualitative findings.

Moreover, we triangulated our multiple sources of evidence to improve the quality of the

study. This triangulation and the use of a number of analysis strategies also helps establish the

validity of the results (Yin, 2003). We systematically consolidated the gradually emerging

conclusions, researching counter-examples and alternative interpretations. When conflicting

evidence did not alter the results that emerged or when it allowed them to be refined and

enriched, the results acquired greater solidity. Furthermore, recourse to common and

structured analysis formats helped systematically and gradually build explanations.

Empirical settings

Before starting the data analysis, we succinctly describe the five cases analysed.

Arti Grafiche Boccia is a typographic firm founded in 1961 in the South of Italy by Mr.

Orazio Boccia. His two sons today play the role of CEOs, while the managing director and

other key managers are external to the family. The family owns 100% of equity. After being

victim of a fraud amounting to around one third of sales turnover in 1993, it took nine years to

repay the bank debt that had been delayed. Subsequently, in 2002 the firm inaugurated a

phase of growth that led sales to boost from 10 to 44 million in nine years (2002-2011). This

process was driven by investments in new and technologically advanced plants,

internationalization (“The Internet has made a shift of the geographical scope from 200 to

2,000 km convenient”, one of the two CEOs said), and the entering of new market segments

(printing of national newspapers, catalogues for companies, and labels for food packages).

Thanks to its growth in a stagnant market, the firm moved from the 64th to the 36th position in

the ranking of Italian printing firms in only three years (2006-2009). Its profitability is in line

with competitors, with the exception of the EBITDA to sales ratio, which remains higher.

Gi Group was founded in 1998 by a young consultant (today CEO and major shareholder),

just one year after private (not owned by the State) employment agencies had been admitted

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in Italy. In the first period (1998-2003) since its foundation, Gi Group focused on staffing

services for small and medium enterprises and its growth mode was exclusively organic. The

acquisition of WorkNet from the Fiat Group in 2004, that allowed Gi Group to enter the large

corporate segment, inaugurated a new period of growth: Gi Group adopted both internal and

acquisitive modes, internationalization (sales abroad accounting now for 35% of sales

turnover) and related diversification, leading to a sales turnover of 1.15 billion in 2011. As

one of the largest staffing companies worldwide, at the beginning of 2011 Gi Group became

one of the nine Global Corporate Member of CIETT (International Confederation of Private

Employment Agencies).

Manni has been active for over sixty years and today holds leadership positions in the Italian

and European steel market, particularly in the segment of steel processing. It operates in two

core business areas: (i) the production of pre-machined steel components for mechanical

engineering sectors and construction; (ii) the production of insulated metal panels for roofs

and walls, intended for the areas of civil and industrial buildings. After a regular and organic

growth path since 1990 (at a compounded average growth rate of around 5%) and the

acquisitions in the following years to complete line products and widespread the presence in

Europe, the economic crisis negatively affected sales (-18% from 2008 to 2011) and net profit

(which fell to zero as an effect of recession in the building industry). Nevertheless, Manni

sales and profit reduction was significantly less than that of its competitors (-30% sales and -

20% net profit from 2008 to 2011).

Sabaf has been listed on the Milan Stock Exchange since 1998. However, the majority of

equity (53%) is in the hands of the Saleri family. The most intense growth started in 1993,

when the founder Giuseppe Saleri was able to acquire (after a competitive auction) the shares

of his brother, who didn’t support the Giuseppe willingness to sacrifice family cash

expectations to allow the firm to develop. In a few years Sabaf became the world co-leader of

the relatively narrow (1.5 billion € in total) segment of components for gas kitchens, that it

sells to assemblers around the world. Thanks to its high quality, safe, and energy saving

products Sabaf is a highly profitable firm, with a two-digit Return of Equity (ROE) for all the

years from 2003 to 2010 and 8.8% in 2011.

Veronesi was founded by Apollinare Veronesi in 1958. The founder did not simply establish

a new company: he actually started an industry that was new to Italy. Indeed, Veronesi was

the first company active in the large-scale production of livestock feed. Today it is the

industry leader in Italy with a market share of around 19.5%, the ninth most important

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producer in Europe, and the 23rd in the world in this field. Built around the concept of “food

made in Italy”, the Group expanded its business by integrating different animal chains. In

1968, AIA was set up to deal in the breeding, processing and marketing of chickens, turkeys,

rabbits, eggs, Guinea hens and trout. In the subsequent years, the Group entered the pork and

beef meat sector both by setting up a series of farms, and by purchasing the leading firm

(Negroni) and several other cold meat and salami factories in Italy.

CASE STUDIES

Empirical evidence emerging from cross-cases comparison was organized around two main

issues: (i) growth strategies, and (ii) stakeholder management. In the present paragraph we

thus outline the emerging themes on both of them.

Growth strategies

As far as growth strategies are concerned, from cross-cases comparison do not emerge a

unique mode of growth (McKelvie and Wiklund, 2010) neither a similar intensity or

periodicity of the growth process. Indeed, two firms adopted a purely internal mode of growth

(Boccia and Sabaf), while the remaining three combined organic and acquisitive growth;

moreover, two firms (Boccia and Gi Group) have intensively grown in the last 8-10 years, one

(Sabaf) in the 90’s, and the remaining two (Manni and Veronesi) have followed a relatively

longer and more regular path of growth obtained by both organic and acquisitive growth;

furthermore, one firm (Manni) works in an industry (steel product) that suffered significantly

from the beginning of the economic crisis.

Nevertheless, some common themes about growth strategies and behaviour clearly emerged.

Indeed, growth (i) is triggered by strategic innovations, (ii) is continuously fostered by dense

paths of punctuated innovations, (iii) occurs also through the broadening of the competitive

scope, (iv) which, in turn, aims at reinforce and is fostered by a differentiation advantage, v)

is sustainable, in that it never jeopardizes the economic and financial viability of the firm.

These recurring topics are now explained and then summarised in table 5.

First, the growth process is bolstered or triggered by one or more strategic innovations that

originated at specific times and unfold over a long time span. Strategic innovations take the

form of a business or production process reinterpretation, the discovery of un-served

customers’ segments or needs or even of a totally new business. Each strategic innovation, in

turn, is led by a clear entrepreneurial vision of an unexploited or overlooked market

15  

 

opportunity and by the commitment to exploit it profitably. Boccia started to grow in the

typographic industry when it realized that future performance would have been driven by a

combination of flexibility and limited runs and “when we started to think of us as publishers”.

The key innovation for Gi Group consisted of a business reinterpretation of employment

agency as a high value-added service instead of a highly standardized, efficiency-based one.

Manni created a new segment of activity in the steel industry that consisted of carrying out

several manufacturing activities on steel-made products on an industrial scale, thus enabling

customers (mainly small builders) to indirectly benefit from economies of scale and to avoid

significant investments. In the 90’s, the second strategic innovation of Manni has been the set

up – also through some acquisitions – of a full portfolio of tailor-made beams, countertops

and panels. Thus, Manni has become “the first European producer able to present a complete

system of tailor-made steel product”. Sabaf understood that it could offer unique products to

gas kitchen assemblers by designing the process around the product, which entailed that

machines and moulds were to be designed and produced internally. The long lasting growth

history of Veronesi was driven by two main strategic innovations. First, in the Fifties

Apollinare Veronesi was the first Italian entrepreneur who grasped the potential of industrial,

large-scale production of animal feed as a key-driver to healthy and fast animal growth;

second, in late Sixties, he realized that food producers had addressed two markets until then:

the mass-market, that looked only for low price, and the aristocratic one, that didn’t care price

just to get the best of quality. Hence, he was the first to address (with the AIA brand)

consumers who were interested in medium to high quality products at affordable costs.

Discontinuous innovations are strictly intertwined with, and unfold through, a path of

punctuated innovations (Brown and Eisenhardt, 1997), mostly of technological and

productive nature. In 1972 Boccia was the first entrepreneur in Southern Italy to invest in a

lithographic printing machine and, in 1991, to buy a 16-page, colour rotary press; in 2002 he

installed the first rotary press “Heidelberg” in Italy and, in 2006, the first “Goss A-4”. The

history of Sabaf since 1993 is shaped by several, incremental product and process innovations

(new components, new moulds, new processes, new raw materials) that have sustained its

international leadership over time. Veronesi combines a relatively continuous flow of product

innovations with investments in new, technologically advanced plants or machines (“My

father paid through the nose for a Diefenbach, a highly productive hydraulic press that he

had seen at the Milan exhibition in 1948” – Mr. Veronesi said). In the case of Manni

punctuated innovations take the form, after the first strategic innovation, of new technological

16  

 

solutions (like magnetic systems to load and shift 24 meter steel-made beams), and new

production solution (able to combine tailored product co-designed with customers together

with a fast time to market) to realize pre-machined steel components. After the creation of an

integrated portfolio of steel product crafted in different plant, Manni punctuated innovations

focused on the production efficiency of the group as a whole. Organizational innovations

(new branch formats, new role design, new organizational structures) aimed at improve

efficiency and productivity, coordination quality, and customer service characterized Gi

Group.

In line with Romanelli and Tushman (1994) study, these punctuated innovations are

functional to implement, sustain, and exploit strategic innovations. Moreover, they can be

framed as “constant adaptations, i.e., ‘first-order’ convergent changes (...)”, that good

managers make “to keep up with ongoing changes in those needs and to better serve the

evolving interests of their customers” (Levie and Lichtenstein, 2010: 333).

All the five firms have broadened their competitive scope. The extension of the competitive

scope ultimately occurred in three main ways: internationalization, related diversification, and

vertical integration. Two firms gave priority to entering new albeit related segments (Manni,

AG Boccia), two privileged vertical integration (Veronesi, Sabaf), one (Gi Group) has both

entered new segments and increased internationalization. Founded in 1998 to offer

customized staffing services to Italian SMEs, Gi Group has subsequently targeted large

companies (through the acquisition of WorkNet from the Fiat Group) and started to offer its

services in other countries, to then aim to offer the broadest range of work-related services

both to SMEs and to multinationals companies on a global basis. Veronesi followed a vertical

integration path that led it to be directly involved in all the value chain from livestock to

animal feed and to human food industry. Boccia has gradually entered new market segments

in the printing industry like those of weakly, coloured inserts of national newspapers,

magazines and catalogues for large retailers, labels for packages, Manni first entered in the

segment of caulked metal panels for the construction industry and then gradually extended its

presence outside Italy. Sabaf has progressively entered new geographic markets that led it to

reach a 60% export on total sales.

The extension of competitive scope occurs within a strategic “vision” encompassing the old

and the new businesses within a mission broadly (re)defined, which is that of “delivering

food, as it is a primary need for everyone” (Veronesi), or of “becoming a global player in the

services for developing the work market” (Gi Group).

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Growth is fostered by the achievement of a differentiation advantage. It is based on product

innovation, insomuch as “The farmer could not believe that I created for him an innovative

livestock feed” (Veronesi); product and service tailoring, which can take the form of work

services (like “Moms@Work“) aimed at meeting specific mothers’ work time needs or at

facilitating young people job market entering (through dedicated branches) (Gi Group);

product quality, which “enables customers to reduce their assistance costs and to produce, in

turn, a high quality products, thus justifying a price premium” (Sabaf); quality combined with

flexibility and willingness to offer small product quantities at affordable costs (Sabaf again).

Differentiation advantage is also achieved by affecting customers’ value chain, enabling them

to get higher value or lower costs: “Manufacturing activities we carry out on an industrial

scale allow customers to save 25% of the total costs they would bear should they make them

internally” (Manni)

Growth is sustainable as it never jeopardises the economic and financial viability of the firm.

Even when markets grew fast, the firms we studied refrained from following their expansion

path to the extent their economic or financial equilibrium was perceived as being at risk. Mr.

Colli-Lanzi, founder of Gi Group, remembers that “we decided to grow step-by-step, to aim

for short term economic equilibrium, to learn how to efficiently manage and reach the break-

even of existing branches before opening new ones.” Despite his growth propensity, Manni

gave up some interesting acquisition opportunities that he considered out of reach with

respect to his firm financial endowments, and then opened the door to the BNL’s group

merchant bank to support the acquisition strategy in the second part of the 80’s. Giordano

Veronesi remembers that his father Apollinare (who died in 2010 when he was 100 year old)

“used to pass his teachings and messages through popular proverbs that recommended to

combine challenging goals with prudence and reminded that earnings without investments

lead to lose all the assets”.

The financial sustainability of growth strategies clearly emerges from the financial data of the

last ten years (2002-2011) of the five firms. It is well established in the literature that growth

is sustainable if a firm’s total assets increase at rates no higher than those of firm’s equity

(e.g. Demirgüç-Kunt and Maksimovic, 1998; Molly et al., 2011), so that the debt to equity

ratio remains stable over time (see table 3). We examined the changes of both net invested

capital rotation (which links firm sales to assets) and of net debt to equity ratio (which

indirectly links assets to equity, thus controlling for growth sustainability). The former

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measures changes of capital productivity, the latter changes of shareholders’ (i.e. the family’s)

financial commitment to the firm by increasing equity (through giving up to withdraw

dividends) with respect to debt.

An improvement of capital productivity allows sales to grow at higher rates than assets, while

a higher shareholders’ financial commitment enables a firm to increase its assets more than its

debt. We thus report changes of both capital productivity (measured in terms of Net Invested

Capital rotation – Sales/Net Invested Capital) and of family commitment (measured in terms

of equity to net debt ratio (E/ND).

Table 3 shows that in all the five firms Net Invested Capital rotation or Equity to net debt

ratio has improved: more precisely, three of them improved capital rotation, four improved

Equity to Net Debt ratio, two both the ratios. The improvement of the former entails that the

need of (new) capital to finance sales growth has been reduced thanks to the higher level of

capital productivity. The improvement of latter means that the need of new capital has been

covered by the shareholders in a greater proportion. More specifically, in three cases out of

five capital rotation improved, while only in one case equity to net debt ratio has slightly

decreased, yet remaining at a fully acceptable level (1,06).

Table 3 – Changes of Net Invested Capital Rotation and Equity to Net Debt ratio (2002-2011)

Net Invested Capital rotation Equity to Net Debt ratio

2011 2002 Δ sign 2011 2002 Δ sign

Arti Grafiche Boccia 1,22 1,10 + 0,29 0,07 + Gi Group (parent company) 9,67 11,21 - 0,58 0,30 + Sabaf 1,08 1,15 - 8,26 2,48 + Manni 2,18 1,54 + 1,06 1,23 - Veronesi 2,93 2,46 + 1,07 0,70 +

To better analyse these effects, we calculated: a) the percentage of sales variation allowed by

an increase of Net Invested Capital (NIC), without any change of NIC rotation or Equity to

Net Debt ratio; b) the percentage of sales variation due to a variation of NIC rotation and of

Equity to Net Debt ratio.

We finally specified the percentages of sales variation due to, respectively: b’) a variation of

NIC rotation; b’’) a variation of Equity to Net Debt ratio. What emerged from data analysis is

that in all the five firms a percentage of sales growth ranging from 5.1% to 197.4%1 is due to

                                                                                                                         1  A  percentage  greater  than  100%  means  that  net  debt  decreased  over  the  period  2002-­‐2011,  which  –  in  case  of  unchanged  capital  productivity  and  equity  to  net  debt  ratio  –  would  have  led  to  a  reduction  in  sales.  Hence,  

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the combined effect (always positive) of variations of NIC rotation and of equity to net debt

ratio (see table 4).

The remaining part of firm growth would have occurred even without any improvement

neither of NIC rotation nor of equity to net debt ratio, but simply as an effect of debt variation

and equity variation in equal percentages. Stated differently, in all the five firms sales grew

more than they could do in case of unchanged capital productivity and family financial

commitment to the firm.

Table 4 – The composition of sales variation (2002-2011)

(Absolute values – mil./€) A.G.

Boccia Gi Group Sabaf Manni Veronesi Δ sales (total) 34 631 45 230 904 a) Δ sales due to Δ NIC (given NIC rotation and equity / net debt ratio) 16 599 -44 114 101 b) Δ sales due to Δ rotation and Δ equity / net debt ratio 18 33 90 116 803 b') whose for Δ capital rotation 5 -111 -8 145 418 b'') whose for Δ equity / net debt 14 143 98 -29 385 (Percentages)

Δ sales (total) 100,0% 100,0% 100,0% 100,0% 100,0% a) Δ sales due to Δ NIC (given NIC rotation and equity / net debt ratio) 46,2% 94,9% -97,4% 49,7% 11,2% b) Δ sales due to Δ rotation and Δ equity / net debt ratio 53,8% 5,1% 197,4% 50,3% 88,8% b') whose for Δ capital rotation 13,5% -17,6% -18,3% 63,0% 46,2% b'') whose for Δ equity / net debt 40,3% 22,7% 215,7% -12,7% 42,6%

Thus, what clearly emerges is that sales growth is not achieved for its own sake, but it was

possible by a more efficient use of capital – which frees up resources – and a greater family

financial commitment to the firm.

                                                                                                                                                                                                                                                                                                                                                                                           the  improvement  of  capital  productivity  and/or  equity  to  net  debt  ratio  accounts  not  only  for  the  100%  of  sales  increase,  but  also  for  the  “avoided”  sales  decrease.  

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Table 5 – Emerging patterns of growth behaviour.

Quotes Emerging patterns

In late Sixties, Veronesi realized that food producers had addressed two markets until then: the mass-market, that looked only for low price, and the aristocratic one, that didn’t care price just to get the best of quality. “We launched the AIA brand to propose a third way: consumer goods of medium to high quality, with an excellent value for money”. (A. Veronesi, founder of the Group) “We realized we could offer unique products to gas kitchen assemblers by designing the process around the product and not vice versa” (A. Bettinzoli, Sabaf CEO) “We understood that we could create value for customers by carrying out for them several activities on long steel-made products – like cutting, folding, drilling – that entailed economies of scale and that nor builders neither producers of machine tools could make at affordable costs”. (G. Manni, Chairman of Manni Group)

Strategic innovations

“Innovation has always been the leit-motive of firm choices (...) Boccia does not lose any opportunities to experiment machines and technologies” (Sole 24 Ore, November 28, 2003) “A new production line will be working in the Boccia factory next week. This investment is within a firm’s policy aimed at innovation: Boccia has invested more than 56 million euro in the last seven years (21,3% of sales turnover)” (Sole 24 Ore, February 28st, 2012) “In case of Sabaf, innovation is the fundamental lever of success” (Sole 24 Ore, June 8th, 2011) “We focused on projecting and settling a new production process that nobody had to craft pre-machined components, for instance to load and shift 24 meter steel-made beams” (G. Manni, chairman of Manni Group). “My father paid through the nose for a Diefenbach, a highly productive hydraulic press that he had seen at the Milan exhibition in 1948” (Giordano Veronesi on his father Apollinare) “Veronesi Group has anticipated customers’ needs by investing in product innovation in an important and continuous way” (Mark Up, March 2010)

Investments in “punctuated innovations”

Internationalization “Export accounts for 55% of sales. France and England are the most important European markets, but Boccia has contracts even in Australia and U.S.A.. The average export to sales ratio is 10% for the Italian typographic industry” (Il Sole 24 Ore, November 28th, 2003) “(...) a record 2011. The staff agency Gi Group focused the last year on growth and international development” (Il Sole 24 Ore, March 17th, 2012) “Sabaf is growing more quickly thanks to emergent markets (...). Sales increase occurred in all markets, but was much higher in the non-European ones” (Il Sole 24 Ore, August 5th, 2010) Related diversification “Gi Group intends to offer the entire range of services allowed by the “Biagi law”: staff agency, staff leasing, research and selection, outplacement, education, (...)” (Il Sole 24 Ore, April 4th, 2007) “After the acquisition of Isopan (a manufacturer of steel panel), Manni bought the Italian leader in the production of steel section bar, thus supporting its related diversification strategy” (Il Sole 24 Ore, July 7th, 1989). Vertical integration “In 2005 the die casting phase of burners will be started in the Brazilian plant, which will lead the production of Sabaf to be fully vertically integrated” (Il Sole 24 Ore, February 12th, 2005) “One of the main goals of the Veronesi Group is the vertical integration of the value chain” (Giordano Veronesi, Chairman of the Veronesi Group)

Broadening of the competitive scope

“We invested a significant part of our cash flow to produce special burners in no-toxic material and valves in light alloy: the two most grown products” (A. Bettinzoli, Sabaf CEO)

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Manni’s processing on steel beams impacted on customer value chain (through cost reduction and faster building), allowing “many craftsman to become small entrepreneurs and many small entrepreneurs to become medium or even large”. (G. Manni, Chairman of Manni Group) “We leveraged on speed in reacting to customers’ (small firms) requests, on customer proximity, on our problem solving and selection capabilities. For small firms paying a 10% more for some months is not a problem: they need the right person quickly. Instead, large firms that need 500 people do not want selection on an individual basis and are highly sensitive on price.” (S. Colli-Lanzi, founder and CEO of Gi Group)

Competitive advantage (through

differentiation)

“We decided to grow step-by-step, to aim for short term economic equilibrium, to learn how to efficiently manage and reach the break-even of existing branches before opening new ones. The Italian market for staff agency was an emergent one, grew fast and would have allowed a much more intensive growth process. Yet, our policy allowed us to produce and retain earnings to grow keeping our debt to equity ratio stable over time.” (S. Colli-Lanzi, founder and CEO of Gi Group) “Before the financial crisis investors told us that we had too little debt, that our cost of capital was too high, that we had to make acquisitions. Indeed, our net debt to equity ratio has never go beyond 30% and our Return on Equity was permanently over 15%. I used to answer that our competitors were far from us in terms of technology and profitability and that we were conquering market shares day-to-day.” (A. Bartoli, Sabaf CFO) “In 1960, just before his retirement, my father spoke to me clearly: ‘I give you a sound firm, with five million lire in cash, that makes it independent from banks. In managing the firm take care of your six, younger brothers, to whom you must provide nourishment’ (...) I could grow much more, but I couldn’t take certain risks ... my father’s message was clear.” (G. Manni, chairman of Manni Group) “BNL (a major Italian bank), through its merchant bank, bought 7,5% of equity of Nuova Sipre (Manni Group) (…). Nuova Sipre, which holds a leadership position in its segment, aims at doubling its sales turnover and developing new programs in Italy and abroad” (Il Sole 24 Ore, November 11th, 1986)

Sustainable growth

Stakeholder management

As we found in case of growth strategies, the firms we studied show some common patterns

of behaviour also as far as stakeholder management is concerned. More specifically, a clear

prioritization logic emerged from case comparison: (i) customers tend to be prioritized to all

other stakeholders, (ii) family members’ interests are postponed to those of employees, (iii)

all firms undertake initiatives aimed at benefitting broader sets of constituencies that form the

“society at large”.

These emerging patterns are now explained and then reported in table 6.

“Customers first”: customers’ primacy – Consistently with the belief that competitiveness

underpins firm sustainable well-being, the entrepreneurs and managers of the five firms share

the view that customers are the firm’s core stakeholders. This centrality may also be codified

in firm documents: among the six principles that orient the firm’s decisions and activities in

the Veronesi Group, the “respect for consumers” is reported as the leading one, because

“customers are our employers”. Giuseppe Manni reported to us that after he took the lead of

22  

 

his father’s firm, he spent a decade (all the Sixties) browsing around his customers’ plants and

construction sites in order to realize what they actually needed and to design what to deliver

to them accordingly. A lesson that has been learnt by everyone in the firm and permeates its

culture, since other, non-family TMT members have confirmed that the “daily commitment of

everybody is to look for better product solutions for everyone of our customers”.

One key-principle that drives strategic and operating decisions of Manni from its foundation

is to “never serve our customer’s customers”, even if it would be easy for them from a

productive and technological point of view. Violating this principle would mean being

inconsistent with the firm’s goal, that “has always been to put direct customers at the core of

our attention”.

Customers’ centrality in Sabaf is the result of an ongoing learning process of a firm that had

always been process and product-oriented, so that “during the last ten years we became more

and more flexible and oriented to the customer care.” The deep knowledge of customers’

needs that Sabaf has developed over the last decade leads producers of components that are

outside its product range to ask Sabaf itself for advice about how to design and produce those

components to better meet customers’ expectations and needs. Ethical commitment to

customers’ wellbeing affects the decision not to offer zama-made valves to kitchen

assemblers operating in new developed countries like Brazil, in spite of the huge market for

this less expensive component, since zama is a raw material that does not guarantee adequate

safety standards. Adherence to customers’ needs and commitment to tailoring offer on them

drives “worker selection processes also for the most undifferentiated and simple jobs, like

telephone operators at call centres.” (an area manager of Gi Group). The Boccia commitment

to deliver high quality and service to its customers resulted in high levels of customers loyalty

(Saparito et al., 2004): 8o% of them have business relationships with the firm lasting ten years

or more.

Employees second: priority of employees over family-members - It would be unrealistic to put

customers’ centrality in practice were not employees at the core of entrepreneurial and

managerial attention. Commitment to the wellbeing of employees and their prioritization over

the family-owners’ interests are grounded on both normative (value-based) and instrumental

reasons. In 1993 Arti Grafiche Boccia was a victim of a fraud amounting to two billion Euro,

around one third of its sales turnover: “the easiest choice would have been to close the firm

and save all that could be saved – the CEO (and founder’s son) said – instead, we decided to

sell our boat, our car, all our family assets and to invest everything in the firm, to fully

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commit ourselves, for passion for our work, for respect of our employees, for dignity.” That

fraud and the family reaction to it was a key event that, on one hand, “set the foundations of

what we label as ‘firm as a community and project of life’”, on the other, increased

dramatically the founder’s and his family’s credibility in front of employees and all firm

stakeholders. Employees’ commitment, in turn, was a key determinant of the impressive

growth process of the firm in the last decade.

For Sabaf’s founder, “our 700 employees are more important than my sons. My sons can live

well anyway.” This entrepreneur’s personal commitment to employees, combined with the

self serving purpose to retain people and their professional skills after the firm decided to

move to a new, larger plant 30 kilometres away from the old one, led Sabaf to undertake a

massive and expensive free transportation and fair-priced house rental for its employees since

2002 (Perrini and Minoja, 2008). Even more, ensuring firm competitiveness and meeting

employees’ expectations led Sabaf’s founder to set severe governance rules: the firm board

must be composed of a majority of independent directors and top management team must be

entirely composed of external managers. Family members have only informational rights

about managerial decisions. This rule has been decided (and formalized in a written family

agreement) by the founder not only to prevent future generations managing the firm

regardless of their skills and competences, but also because “if a non-family manager is not

doing well I can fire him, but if he is a family member it would be much more difficult”.

For an employment agency like Gi Group service to customers and to employees goes hand in

hand. The following examples are illuminating: “I remember – an area manager said – that

one of our managers took his own car to pick a group of Senegalese workers up to allow them

to be on their job in time in a day of train strike”. Such a commitment to serve employees is

perceived and highly appreciated: “A firm addressed us because a person who was looking for

a job told them he would have accepted being hired through a temporary work agency

provided that it was Gi Group.” (Colli-Lanzi, founder of Gi Group)

Mr. Manni, following his old mother’s recommendations (“My mother always calls me and

says: ‘don’t fire any of your employees!’”), has never reduced his workforce in the 60 years of

the company, even during the last years of economic crisis. This behaviour in times of

economic downturn is made affordable by parsimonious compensation and salary policies in

times of economic expansion. “I have been ridiculed in the past for my dividend and

compensation policy. But I always believed that what is important is to keep the jobs safe

even at dark times and to ensure that the assets the family members entrust to me are fruitful

24  

 

in the long period. Today, several entrepreneurs that appeared to be generous in the past are

firing their exceeding workforce. This is a confirmation that our policy was right.”

Finally, society at large - Firm competitiveness and key-stakeholders’ satisfaction allow

entrepreneurs to go beyond the family borders to contribute to the well-being of society at

large. The competences and experience they developed, combined with a value-based

commitment, drive their search for what Porter and Kramer (2011) label as “shared value”.

Moreover, such a commitment is deeply rooted in their own entrepreneurial activity and

enlarges the scope of the mission that underlies firm strategy. Thus, it covers a variety of

issues – economic, social, cultural – and involves the firm as a whole, the entrepreneur or

founder as an individual or both. The focus on the society at large is the result of the idea that

the firm is an overarching good to preserve and develop over time.

Giuseppe Manni was awarded (in 2008) by the Italian Minister of Equal Opportunities for

having conceived and led a project of integration of immigrant workers. He also supported

micro-entrepreneurship in Latin America and helped employees who decided to come back to

their countries to find a job there. Manni’s Group has also been present supporting the most

relevant cultural initiative in Verona (the Arena of Verona Foundation) and in Italy (the

reconstruction after each earthquake.

Mr. Boccia moved from his firm success to promote entrepreneurship and economic

development of Southern Italy, announcing publicly that a “strong and competitive firm is the

best weapon to fight against criminality” and with his personal involvement as Vice President

of Confindustria (the Italian Association of firms). The commitment to a cultural mission

inspired Gi Group to invest in the “Work Palace” in Milan and to found, in 2009, the Gi

Group Academy, a place where people can meet to discuss emerging issues on work, to

receive specialized training, and to voice ideas and suggestions that even governments and

public authorities can hear. This involvement in developing work culture, and the amazing

growth process that made it one of the largest staffing companies worldwide, led Gi Group to

become one of the nine (and the only Italian) Global Corporate Member of CIETT, the

International Confederation of Private Employment Agencies. Mr. Apollinare Veronesi was

repeatedly awarded for contributing to the economic development and well-being of many

previously rural communities in the North-East of Italy, after establishing or widening dozens

of plants and promoting local suppliers growth since 1970.

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Getting involved in initiatives to benefit society at large entails taking care of what Hillman

and Keim (2001) call social issues, thus going beyond the “inner ring” of firm stakeholders.

Emerging patterns of stakeholder management are reported in table 6.

Table 6 – Emerging patterns of stakeholder management.

Quotes Emerging patterns “Customers are our employers; customers are our bosses, customers make us become important and reward us for sacrifices we made” (A. Veronesi at the end-year meeting with salespeople, year 2000). “The company’s development strategy focuses on the Customer” (Veronesi Internet site). “Since the beginning I started to imagine what we could do in order to make customers’ job easier. I asked: what do our customers actually need? My employees are now doing the same thing.” “Our goal has always been to put customers at the core of our attention”. (G. Manni, chairman of Manni Group). “The first condition to provide quality is adhering closely to customers’ needs, without being afraid to say ‘not’ when we are not able to meet them”. (an area manager of Gi Group)

Customers primacy

In 1993 the firm was a victim of a fraud amounting to two billion euro, around one third of its turnover: “the easiest choice would have been to close the firm and save all that could be saved ... instead, we decided to sell our boat, our car, all our family assets and to invest everything in our firm, to fully commit ourselves, for passion for our work, for respect of our employees, for dignity.” (V. Boccia, CEO and founder’s son) “According to me, our 700 employees are more important than my sons. My sons live well anyway” (G. Saleri, founder of Sabaf) Because of its stock grant program for employees, Sabaf was defined as “a pioneer of employees shareholding” (Il Sole 24 Ore, September 1st, 2009) “My mother always calls me and says: ‘I advise you: don’t fire anyone of your employees!” (G. Manni, chairman of Manni Group).

Priority of employees over family-members

Gi Group invested in the “Work Palace” in Milan and founded, in 2009, the Gi Group Academy, “a context where we can leverage on our know-how to promote a work culture, to take a public responsibility, to contribute to define and not only to respect rules in the field of work and of services for work.” (Colli-Lanzi, founder and Chairman of Gi Group) “AG Boccia is an icon of a Southern Italy able to make its best energies to emerge and to endorse them, so contributing to the development of the entire Italy” (G. Napolitano, President of the Republic of Italy, in his message for the 50 years from the foundation of the firm, as reported in Il Sole 24 Ore, May 16th, 2012). “Sabaf, which is the European leader of the segment of components for gas kitchens, is very active on issues like safety and energy saving” (Il Sole 24 Ore, December 24th, 2007)

Finally, society at large

THEORETICAL INSIGHTS

The second step of analysis consisted of combining existing theory and empirical evidence to

infer a general conceptual framework of the relationships among growth strategies and

stakeholder management in outperforming family firms. To this purpose: (i) we identify some

specific links among patterns of growth, and (ii) among patterns of stakeholder management

26  

 

that emerged after the first step of analysis; (iii) we infer relationships between growth and

stakeholder management of general validity in outperforming family firms.

The emergence of an idiosyncratic growth behavior

To a closer examination, we could realize that the broadening of competitive scope and the

achievement (or strengthening) of a competitive advantage are not independent. Firms tend

not to invest in new segments or industries because they are profitable or fast growing, but

since they offer opportunities to progress in terms of knowledge and competences and to

upgrade what they offer: “we started this industry fifty years ago and now it is our duty to

assume risks and invest in any kind of projects that can improve knowledge and allow us to

offer better products” (Veronesi). Even when an autonomous, non-captive new

entrepreneurial activity is started, it is not only related to the existing business, but it may also

be “reconverted” to strengthen competitive advantage in the latter. Icom Engineering, started

in 1996 by Manni as a new venture, “at the beginning, grew rapidly achieving a 40 million

sales turnover serving totally new customers. Then we re-addressed it to improve our offer to

existing customers, which allowed us to increase the group’s profitability and reinforce our

competitive advantage”. The same goal drives vertical integration, that enables Boccia “to

carry out an order from the paper to the final product in the same plant, which leads to save

costs, to constantly monitor quality, and, above all, in quick and certain times”, and Veronesi

to better organize logistics and hence “optimize delivery times and improve efficiency of the

distribution process and contact with final consumers”.

Widening competitive scope entails also benefitting from both economies of scale and

reputation advantage that arise from rebranding different products lines, plants or companies

even in different countries using the most reputed brand (“Negroni” – the name of an acquired

company – became the only brand used by Veronesi in the cure meat segment; Gi Group

renamed all the companies acquired in the staffing industry with its own name, which became

a global brand).

Achieving or reinforcing competitive advantage in certain segments may require to become

global. To meet large multinationals’ needs in the staffing service industry, Gi Group “must

be able to offer integrated solutions, that is, solutions in different countries. That is to say, if

we want to serve Nestlè, we need to be able to serve it in 30 countries. To do that, we are

27  

 

planning to expand from 12 to 30 countries and to build a global infrastructure at the top of

our organization, which is now designed to work at individual country level”.

At the same time, competencies that sustain competitive advantage in the original business

lead firms to expand their competitive scope in new markets or segments where they can

profitably exploit them. Capabilities to serve the upper market segments (Sabaf and

Veronesi), to meet small and medium firms sensitive to service (Gi Group), to tailor products

to specific customers’ needs (Boccia and Manni) are powerful drivers of growth through

internationalization.

Hence, interdependences among the search of competitive advantage and growth, either

operating in the existing business or extending the scope to new ones, clearly emerge. They

can be represented as a couple of loops that unfold dynamically around competitive advantage

and are driven by two “engines” (figure 1). The first one – innovation, either strategic or

“punctuated” – fosters the loops conferring new impulse and energy. The second one –

financial and economic constraints – regulates the speed and time at which the loops unfold to

avoid the reaching of a “breaking point”, thus ensuring growth sustainability.

Figure 1 – The emerging pattern of an idiosyncratic growth

The growth pattern we have outlined reveals search for differentiation much more than for

conformity to institutional pressures; this characterizes the growth process of our all our five

family-firms that outperform their competitors over the long period.

As explained in strategic management literature (Porac et al., 2011; Miller et al., 2013), firms

need to balance between conformity to environmental pressures and the need of

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28  

 

differentiation. While the former improves legitimacy and hence access to resources, the latter

leads to uniqueness and competitive advantage (Porter, 1985). Institutionalists (DiMaggio and

Powell, 1983, Baum and Powell, 1995) contend that firms are exposed to pressures to

conform that may arise from the state, financial markets, groups of stakeholders, even from

competitors (Porac et al., 1989). Listed, large family firms can be subject to even stronger

pressures by outside stakeholders, because their family leaders are deemed to give importance

to socioemotional wealth, often at economic cost for the firm (Berrone et al., 2010; Miller et

al., 2013). According to the strategic views, to succeed firms need to be different, since “by

not conforming – by being different – a firm is able to enter market niches with fewer

competitors or to adopt differentiated strategies that confer competitive advantage” (Miller et

al., 2013, 195).

Miller et al. (2013) measure strategic conformity with absolute deviations of a firm’s scores

from industry medians along a given set of variables, namely capital intensity, R&D to sales,

advertising to sales, financial leverage, dividend policy, and unsystematic risk. Having

adopted a case study method, we did not use a similar approach. Nevertheless, we collected

from our investigation plenty of information on several variables that are good and relevant

proxies of those used by Miller et al. (2013). Such information (see table 5) offer a

dependable and robust empirical support to the idiosyncratic, non-conforming nature of

growth strategies of the firms we analysed.

First, the key role played by innovation – that these Authors capture through R&D to sales

and advertising to sales – in triggering and fostering growth, which led the five firms to enter

or even create unexplored markets or segments, to be on the frontier of technological

innovation in their respective industries, and to put in practice customers’ primacy through

offering new products and services; second, the low and often decreasing level of financial

leverage, which “assesses the extent to which a firm relies on debt to finance its operations or

its expansion” (Miller et al., 2013, 197); third, their parsimonious dividend policies, that

allowed significant earning reinvestments.

Being fully committed on listening to and serving their customers, outperforming firms “don’t

care about what competitors are doing” (Veronesi), neither are willing to unconditionally

comply to financial markets: “if you are a successful entrepreneur and know well your

business you must not fear the analysts. You have to interact with, not to be prone to them.

Your business is your north star” (CFO, Sabaf).

29  

 

The emergence of a hierarchical, dynamic stakeholder management

Literature on stakeholder management acknowledges that organizations have “disparate

demands, changing foci of attention, and limited ability to attend to all problems

simultaneously” (Mitchell et al., 1997). A too general level of analysis in dealing with

stakeholder concerns “tends to lead to generic strategies that could apply regardless of

industry and circumstances” (Freeman and McVea, 2001, p. 193) and to leave executives

without well established criteria to manage the complexity that stems from working with a

considerable number of stakeholders (Mitchell, 1997; Ackerman and Eden, 2011). Stated

differently, it leads to a lack of purposeful behaviours (Jensen, 2002). By contrast, Pfeffer

(2005) identifies a clear stakeholder hierarchy, embedded in the firm culture, as an

underpinning of Southwest Airlines outstanding profitability and growth performance: “the

key to Southwest's performance is great service and outstanding productivity produced by (a)

a strong culture built on a value system that puts employees first, customers second, and

shareholders third, and (b) a way of thinking about and treating employees that has built

loyalty and commitment even with a heavily unionized workforce.” (2005, p. 124). In a similar

vein, Coda observes that “well-run firms have a strong impetus toward economic

sustainability, but with a dual focus: on customer needs and on the requirements and

potential of company personnel” (2010, p. 112).

Our analysis suggests that outperforming firms organize prioritization patterns in managing

stakeholders’ claims around a hierarchical and dynamic model (figure 2).

Figure 2 – The emerging pattern of a hierarchical, dynamic stakeholder management

Employees’satisfaction  and  endorsement

Customer  primacy

Family  members’satisfaction

Commitment  to  society  at  large

arrows mean value distribution to stakeholdersarrows mean support from stakeholders.

Legenda:

12

3

30  

 

Hierarchy does not simply stands for prioritization, nor indicates a logic to solve trade-offs

among competing claims. Rather, it evokes a chain where satisfaction of one class of

stakeholders is conditional upon the satisfaction of the stakeholder classes which come first

along this chain. Just to exemplify, in “our” firms members of the owner-family cannot be

satisfied unless customers and employees are.

The dynamic nature of this model is twofold. First, this chain unfolds over time, in that all

stakeholders are not satisfied simultaneously; moreover, today sacrifices can be compensated

in a long-term perspective: “as much for dividends, also for salaries what is relevant is the

long-term policy. We appeared less generous with respect to other firms in the past, but now,

during these dark times, we can afford not to fire anyone of our employees, while those firms

are dismissing those people they consider as redundant workforce” (Manni). Second, there

are return effects, since satisfying a given class of stakeholders entails their support, which, in

turn, allows to better fulfil expectations of the stakeholder classes that come first along the

chain.

More specifically, starting from the core issue of identifying and satisfying customers’ needs

– which is perceived as the raison d’être of the firm – stakeholder management unfolds

through wider dynamic loops that involve employees, then family members and, finally,

society at large. The core loop consists of the mutual reinforcing of customer satisfaction and

employees’ satisfaction and endorsement (loop 1), which originates sustainable competitive

advantage and hence, in the long term, resources to meet family members expectations.

Mutual reinforcing relationships between customers and employees satisfaction are at work,

for instance, when “a strong and competitive firm is the result of a lot of actions of its own

employees and, in turn, it is a guarantee for their future” (Boccia), where it is acknowledged

that “it is not the firm that creates job opportunities, it is the firm’s customers who do” and

employees are “proud to achieve leadership in the market” (Veronesi). Also managerial

literature recognizes that customers’ and employees’ satisfaction foster each other driving

firm’s growth and profitability (see Heskett et al., 2008, for an example).

Family members, in turn, ensure their financial (by accepting parsimonious or delayed

dividends, or even to infuse further resources) and managerial (by taking responsibilities or

accepting to stand aside) support to the firm, making it possible that loop 1 is in place (loop

2). More interestingly, this support appears to be deeply rooted in a family value system that

leads its members to prioritize firm competitiveness to their personal self-interest, and to

monitor that firm strategies and employees’ behaviours are consistent with those values. In a

31  

 

book published to celebrate the first 50 years of its activity, it is explicitly acknowledged that

Veronesi Group is grounded on the founder’s principles’: “In principle there were neither the

bran nor the animal feed. In principle there were the principles. The Veronesi Group is 50

year old and is deeply grounded on a solid stone: the principles of its founder Apollinare

Veronesi”. The CEO of Manni Group, external to the owner-family, observes that when he

was appointed he was “attracted by the entrepreneurial vision that the family had for the

Group: a strong managerial involvement, full autonomy, and delegation. These were not

merely words: during these years I could appreciate a owner-family that is always present

and plays a strong monitoring role especially on values, without interfering with managerial

activity.”

Once that resources are available to meet customers, employees, and family expectations,

outstanding family firms tend to take charge of broader responsibilities and requests. Hence,

they commit to society at large by engaging in social, cultural, or economic development

issues. This commitment is likely to turn into intangible assets for the firm like reputation,

legitimacy and even competitive advantage (Gardberg and Fombrun, 2006) (loop 3).

A multilevel model linking growth behaviour and stakeholder management in

outperforming family firms

“Recognition of the importance of stakeholder relationships to the acquisition and

development of competitive resources” (Harrison et al., 2010: 58), a thriving stream of studies

on corporate social responsibility, as well as a widespread call for a more ethically inspired

corporate behaviours explain the increasing scholarly interest for unveiling the links between

stakeholder theory and strategic management theory. Nevertheless, while it is acknowledged

that “Some of the measurable outcomes that should be evident from a managing-for-

stakeholder approach include growth, efficiency, and higher levels of innovation” (Harrison et

al., 2010: 70), how stakeholder management is connected to corporate growth still remains

relatively unexplored (see Walker and Marr, 2002, and Cavazos et al., 2012 for two

exceptions).

In the present paragraph we develop and explain a model (figure 3) that links growth

behaviour to stakeholder management in outstanding family firms at three different levels: a)

the level of values and goals; b) the level of strategies; c) the level of performance.

32  

 

Figure 3 – A multilevel model linking growth behaviour and stakeholder management in outperforming family

firms.

a) The well-being of the firm as an overarching goal.

Some leading management scholars have emphasized that searching for the “good” of the

enterprise is a fundamental duty for managers. More precisely, it is at the foundation of what

could be labelled as “good management”. Peter Drucker (1954, 2004) warns against the

commitment to stakeholders’ wellbeing that is not deeply rooted in “the right for the

enterprise”: “Effective executives (…) know that a decision that isn’t right for the enterprise

will ultimately not be right for any of the stakeholders. (…) Asking ‘What is right for the

enterprise’ does not guarantee that the right decision will be made. Even the most brilliant

executive is human and thus prone to mistakes and prejudices. But failure to ask the question

virtually guarantees the wrong decision” (2004: 60). Bartlett and Ghoshal (1994), following

Barnard (1938), ask “why do some individuals, in some organizations, but not in others,

routinely do so much more ‘for the good of the organization’ (...) than their personal or

political rewards would justify?” (1994: 91). The response resides, according to the two

Authors, in a work ethic that is infused in some organizations and induces its members to

further “the interests of the organization as an end in itself, not just as a means to an end”

(1994: 92). This work ethic, or “moral factor” (Barnard, 1938), is “a central requirement for

effective organizations”. Sison and Fontrodona define the “common good of the firm” as “the

Hierarchical,  dynamic  stakeholder  

management

Idiosyncratic  growth  behavior

Outstanding  long-­‐term  performance

Firm  well-­‐being  as  an  overarching  goal

STRATEGY LEVEL

PERFORMANCE LEVEL

GOAL/VALUE LEVEL

1 2

3

4

56

33  

 

collaborative work through which goods and services are produced” (2013: 2). The

achievement of this common good entails that the firm’s purpose is fulfilled and, also, that the

firm becomes a “’good firm’ in an integral sense: one that is well-governed, one that makes it

members good, and one that delivers excellent products” (2013: 2).

While we didn’t ask interviewed people to specify values guiding their choices and

behaviours, the firm wellbeing as an overarching goal emerged spontaneously and clearly

from their narratives (see table 7 for some examples) as a common view of the outstanding

family firms’ leaders. Indeed, this view belongs to the spheres of firm goals and values, as it

suggests that the firm’s goal is not that of maximizing any individual kind of performance

(like profit or growth) in the interest of one or more classes of stakeholders, but of achieving a

“common good” – which is the firm itself – whose survival and prosperity is beneficial for all

of them. This firm-centred view has also a value nature, in that it helps set priorities in

defining strategies, behaviours and actions. Hence, this value can be found in practice (Joas,

2000; Gehman, 2013), and “practices imply which ends should be pursued, what should be

said and done, and how actions should be carried out” (Gehman et al., 2013, p. 87).

Table 7 – The firm wellbeing as an overarching goal: citations from interviews.

“What makes us cohesive is our shared belief that there is an overarching ‘good’ which is the company itself, which means its survival or its growth, depending on times” “The company represents for us a value which comes before individual stakeholders” (G. Manni, chairman of Manni Group) “I learnt from my thesis supervisor a passion for the firm as a whole, as a subject able to create value for all its stakeholders, in short, as a win-win tool.” (S. Colli-Lanzi, founder of Gi Group) “An entrepreneur must put the company, not money, at the first place, because if your main goal is money, you can never be a good entrepreneur”. “I’m not interested in money, money is available, has always been available, but for the firm.” (G. Saleri, founder of Sabaf) “Continuity of the firm and of its activity in the social context in the long run is the most relevant goal, for clients, for suppliers, for everyone”; “My father was an enlightened and god-fearing miller. He never took an interest in money, except for keeping the firm competitive and his sons educated” (A. Veronesi, founder of the Veronesi Group) “A strong and competitive firm, which guarantees the future of its employees (...), can be close to them and give them back all that they offer to the firm” (Boccia, Premise to the contract signed with Unions).

Analysis of theoretical background as well as of our empirical setting confirm that this firm

centrality has multiple impacts on the strategy level, encompassing both stakeholder

management and growth strategies (relationships 1 and 2 in figure 3). Being far-reaching in

nature, this view confers a long-term investment perspective (Le Breton-Miller and Miller,

2006) to every decision, emphasizing firm sustainable competitiveness as the key driver to

both stakeholder satisfaction and firm growth. On the former side, it imposes to put customers

and employees at the core of managerial attention as a must to ensure shareholder (and thus

family) satisfaction, as Francesco Manni (the founder’s son) brightly explained: “the family as

34  

 

a stakeholder almost does not exist. The family is satisfied if the firm increases year by year

its competitiveness. What is the benefit of increasing dividends if we, as a result, impoverish

the firm competitiveness?”. On the latter, it entails keeping in mind the simple “truth” that

environment is highly dynamic and hence no strategy, though successful, can remain valid

indefinitely. Thus, innovation – either disrupting or incremental – is essential to trigger self-

reinforcing loops of growth and competitive advantage. Again, firm continuity requires to

both explore new opportunities of growth and to check for their impact on financial and

economic soundness: “I certainly could not jeopardize the family fortune to follow the ideas,

perhaps courageous but at higher risk, that went through my head when I was young. (...)

Perhaps I could start to invest immediately in growth, to buy machinery, to increase the plant

and the number of employees. Perhaps I would have grown up definitely more compare to

what some other entrepreneurs who started up after me were able to do. But I could not

assume certain risks. I could only grow in a gradual manner” (Manni).

The firm-oriented view affects strategy of outstanding family firms also in a third way

(relationships 3 in figure 3), that is by inducing their leaders to leverage on every opportunity

to make stakeholder management and growth to reinforce each other. In other words, these

leaders capitalize and exploit the potential to turn a hierarchical, dynamic stakeholder

management into a idiosyncratic growth, and vice versa. To this purpose, they manage value

distribution among stakeholders with the aim of having adequate residual resources to be

invested for growth.

b) The level of strategies: how stakeholder management affects growth strategies.

Indeed, the pattern of stakeholder management we inferred by our empirical setting affects the

idiosyncratic growth behaviour in several ways (relationship 4 in figure 3):

i. giving priority to customers as “architects” of the value creation process, it fosters the

pivotal role of competitive advantage as a driver for growth: “Whatever the market or

segment we entered, the seeds of customer increasing satisfaction through product

improvement or price reduction were planted in our mind and in our heart” (Manni);

ii. it exercises a strong motivational force on workforce at all levels, which, in turn, fosters

growth. Employees prioritization on family members allows a firm to attract skilled

managers, who are better equipped to promote innovation and growth; on the other, it

leads existing managers and employees to fully commit to firm development: in Manni,

where employee turnover is close to zero, “the continuous broadening of our customers

35  

 

portfolio over time has been significantly enhanced by our middle managers team: they

have been signalling new customers, new geographical area, product innovation and

product extension”;

iii. commitment to society at large, combined with growth itself, leads to public recognition

and awards, creates resonance, and enhances firm visibility and reputation in the

broader stakeholder environment. The latter turns into new, albeit future and potential,

opportunities of growth. The “Sole 24 Ore” (January 12th, 2011) emphatically celebrates

the admission of Gi Group as a Global Corporate Member of the International

Confederation of Private Employment Agencies (CIETT) as its official entrance “in the

inner and exclusive circle of the few ‘Human Resources Multinationals’, which will

open the door to the direct dialogue with the governments and supranational

associations in the field of work”. The appointment of Vincenzo Boccia as vice-

president of “Confindustria”, as well as the fifteen prizes and recognitions awarded to

Apollinare Veronesi for his contribution to the economic development of the rural and

underdeveloped areas of North-East of Italy and to innovation in agricultural practices

provided strong media coverage, which enhanced these firms’ visibility or even

celebrity.

c) The level of performance.

An outstanding, long-term growth performance directly springs from a growth strategy built

around competitive advantage, innovation, as well as financial and economic sustainability

(relationship 5 in figure 3). Interestingly, this outstanding performance has a strong, positive

impact on the sustainability of a hierarchic, dynamic pattern of stakeholder management

(relationship 6 in figure 3). Indeed, it shows to stakeholders – and above all to family

members – that sacrifices deserved to be made; moreover, it enhances leader’s credibility in

front of other stakeholders, who increasingly trust on him and share a positive disposition

(Ackerman and Eden, 2011) toward him and to all the family owners. This effect can be

reinforced by an effective and transparent communication policy, aimed at explaining the

results that the firm is being achieving: the shareholder annual meeting of Manni has been

transformed in a stakeholder annual meeting, where the entrepreneur explains to every

constituency the results, the strategies, and the investment policy that the firm is carrying out.

36  

 

DISCUSSION AND CONCLUSIONS

Theoretical contributions

This study is a step towards the direction indicated by Freeman et al. (2010), that advocate for

“efforts to apply stakeholder theory to strategic management”, and by McKelvie and Wiklund

(2010), that call for empirical studies “providing answers to the question ‘how?’” firms grow.

Following those directions, we explored how stakeholder management affects growth of

family-owned firms that outperformed their competitors over a long period. Moving from an

in-depth, longitudinal study of five Italian family firms, we inferred a multilevel conceptual

model showing that: (i) a dynamic, hierarchical stakeholder management fosters an

idiosyncratic growth behaviour; (ii) both stakeholder management and growth behaviours are

positively affected by the leader’s view of the wellbeing of the firm as an overarching goal;

(iii) an outstanding growth performance stems from an idiosyncratic growth behaviour and, in

turn, facilitates a dynamic, hierarchical stakeholder management.

We believe that our study provides some interesting contributions, that we deliver to scholars’

community for further theoretical and empirical developments. First, our study sheds light on

the relationships between growth strategies and stakeholder management, which still remains

relatively unexplored in spite of the recent theoretical and empirical efforts to bridge this gap

(Elms, 2010). By so doing, this paper complements existing theory on growth showing that

intensity and modes per se cannot adequately explain “why”, and more specifically, “how”

firms over-perform their competitors over the long period. Second, our theoretical model

suggests that differentiation and uniqueness (namely, idiosyncratic growth behaviour), on the

one hand, and legitimacy and support by the stakeholder environment, on the other hand, are

not necessarily conflicting, as some Authors state (Porac et al., 2011; Miller et al., 2013). A

better integration between strategic management and institutional theory could contribute to

find interesting and useful ways to reconcile them. Finally, our study answer to the literature

call for more “in-depth longitudinal case studies of different types of growth processes”

(McKelvie and Wiklund, 2010, p. 280) with the aim of analysing the driver of firm growth.

 

37  

 

Managerial contributions

From a managerial point of view, we believe that our study can be a source of several ideas

and suggestions for family business entrepreneurs and managers that are interested in

reflecting on their respective firms’ growth. More specifically, the outstanding firms we

studied can be considered as benchmarks to which any family firms can be usefully

compared. This comparison should be carried out not to formulate evaluations on how a

family firm is “good” or “bad”, but as an opportunity to go more in depth in understanding the

role of the broad stakeholder environment in supporting or constraining firm growth, to then

go back to both practices and value foundations of stakeholder management.

Thus, we tried to translate what we learnt from our study into a set of questions aimed at

guiding a consultant hired by a family firm, or the entrepreneur or top executive himself,

along a (self)reflection path on firm growth and on its links to stakeholder management (table

8).

Table 8 – Guidelines for managerial self-assessment on firm growth

After asking to assess firm growth performance and to briefly describe the growth path (intensity, speed, modes, etc.) that the firm is following, an entrepreneur or manager of a family firm may be asked the following questions. • STEP 1: Going in depth to explore the “how” and “why” of firm growth. Possible questions: 1.1 Why is

your firm growing (or not growing)? 1.2 What are the most important factors that enable your firm growth? 1.3 And which ones are constraining it (financial, managerial, technological, etc.)? 1.4 What are the most important drivers of your firm growth (f.i., market growth, related diversification, unexpected opportunities, product or process innovation, etc.)? 1.5 How do you select growth opportunities? 1.6 How much is achieving or improving competitive advantage important in selecting growth opportunities?

• STEP 2: Exploring the role of stakeholders. Possible questions: 2.1 Do your firm stakeholders support or hinder your firm’s growth? 2.2 Which ones support and which ones hinder him? 2.3 Why? 2.4 What is, in particular, the role of the family-owner? 2.5 How do you try to convince stakeholders to support your firm growth?

• STEP 3: Exploring goals, values and mental models. Possible questions: 3.1 what is your view of the firm goal(s)? 3.2 What are firm responsibilities, in general and toward society? 3.3 What is your stakeholder prioritization model? 3.4 What is, in particular, the position of the family-owner in your “ranking”?

Limitations and directions for further research

Our research suffers from some limitations. First, it does not distinguish among different

types of family-owned firms (Miller et al., 2013). Comparisons between small and large,

listed and privately held firms, with diffused and concentrated ownership, with a family and

non-family CEO, as well as between firms owned or managed by family members of different

generations would be appreciable and add value to our study. Second, we focused on Italian

38  

 

firms only. Hence, we cannot say to what extent our theoretical model’s validity is contingent

on Italy’s cultural and socio-economical setting. Third, we didn’t interview firm stakeholders

other than founders, family owners, CEOs and other TMT members. Nevertheless, while

listening to a broader range of stakeholders would have added robustness to our theoretical

development, we believe that the criterion we used to select cases – having outperformed

competitors in the long period – reduces significantly the likelihood that our informants were

biased by socially desirability intents or needed to provide a positively-biased picture of their

firm or of their personal role.

Our exploratory study stimulates several research questions, driving avenues for further

studies that could enrich and complements our results. Two directions of research appear to

be particularly interesting and fruitful. The first one is the investigation of the firm leaders’

values favouring and fostering a hierarchical and dynamic stakeholder management and of the

relations between those values and the shaping of a specific stakeholder prioritization: How

firm’s leader develop their “enlightened” view that the long-lasting wellbeing of the firm is an

overarching goal? How did they learn to practice it in strategic and stakeholder management?

How do these leaders manage to infuse their personal values into organizational culture and to

transmit them across generations? The second direction of research concerns the extension of

our study to non family-owned firms: Which stakeholder prioritization model is practiced by

outstanding, non-family firms? What are the underlying values and goals? How does this

model affect their growth strategies?

39  

 

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